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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