links for 2011-06-30

  • Washington is struggling to make a deal that will couple an increase in the debt ceiling with a long-term reduction in spending. There is no reason for the players to make their task seem even more Herculean than it already is. But we should be prepared for upward revisions in official deficit projections in the years ahead—even if a deal is struck. There are at least three major reasons for concern. First, a normalization of interest rates would upend any budgetary deal if and when one should occur. At present, the average cost of Treasury borrowing is 2.5%. The average over the last two decades was 5.7%. Should we ramp up to the higher number, annual interest expenses would be roughly $420 billion higher in 2014 and $700 billion higher in 2020.
  • Public companies are sitting on record amounts of cash — and they’re spending more of it on mergers and acquisitions — but money isn’t the only thing controlling these deals. Five Silicon Valley technology executives, four of them at public companies that are buying, spoke in San Francisco last week at a conference sponsored by the technology blog GigaOM on the multitude of factors that go into making a deal — including emotion. “The whole process hurts –- it’s painful for the acquirer and the acquired,” said Lorenzo De La Vega, a vice president at International Business Machines Corp.’s software group who’s been involved in mergers and acquisitions for 19 years. “You keep an eye on the prize and rally the team around fulfilling that vision…so you have something to show for it.”

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