We’ve often mentioned the bond vigilantes who could cause unimaginable trouble for the U.S. and greatly increase the burden of paying interest on our huge national debt.

Today, our Treasury Department auctioned off $21 billion in 10-year bonds. Fewer bidders wanted the bonds. The bid-to-cover ratio was 2.92 compared to a recent average of 3.12. And, those bidders are demanding we pay a higher rate of interest, now 3.34% up from 3% a few weeks ago.

It could get a lot worse!

We’ve been running huge deficits for 8 years. We’ve spent hundreds of billions on stimulus. Yesterday, we learned the President and the Republicans added to the deficit by extending the tax cut. Today, a senior official at the Chinese Central Bank said Europe was a better credit risk than the U.S. We have no plan to deal with the growing deficit. Is it any wonder that bond buyers are worried about inflation and demanding higher rates to take risk of inflation and credit?

The bond vigilantes may get here before we expected. If so, sitting in cash would make me comfortable.