aaron, james lindsay, and pietro nivola ( eds. ), agenda for the nation ( the brookings institution, 2003 ). see also the general accounting office, truth and transparency : the federal government ’ s financial condition and fiscal outlook ( september 17, 2003 ) and rudolph g. penner and c. eugene steuerle, budget crisis at the door ( the urban institute, october 2003 ). see, for example, peter hooper, karen johnson, and jaime marquez, “ trade elasticities for g - 7 countries ”, princeton studies in international economics, vol. 87, ( august 2000 ). even this claim may be overoptimistic. see, for example, thomas laubach, “ new evidence on the interest rate effects of budget deficits and debt, ” finance and economics discussion series working paper ( april 2003 ). among other things, laubach has an interesting way to remove cyclical effects from his dependent variables, interest rates. portfolio shifts, perhaps even including increasing their stock of dollar - denominated debt. this denomination effect would not permanently prevent any relative price adjustment, but it could lengthen the process. beyond that, for pragmatic reasons this conventional adjustment process could be extended or distorted even further. by way of illustration, asian central banks have now accumulated more than a trillion dollars of international currency reserves - largely in dollar - denominated assets - equal to roughly half of the outstanding net debt of the united states. these central banks are not traditional wealth - holders motivated by expected risks and returns. instead, they seem motivated more by the prospect of preserving low domestic currency values for their exporters. 10 to pursue this objective, they can print money to buy u. s. securities. this monetary expansion could generate domestic inflation unless it is sterilized with other open market sales of securities - and the mere scale of present and expected future debt stocks may make continued sterilization impossible. but if these central banks continue behaving this way, the so - called credibility range could be extended significantly. while trade deficits should ultimately correct themselves, perhaps after a long trek through the credibility range, there are really no natural self - corrective mechanisms for budget deficits. once the u. s. economy gets through the credibility range, interest rates on the increasing government debt will have to rise to induce people to hold the debt. this rise increases the interest burden and causes total deficits to rise further, all the time subtracting

alan greenspan : financial literacy remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the federal reserve bank of chicago ’ s money smart conference, chicago, illinois ( via videoconference ), 13 may 2004. * * * this morning i should like to broaden the focus of financial literacy to the education you are going to need more generally in the years ahead. within the next several years the vast majority of you will have completed your formal schooling and begun careers in private business, government, or the nonprofit sector. i suspect most of you have not as yet figured out what career you would like to pursue. but as with all the generations of teenagers that have gone before you, something will grab your interest and engage you. with me it was music. i was entranced with sound and visualized myself playing with the likes of the glenn miller orchestra or becoming another benny goodman. i practiced clarinet and saxophone three to five hours a day and, following graduation from high school, toured the country for a couple of years with a dance band. i was a good amateur but only an average professional. i soon realized that there was a limit to how far i could rise in the music business, so i left the band and enrolled at new york university. during my dance band years i spent the twenty - minute breaks from playing in reading. i became intrigued by books on finance, and, hence, at nyu i majored first in finance and, as my interest broadened, in economics and in what was then called mathematical statistics and now econometrics. in retrospect, that choice probably was not surprising since math was my most engaging course in high school. i graduated and joined an economic research organization. but my education did not stop. i earned a masters degree and went on to further studies at night at columbia university. at the age of twenty - seven i joined a very small wall street firm as a partner and was essentially in charge of making it grow. it did, and i eventually became the senior partner. but twelve hours a day at work left little time for school, and my aspirations to earn a ph. d. faded, at least for a time. however, the pursuit of my profession as an economist and the head of a consulting firm required that i broaden my knowledge, and i proceeded to read books, not only on economics and mathematics but also on philosophy, history, physics, and astronomy. i was