Stan makes an excellent point this morning.  The bond market is very aware of the rapid deterioration of deficit forecasts and is poised to raise interest rates with or without the Fed as reported by Matt Benjamin of Bloomberg today.  Unless the economy worsens considerably, higher interest rates are likely by inauguration day.  I fear that the next president and Congress may ignore the markets and enact expensive new tax and spending programs anyway.  We've been through this fight before in the 1980s.

Back then, Wall Street economist, Ed Yardeni, coined the term "bond vigilantes" back when Ronald Reagan ran the highest peacetime deficits in history.  Yardeni's prediction of higher interest rates made him very well known among investors.  On May 29th, Ed issued a similar prediction.

Bond traders rejoice; you're about to have a lot of product to sell.

The Treasury said last week that the government would reach its borrowing limit by October 1.