US Federal Reserve to buy US Debt with what?

US FEDERAL RESERVE to buy US DEBT? WITH WHAT?


The Coming Depression

Thursday, December 4, 2008


This doesn’t make any sense. The U.S. Government authorizes the Fed to create money out of thin air, which it will then use to buy up the debt of the U.S. Government that nobody else wants?


Is anyone who is currently holding U.S. Treasuries even reading the news? The auctions are going to fail, so the debtor is just going to snap his fingers and create the money to buy the debt that nobody else wanted to buy?



How does the dollar not collapse on this?

The Bloomberg piece focuses on similarities between monetary policies in the U.S. and Japan, and highlights a couple, “Bernanke-San,” references, but there’s just one tiny fact that the article doesn’t mention. Japan is the third largest creditor in the world. Where does the U.S. rank, on the current accounts balance list?


https://www.cia.gov/library/publicat.../2187rank.html


Scroll down. Keep going. More. Down. Down. Until it stops. That’s right. Out of 188 countries on the list, the U.S. is dead last, meaning that it is the largest debtor in the world.

BANGLADESH is BETTER OFF THAN THE USA!



And the U.S. Federal Reserve is going to start buying U.S. Treasuries?

A good read stout and just to bring up one point, debt should be viewed as a percentage of GDP as opposed to total debt but I digress.
Many years ago we abandoned having our currency backed by precious metals and having a fiat currency that is backed only by the economic might of the US economy. Right now we are in a situation similar to 1991 when deficits were exploding and markets feared our ability to pay back these notes. Oddly enough, the markets (at least temporarily) have rushed into bonds, boosting the dollar and lowering interest rates. My thoughts is two fold on this... one, the greenback has always been a haven for safety and security. Two, this time there is a global recession and the other economies are lowering interest rates aggressively causing a run on their currencies.
If you looked at a prior post I had on the US dollar, I even was surprised at the recent dollars accent considering we want to auction over a TRILLION dollars in new paper. Common sense would tell you that bond rates would need to rise dramatically to attract enough investors to raise this type of capital. The real question is when is the breaking point? As I wrote above, the dollar has been declining in value for years and has had a recent run up (this I DIDN'T SEE COMING) is a good thing for us considering we will have our hands out very soon. Using the government figures, we raise around 5 trillion dollars a year in revenue this includes 1 trillion per year from social security in which the govt keeps throwing IOU's in a box thinking it's their money to spend but that's another story. Would you lend a person money that had $50,000 in income and $120,000 in debt? Maybe? If it was on a long term payback schedule like a 30 year note. Since bill clinton got away from issuance of the longer term notes to save interest on the total debt. Most of this debt is in 5 and 10 year paper. This is a long term problem and can't be solved with short term paper. Soon enough you will see the yield curve increase as bond holders demand higher interest rates. There's a rough road ahead...

great....so, we got that going for us too...
i want to over throw a small tropical island government and set up shop. who's in?
i'm thinking cuba