Posted on 05/01/2011 6:09:29 AM PDT by CharlyFord
My weekend column is about “the debt ceiling” and how, even as the Treasury issues more and more debt, there are fewer and fewer people willing to buy it. I forgot to mention the really startling number. Pimco (which has now dumped US Treasuries) estimated last month that, under QE2, 70 per cent of the US Government’s debt is being bought by the Federal Reserve.
In other words, under the 2011 budget, every hour of every day, the federal government spends $188 million it doesn’t have, $130 million of which is “borrowed” from itself.<.p>
That's just printed money, monopoly money! It does not represent anything of value or wealth!
Why should the owners of the Federal Reserve be rewarded with such wealth???? They've done nothing to earn it!
As the debt is repaid, the value of the $$ received will be progressively less valuable. The compounded inflation will pay off the debt.
wealth? It’s just monopoly money
Excellent!!
Do you realize how much inflation it will take to offset the National Debt. We’ll need a wheelbarrow full of bills to buy a hamburger and a truck load to buy a tank of gas!!
Maybe I will be able to skip a meal and pay off my house?
Great line.
Interesting article and comments at the source.
Eliminate the FED. Defund all collectivist’s collectives. The U.S.A. becomes financially solvent and we become very low-taxed prosperous/productive citizens in a country which acts as a beacon for individual liberty.
OUTSTANDING!
And, you’ll have to cash in your entire 401k retirement savings account to pay your electric bill! Kind of puts a damper on the motivation to save money and plan for the future.
New National Motto - Spend it now, while it’ll still buy something!
Please explain money printing. I understand two ways of money creation: (1) Government gives out money as loans, but in that case the borrower must eventually pay it back with interest, so that isn’t a permanent injection of money into the economy. (2) Government allows banks to keep a lower cash reserve to cover loans it makes. In this case also the banks “create” money but it must be paid back eventually.
If one of these loans is defaulted on, does the money that was loaned stay in the economy as though it were merely printed with no expectation of being paid back?
Is there a case where the government simply puts money into the economy with no requirement that it be paid back? Perhaps this would take the form of a zero interest, infinite-term loan.
“Why should the owners of the Federal Reserve be rewarded with such wealth???? They’ve done nothing to earn it!”
A very good post. One could argue that the member banks in the Federal Reserve System are also being rewarded with little effort since they get money from the Fed for practically nothing and then lend it out at a fee which can effectively be at 400% or more. (Even foreign banks get in on the action.) Who couldn’t make money in a system like that? All courtesy of the taxpayers who pay for the money printing AND the interest fees charged by bank when they take loans out.
Great graphic. After all the campaign bluster, the GOP hasn’t succeeded in cutting a single program. Obamacare, Planned Parenthood, PBS funding, wasteful and obsolete agencies, etc. continue without interruption.
Since the election (but notably not before) Boehner has consistently “cried” about only having one half of one third of the government. Well...he has a significant force multiplier that he can easily leverage — the Tea Party — but which he has virtually ignored.
“We’ll need a wheelbarrow full of bills to buy a hamburger”
Or use the bills to generate heat in fireplaces like they did in Germany in the 30’s.
Realize you directed your questions to someone else, but thought you might enjoy this video which went viral awhile back.
http://www.youtube.com/watch?v=PTUY16CkS-k
That's essentially what the Treasury and the Fed have been doing for the last two years, the most recent incarnation being "QEII".
Treasury sells bonds to fund the government, and the Federal Reserve buys them.
“Treasury sells bonds to fund the government, and the Federal Reserve buys them”
I remember hearing that and forgot, but ...
Ok, now the Federal Reserve has money that they can inject into the economy, but they have to pay it back plus interest to the Treasury.
So, the “created” money will eventually be paid back to the Treaury and will thus come back out of the economy.
So I’m still not aware of any money-creating mechanism that doesn’t require that the money be given back and thus removed from the economy. Is there something else?
If there is no other mechanism other than money creation by lending then I think the term “printing money” is not really what’s happening.
You got the players backwards - it’s the Treasury that ends up with money to “inject” into the economy in the name of government spending; they borrow it by selling bonds to the “Primary Dealers”, who in turn sell those same bonds (literally “the same bonds” - matched up by serial number) to the Fed, while of course extracting their fees.
It’s the Federal Reserve that ultimately holds the bonds, and those bonds will be rolled-over in perpetuity.
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