John Cochrane interview
When debt grows so much that people don’t believe the Treasury will pay it, they sell their bonds and buy other things, sending prices through the roof.
Excerpt
The present crisis may “reteach our politicians, officials and commentariat the classic lessons that there are fiscal limits, that fiscal and monetary [policy] are intertwined.” It may also teach them, Mr. Cochrane says, “that a country with solid long-term institutions can borrow, but a country without them is in trouble.”