The Other Bubble - Public Debt

Mr Hoenig said that rising debt was infringing on the central bank's ability to fulfil its goals of maintaining price stability and long-term economic growth. "Stunning" deficit projections were putting political pressure on the Fed to keep interest rates low, infringing on its independence at the risk of inflation, he said.  "Without pre-emptive action, the US risks its next crisis," Mr Hoenig said in a speech at the Pew-Peterson Commission on Budget Reform.

Meanwhile, the foreign appetite for U.S. debt shrank.  Figures show China began to unload its holdings of U.S. treasuries in December, leading to a record decline in foreign demand.