I have been wondering where the money is going to come from for all these bailouts and investments in banks. We already have astronomical deficits. Are we going to borrow it? From whom? Won't any lenders demand a high rate of interest?
What Harry says: You are certainly asking the right questions. Let me give you a highly abbreviated answer. With money coming out of the stock market and other investments, the safest place for it is in U.S. securities. So far there has been enough money going into the demand for U.S. bonds, notes, and bills to keep the interest rates from going through the roof. Remember that a high demand for debt instruments keeps the interest rates low. An alternative would be to just print new money, but that would be horribly inflationary and would really cause us unbelievable havoc. *