Doesn't the Fed set bench mark interest rates? In turn Treasury Securities are offered at auction by the Treasury Department with a set interest rate. But, the relative discount or premium the securities are sold at is in direct relationship to the current market supply and demand. However, if these instruments are sold at a discount (interest rates rising), then more securities must be auctioned off to obtain the same amount of cash had those securities sold at face value or at a premium.
Should the Fed increase rates, then the marginal rates on the securities will either increase, or they will be sold at a deeper discount than before. I'm thinking either scenario leads to a larger percentage of tax dollars needed to pay interest on the current debt.
Abrignac wrote:
