JOHN COCHRANE: Low Interest Rates and Government Debt. “Default is not impossible, just because the US and eurozone print our own currencies. Imagine my scenario and add policy chaos. The US is just getting going on political chaos. Bond markets are demanding 5% or 10%. Are the US Congress and Administration, really going to put interest payments to the Chinese central bank, ‘the rich,’ and ‘Wall Street’ ahead of writing checks to needy Americans? Don’t bet on it. It won’t be a simple default. It will be a complex restructuring, as it always is. T bills may get forcibly rolled over to low-coupon long term debt for example.”

Related: My thoughts: “Right now, yearly deficits are going up, but the debt — essentially the sum of all previous deficits — is skyrocketing. It has done that for a decade, except for a couple of years when it briefly leveled off due to the influence of the Tea Party movement. I’m sorry to say I’ve kind of given up talking about it because nobody seems to care, and I’m afraid the politicians in both parties will kick the can down the road until something really drastic happens. I’m guessing that might happen in the next decade, but although the rule is something that can’t go on forever, won’t, there’s no guarantee as to when it will stop. I feel safe in predicting, though, that it won’t stop due to a sudden infusion of virtue and self-control into our political class.”