Champagne and Chickens September 24, 2003February 23, 2017 Here’s an interesting thing I just learned: even uncorked, champagne stays fizzy for weeks in the refrigerator. No wonder it costs more than Dr. Pepper! How do they do that? (Like so many great discoveries, this one came entirely by accident. I don’t even like champagne — but I don’t like throwing things out, either, so when we had half a bottle left over from something and no convenient cork, I just put it on the bottom shelf of the refrigerator door and forgot about it. Just now, I needed something to swig down a pill – and the discovery was made. I feel a new chapter coming on. Corking Like a Guy™.) And here’s a question I have. We are clearly putting the pedal to the metal, with huge tax cuts and deficit spending to stimulate the economy . . . and magnificently accommodative monetary policy (read: low-low interest rates) to stimulate it further (anybody want a 0% interest-rate credit card for nine months?) . . . So what happens if it doesn’t work? Or, to be less gloom-and-doom about it, what happens if it does work long enough to get the administration past the 2004 election, as it well may, but . . . well, what happens then? Are there any chickens involved here? Will they come home to roost? Usually, when you go many hundreds of billions of dollars into debt, there are chickens. Our budget and trade deficits are both so large, a lot of smart people are betting the dollar will weaken, which makes investors less eager to hold US-dollar-denominated bonds, which makes interest rates rise. (The higher interest rate is needed to tempt investors into buying bonds issued in currencies they think may depreciate.) And if long-term interest rates do rise, what does that do to the real estate market, and to all the housing-related industries? And to the spending power people have been getting from refinancing their homes? And their general feeling of wealth? If we were borrowing so massively to make fundamental investments in our infrastructure or our kids, I would be less concerned. Instead, we’re like a company that’s losing money but borrows to pay its richest shareholders a dividend. I think there could be chickens.