It appears that foreigners are no longer lining up to buy U.S. government debt. As reported in the article below, the Federal Reserve is now buying around 80% of the debt issued by the U.S. government to fill its $1.4 Trillion record annual budget deficit. This is a disturbing development and confirms that the U.S. government is essentially broke.
This monetization of debt will only serve to increase the rate at which the dollar is collapsing and push prices for gold and silver significantly higher. If you still have your savings or retirement in dollars, you might want to consider converting those dollars into real assets while you still can.
The original article below was posted by “Shattered Paradigm” and appears at the blog “The Future.“
Most Americans have no idea just how bleak the economic future of the United States is. In 2009, the U.S. government was forced to borrow a much, much larger amount of money than ever before. So who did they get that money from? Did they borrow it from the China and Japan like they have in so many other years? Actually, no. In 2009, the Federal Reserve bought approximately 80 percent of all U.S. debt. But weren’t they also the ones selling it? Yes, they were. It is called a shell game and it is now what is being used to fund the United States government.
But have you seen headlines about this in any mainstream media outlet? No. However, the fact that the Federal Reserve is now buying approximately 80 percent of U.S. government debt was recently admitted on CNBC. The video clip below is from January 8th, and at the 1:45 mark of the video CNBC anchor Erin Burnett mentions the 80 percent figure and uses the term “Ponzi scheme” to describe the current state of affairs….
So what is wrong with the Federal Reserve buying up so much of the U.S. government debt?
Well, the truth is that it is wrong on so many levels it is hard to even know where to begin.
First of all, when the Federal Reserve buys U.S. government debt, that does not leave us in a situation where we “owe the money to oursevles”.
The Federal Reserve is not “us” – if you do not know this fact, then please read this article on our sister site. The United States does not “own” the Federal Reserve and it never has. The Federal Reserve is a private central bank that is owned and operated for profit by a group of elite international bankers (many of which are not even Americans).
Secondly, this action by the Federal Reserve represents extreme market manipulation. Normally what would happen is that interest rates on U.S. treasuries would rise until there were enough buyers to meet the supply.
But the Federal Reserve is not letting that happen. Instead they are swooping in and “buying” any treasuries that have not been sold at extremely low interest rates.
In this way, the Federal Reserve is keeping interest rates at ridiculously low levels. You see, if interest rates on treasuries started to skyrocket, that would immediately cause interest rates on everything else throughout the U.S. economy to fly through the roof.
If interest rates did skyrocket, there would be a massive cascade of mortgage defaults and personal bankruptcies and it would be an absolute death blow to the U.S. economy.
So instead of letting the free market have its way, the U.S. government and the Federal Reserve are manipulating the markets in an effort to keep interest rates artificially low.
But they can’t do it forever.
And they are making the long-term economic problems of the United States far worse.
By flooding the U.S. financial system with cheap dollars, the U.S. government and the Federal Reserve may be able to prop up the U.S. economy for the moment, but they are also ensuring the death of the U.S. dollar.
When you put more dollars into the system, the value of each existing dollar decreases.
When you put gobs of new dollars into the system, the value of each existing dollar will ulitmately end up dramatically decreasing.
The dollars that you are holding right now are never going to have more value than they do today.
Someday when you wake up and a loaf of bread costs ten dollars, you can thank the Bush administration, the Obama administration and (most of all) the Federal Reserve for shoving the U.S. economy into the toilet.
At this point, nothing can save the U.S. dollar. Use them while they can still buy you something.
Because the day is coming soon when it may be cheaper to use dollars as toilet paper than to actually use them to buy toilet paper.
To get my views on the markets and the best ways to protect and grow your wealth in the coming years, subscribe to the Gold Stock Bull Contrarian Report. In addition to receiving the monthly newsletter, you will be able to view the GSB Portfolio which gained 133% in 2009 and receive email trading alerts whenever I buy or sell. It is only $35 per month and you can cancel at anytime if you aren’t 100% satisfied.