I'm currently reading a book on investing and came across a section that has much relevance to alot of things we talk about around here. It's about the National debt. What I gathered from the section & found informative: The national debt is made up of Treasury bills, notes & bonds. Although the national debt is growing at unprecedented rates, it is still shrinking as a percentage of GDP (gross domestic product). The inherent problem with reducing the national debt is that the only two solutions are unpopular, raising taxes and/or reducing spending. Also increasing the problem, public officials have the tendency to increase spending when taxes increase - thus not reducing the debt at all. The national deficit creates economic problems because all other bond issuers - corporations, municipalities, or even foreign governments - must compete with the US government for investors dollars. So when the government must raise interest rates to attract investors, all other bond issuers must raise their rates to remain competitive. (US backed bonds are considered the least risk & thus offer the lowest interest rates - other entities would have to keep their rates above US bonds'). The concern is that the defecit could grow larger than the pool of investors & that higher interest rates by the US government could cause corporations & even local government agencies to go bankrupt, due to having to pay much higher rates of interest on their debt. Because the world has never seen a deficit of this magnitude, no one knows what will happen.