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View Diary: Krugman: Dwindling Deficit Disorder (135 comments)

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  •  debt being rolled over is independent of new (1+ / 0-)
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    elwior

    borrowing unless the latter drives up interest rates

    "We didn't set out to save the world; we set out to wonder how other people are doing and to reflect on how our actions affect other people's hearts." - Pema Chodron

    by teacherken on Mon Mar 11, 2013 at 12:28:10 PM PDT

    [ Parent ]

    •  It is the same (0+ / 0-)

      when you roll over debt, you simply are issuing a new note to pay off the old one, however, the new note has its own interest rate (and term) and will be the current rate, not the same as the one it replaced.  Hence the risk is that when the debt comes due, we are rolling it over at higher rates.  This is why the government should be issuing as many 10s-30s as possible and a lot less of <2 year notes.  

      Effectively, there is no difference between debt rolled over and new debt issued (at least from an interest rate standpoint).

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