In February 1993, weeks into Bill Clinton’s presidency, James Carville famously quipped: “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
What Carville was referring to is the fact that the U.S. government runs massive deficits every year, which requires the U.S. government to issue bonds to fund those deficits. In turn, other people, i.e. the bond market, have to be willing to buy those bonds we issue. That is the difference between a healthy country vs. a country like Russia, where nobody wants to buy their debt and they have to resort to cannibalization to fund spending.
