Meanwhile, there is little prospect that Congress will do what is necessary to bring spending and borrowing down to levels that do not trigger inflation. Politicians just don\u2019t worry as much about inflation as about catering to their multiple constituencies. So the Treasury will have more trillions in IOUs to peddle.<\/p>\n
But its best customers just might be unenthusiastic about adding significantly to their holdings. Wen already owns trillions in Treasury bills that are depreciating in value. Besides, China\u2019s mounting needs for infrastructure and an improved safety net will sop up funds once used to buy American securities. Japan, another large customer, is now running a current-account deficit, and so it won\u2019t have as many dollars to recycle. Nor will Middle East buyers, no longer receiving a flood of dollars from $140-a-barrel oil. Little wonder that Larry Lindsey, former economic adviser to President George W Bush, says he \u201ccannot figure out what combination of foreign buyers is going to acquire . . . [the] debt\u201d\u009d that Obama\u2019s plans will generate.<\/p>\n
Which leaves Americans and the Fed as customers. Even if they save more, domestic consumers can\u2019t absorb all the Treasury bonds that will be on offer. And if the Fed keeps buying, it will pour fuel on the inflationary fires.<\/p>\n