Alan is right.  When the rates start rising it may be swift, painful and    
   there is nothing the government will be able to do to stop it.  When the    
   buyers had for the exits, demand will dry up and rates will rise.  It    
   will be ugly.     
      
      
   =====================================================   
      
   http://preview.bloomberg.com/news/2010-06-18/greenspan-says-u-s-nearing-   
   limits-on-borrowing-capacity-restraint-needed.html   
      
   Greenspan Says U.S. May Soon Reach Borrowing Limit   
   By Jacob Greber - Jun 17, 2010    
      
   Former Federal Reserve Chairman Alan Greenspan said the U.S. may soon    
   face higher borrowing costs on its swelling debt and called for a    
   “tectonic shift” in fiscal policy to contain borrowing.    
      
   “Perceptions of a large U.S. borrowing capacity are misleading,” and    
   current long-term bond yields are masking America’s debt challenge,    
   Greenspan wrote in an opinion piece posted on the Wall Street Journal’s    
   website. “Long-term rate increases can emerge with unexpected    
   suddenness,” such as the 4 percentage point surge over four months in    
   1979-80, he said.    
      
   Greenspan rebutted “misplaced” concern that reducing the deficit would    
   put the economic recovery in danger, entering a debate among global    
   policy makers about how quickly to exit from stimulus measures adopted    
   during the financial crisis. U.S. Treasury Secretary Timothy F. Geithner    
   said this month that while fiscal tightening is needed over the “medium    
   term,” governments must reinforce the recovery in private demand.    
      
   “The United States, and most of the rest of the developed world, is in    
   need of a tectonic shift in fiscal policy,” said Greenspan, 84, who    
   served at the Fed’s helm from 1987 to 2006. “Incremental change will not    
   be adequate.”    
      
   Rein in Debt    
      
   Pressure on capital markets would also be eased if the U.S. government    
   “contained” the sale of Treasuries, he wrote.    
      
   “The federal government is currently saddled with commitments for the    
   next three decades that it will be unable to meet in real terms,”    
   Greenspan said. The “very severity of the pending crisis and growing    
   analogies to Greece set the stage for a serious response.”    
      
   Yields on U.S. Treasuries have benefitted from safe-haven demand in    
   recent months because of the European debt crisis, a circumstance that    
   may not last, said Greenspan, who now consults for clients including    
   Pacific Investment Management Co., which has the world’s biggest bond    
   fund.    
      
   Benchmark 10-year Treasury notes yielded 3.20 percent as of 12:11 p.m.    
   in Tokyo today, down from the year’s high of 4.01 percent in April and    
   compared with as high as 5.32 percent in June 2007, before the crisis    
   began. Yields have remained low “despite the surge in federal debt to    
   the public during the past 18 months to $8.6 trillion from $5.5    
   trillion,” Greenspan said.    
      
   The swing in demand toward American government debt and away from euro-   
   denominated bonds is “temporary,” he said.    
      
   “Our economy cannot afford a major mistake in underestimating the    
   corrosive momentum of this fiscal crisis,” Greenspan said. “Our policy    
   focus must therefore err significantly on the side of restraint.”    
      
   To contact the reporter for this story: Jacob Greber in Sydney at    
   jgreber@bloomberg.net    
      
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