Federal Deficit

[Bestmiler]

I don't understand this statement made in an article written today by the WSJ.

"Meanwhile, the $1 trillion federal deficit is crowding out private investment..."

How is it that the federal deficit affects private investment?

Article: http://online.wsj.com/article/SB124762005061042587.html

 

[Martinghoul]

Federal deficit should imply higher long-term treasury yields, which are used as risk-free basis for all other cost-of-capital calculations. As a result, all discount rates rise, which makes private investment in a project less attractive, simply because the PV of your future cashflows from this project is much smaller.