Nicholas, NONE OF THAT changes the fact that we are heading towards a higher cost of borrowing money for the federal government....and that is not even the worst part - the worst part is loss of value of held financial assets.

A large amount of government debt forms the backbone of bond markets. Bond markets are for those demanding safety—guaranteed return from a bond's interest payments—and the largest, safest supply of bonds is US government debt. Add to that the huge quantity of bonds that are not issued by the government directly but guaranteed by it—all of the trillions of $$$ of mortgage-backed securities issued by Fannie Mae, for example—and you can see how a threat to the solidity of the federal government's obligations strikes at the heart of the bond market.

There are two things make the value of a bond go down: increased credit risk and an increase in interest rates. In effect, any new buyer of the bond will demand a steep discount to compensate him for the increased risk of default and to provide him with a higher yield to keep up with increased interest rates.

The sheer math of this is simple and unforgiving.

Obama doesn't understand these issues. If he gets "his way" with the federal budget, he will be remembered as this century's Herbert Hoover—but at least without the widespread fallacy that he has anything to do with capitalism.