Why are Interest Rates Going Up? Bush's Massive Borrowing.

As Krugman says today: "even before Friday's grim report on jobs, I was puzzled by Mr. Greenspan's eagerness to start raising interest rates. Now I don't understand his policy at all."

Economists are predicting a quarter point increase today to 1.50 percent for the overnight rate. Greenspan has, historically, said he raises interest to cool down a too-rapidly expanding economy.

But the stock market is in the cellar with a cold towel on it's head, the jobs report is at the bottom of a 1M jobs well, and anyone with the smallest amount of prognostication can see that we are about to enter a hamstrung economy, thanks to sky-rocketing oil prices which will not get better (This morning: oil production in Iraq was suspended, under threats from Sadr's boys of sabotage).

What gives? The economy is not on fire, so why the cold water of an interest rate hike?

Well, perhaps it's the old-fashioned market: Bush's tax cut has lead to $300-400 Billion in new debt each year of the last three years, taking $1 Trillion out of the cash supply. Greenspan's perhaps caught on by now that, with $400B yearly deficits as far as the eye can see, we'll have trillions of dollars of federal government debt, sucking up borrowing supply. That makes the government by far the biggest borrower -- and it can't be permitted to suck up the whole supply, which is not infinite. Smaller supply,bigger demand -- the costs of borrowing must increase. Thus, it's time for a higher interest rate, to stop this wild government borrowing Bush has brought us.

In other words, we've returned to a time of massive government borrowing, and spiraling interest rates.

The solution: roll back the Bush tax cut on the wealthiest americans -- those earning above $200K/yr, who never asked for it in the first place -- and return to fiscal responsibility, and get the government out of the massive borrowing business.