For Freepers who are just now beginning their journey into enlightenment, let me explain about these asset purchases. Sounds great, huh? Who could be opposed to our Federal Reserve purchasing some more assets? They’re buying bonds, which are supposed to be conservative investments. So maybe they’re building up our nation’s financial strength somehow.
No. Their lips are moving. As always, that means they’re lying. Here’s how this shell game works.
When a government has to start printing money to pay its bills, the end is near. Soon such money becomes worthless, so governments will not even think of doing that unless it is a last resort to buy a little time before everything collapses. If you did have to do that, you might try to disguise it, so that it didn’t look to the casual observer like you were printing money to pay your bills. It would buy a little more time before people caught on and began acting in the disruptive ways that people do during currency destruction.
When the US government was semi-solvent, we just borrowed more and more money by selling bonds. But as it became increasingly clear that we could never repay our debt, fewer and fewer institutions and governments were willing to buy our bonds. It was more and more clear that we would have to default. We begin to offer bond and T-bill offerings that were undersubscribed, that is, people were saying “No, thanks” and leaving them unbought.
So the Federal Reserve Bank began buying the US bonds because no one else would. There were some bond auctions where 90%+ of the debt was “purchased” by the Federal Reserve Bank. The jig was up. Or it would be as soon as the press accurately informed the public about what was going on.
HAHAHAHA!! Sometimes I crack myself up.
There is so little risk of that happening that they doubled down. The Fed buys the debt for 0.1% - 3%, as if it were not junk debt, but blue-chip debt. This prevents the inflationary spiraling interest rates that the free market would like to assign to our debt. Mmm-mmm, fresh, crunchy new Federal Reserve Notes, better known as dollars. And they’ll be none the wiser, Ollie.
Just thought you should know something about those shiny new assets the Fed is purchasing.
Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent.I want to remind you that I am only talking about the unfunded portions of Social Security and Medicare. It is what the current payment scheme of Social Security payroll taxes, Medicare payroll taxes, membership fees for Medicare B, copays, deductibles and all other revenue currently channeled to our entitlement system will not cover under current rules. These existing revenue streams must remain in place in perpetuity to handle the “funded” entitlement liabilities. Reduce or eliminate this income and the unfunded liability grows. Increase benefits and the liability grows as well.
It's been growing substantially worse since 2008. I've seen estimates of debt and unfunded liabilities of around $150 Trillion. There's no way to tell how large the global derivative market is, but just one company manages over a 1/4 quadrillion in commitments. There's not enough global value to cover anything close to those commitments.