Financial markets function to discount the future. Usually, by the time you read about something in the newspaper, financial market pricing has already “discounted” that event weeks, months, or perhaps even years before it hits the front page and becomes evident to everyone else. That’s what it means to “speculate.”

The whole world is beginning to seriously speculate that the Treasury is becoming a deadbeat borrower. Normally, such speculation would be expressed as a higher cost for borrowing, meaning higher interest rates on treasuries, coupled with a reluctance by lenders to offer long-term financing. If you have money to lend, why would you risk it by lending long term when you would be exposed to less risk by lending short term? The risk for lending long term to the Treasury is that there is more time for something bad to happen like inflation, a currency collapse or even default. As Will Rogers once said, “I ain’t so much worried about the return on my money as the return of my money.”