Guest Contribution: “Financing U.S. Debt”

"...With the outlook for continued U.S. budget deficits and growing debt -- and the uncertainties regarding their financing -- we examine the role of foreign official holdings of U.S. Treasury securities in determining Treasury security interest rates, and the resulting implications for international portfolio allocations, net international income flows, and the U.S. net international debt position. ... Although relationships suggest that the world portfolio could potentially accommodate financing requirements over the intermediate horizon, substantial uncertainty surrounds the likelihood of that accommodation and the associated effects on interest rates and adjustments in international portfolios. Notably, unprecedented levels and growth of foreign official holdings of U.S. Treasuries will be required to keep longer-term Treasury security interest rates from rising substantially above current consensus projections..."

at http://www.econbrowser.com/archives/2012/03/guest_contribut_14.html