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General Econ Question
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| kush paintings |
| What effect on U.S. Treasury bonds did the war with Iraq have? |
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| occrider |
| It's difficult to say considering the factors that affect T-bills is not limited to one single event. Is the question you're leaning towards really what effect do budget deficits have on t-bills? |
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| kush paintings |
| Yeah, that is basically what Im looking for. |
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| occrider |
| Well the method within which deficit spending impacts government securities is that they affect the yield curve of these instruments. As a government security becomes a safer investment, the interest rate demanded decreases. If a government becomes less risky with respect to paying back their debt than you're taking less risks on a long term investment. The opposite holds true as well, if a government becomes less reliable with respect to paying back their debt than the markets will respond by anticipating inflation and demanding a higher interest rate for taking risks with their principal. As such, government debt becomes more and more expensive. I'm actually skipping and oversimplifying a lot of steps but I'm trying to answer (guess) your question of step g with what happens in step b. |
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