Understand that the money used to buy up this debt was created out of thin air. When you print up money that's not backed by gold, or not coincided with a comparable rise in GDP, the result is inflation - the loss of the buying power of the currency. It's not that prices rise, it's that each dollar buys less. So when you look at the food on your shelf or the price of gas, etc, don't be angry at the seller or the manufacturer. Blame the Fed. Audit it, end it, and send these murdering thieves to prison.
- Cryptogon -
Am I reading this right!? Someone tell me I’m not reading this right.
Here’s the problem that the U.S. Fed’s “exit” poses in simple English: Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but as shown in Chart 2, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve. Of course they purchased more 30-year Agency mortgages than Treasuries, but PIMCO and others sold them those mortgages and bought – you guessed it – Treasuries with the proceeds. The conclusion of this fairytale is that the government got to run up a 1.5 trillion dollar deficit, didn’t have to sell much of it to private investors, and lived happily ever – ever – well, not ever after, but certainly in 2009. Now, however, the Fed tells us that they’re “fed up,” or that they think the economy is strong enough for them to gracefully “exit,” or that they’re confident that private investors are capable of absorbing the balance. Not likely.