Why treasury bond interest rates stay low when the budget deficit increases : Planet Money The government used to be afraid to borrow too much money. Today, it borrows hand over fist. And it's ... fine? | Subscribe to our weekly newsletter here.

Bond Voyage

Bond Voyage

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US President Joe Biden speaks about the American Rescue Plan and the Paycheck Protection Program (PPP) for small businesses in response to coronavirus, in the Eisenhower Executive Office Building in Washington, DC, February 22, 2021. Saul Loeb/AFP via Getty Images hide caption

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Saul Loeb/AFP via Getty Images

US President Joe Biden speaks about the American Rescue Plan and the Paycheck Protection Program (PPP) for small businesses in response to coronavirus, in the Eisenhower Executive Office Building in Washington, DC, February 22, 2021.

Saul Loeb/AFP via Getty Images

In 2020, The US government borrowed $3 trillion in response to the economic damage caused by the COVID-19 pandemic. In the next few weeks, Congress is likely to pass a relief bill that will lead the government to borrow another $1.9 trillion.

If that amount of borrowing seems insane, that's because it is. Or at least, it used to be. Until recently, the government worried that borrowing too much would hurt the economy by driving up inflation and interest rates.

Now, the United States borrows more money than ever, but interest rates for treasury bonds don't budge and inflation stays low. Somewhere along the way, it seems, there was a massive shift in the way deficits and interest rates work.

Today on the show, when everything changed. Why the government stopped being scared of borrowing. And how we make sense of this new world.

Music: "Marvellous Vibe," "Call Me Yours," and "The Soul of Shaolin."

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