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Public Debt, Balanced Budgets, and Current Accounts

The future of the American economy is concerned, as well as the dollar’s stability have been put in doubt by the exponential rise of the debt curve. Also, destabilizing is the fact that Congress sets the ceiling on how much the country may borrow from its citizen without asking penetrating questions to those who authorize runaway expenditures.

Critics say that by now, raising the debt ceiling has become the nearest thing to routine. This does not go unnoticed by the markets. In mid-2011, when the debt ceiling was raised after a political fight, trading in CDSs on Treasury securities picked up. The price of protection against default, as measured by the CDS spread, rose to the point that ...

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