Complications of Deficit Financing
Money markets are being put to severe strain by government borrowing to finance the biggest federal budget deficit since World War II. All the skill and ingenuity of the government's debt managers will be needed to keep the strain of the borrowing, combined with mounting inflation and rising interest rates, from disrupting the entire economy. The difficulty of financing a deficit that will total at least $14 billion by next June 30, and might run close to $22.4 billion without a tax increase, was aggravated by the British government's decision on Nov. 18 to devalue the pound sterling. Until then, borrowing pressures had been felt mostly in the bond market. But the cost of business borrowing from American banks, already moving ...