No it won't. The raising of the debt limit could be measured in trillions, but at the most only a couple trillion, and without spending cuts, the raised limit will run out of wiggle room very quickly. The US will default, and if the Fed is smart, will recognize that they are not responsible for correcting an economy managed by an irresponsible administration. As monetarists primarily, creating slush funds for treasuries will not help the situation, but may keep rates low for an extended period of time. However, that extended period of time <b>GUARANTEED WILL EVENTUALLY LEAD TO HIGHER INTEREST RATES THROUGH <i>INFLATION</i>.</b>
The US public must prepare for drastic cuts to overcome all of the government's wasteful spending, which, I might say, is very unlikely to continue for very much longer. 3-5 years, not even till 2018.
Any bond investor in United States Treasuries is being ripped off, and once we get ppi and cpi later this week, I think the yoy rise of 7.5% will make it painfully obvious that owning bonds is a losing proposition, and anyone who wants credibility on this issue should not be a proponent for any type of fixed income investing. Short term rates especially do not create any profitable investing scheme, but I did notice one foreign pundit saying that ten year will go to 250 or 275.