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Dec 04 2012

Fed Monetizes Obama’s Gargantuan Debt

Elections have consequences. The consequence of Obama’s reelection — which should be obvious to anyone with a double-digit IQ — will be hyperinflation and economic ruin. Less obvious is just how close we are already:

Even as U.S. government debt swells to more than $16 trillion, Treasuries and other dollar fixed- income securities will be in short supply next year as the Federal Reserve soaks up almost all the net new bonds.

The government will reduce net sales by $250 billion from the $1.2 trillion of bills, notes and bonds issued in fiscal 2012 ended Sept. 30, a survey of 18 primary dealers found. At the same time, the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co.

Ironically, the depressed state of the economy is the only thing holding back Weimar Republic-style hyperinflation. At this point, there is no way out of Hope & Change that isn’t going to hurt.

obama money

On a tip from AC.

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  • Bill

    The Fed is buying treasuries is because no one else wants enough of them. Bernanke is again creating $$ out of thin air. Elections have consequences. Get it fools? ELECTIONS HAVE CONSEQUENCES!

  • justme

    We’re on a one-way cruise aboard the Titanic. May as well enjoy the band and the free ice in your drinks before the whole thing sinks.

    The difference between the Weimar Republic and the Bernake-Obama Kleptocracy, The Germans were not committing cultural suicide, but were paying off the onerous League of Nations mandated War Reparations with confetti paper. In that light, the Weimar Economists were brilliant, while “our” economists will prove to be the most inept in history and responsible for collapsing a superpower.

  • Frank

    “At this point, there is no way out of Hope & Change that isn’t going to hurt.”
    ________

    The only thing at issue is whether or not the citizens have the ‘nads to insure it also hurts, in the worst way, those that caused to problem.

  • AC

    We’re paying off onerous reparations of a different sort as part of Comrade Chairman’s radical social justice and anti-colonialist agenda.

  • Bo-Jangles

    And, generally speaking, the American voters deserve every bit of it, and more. And more is on the way.

  • RobM1981

    Remember, the total debt isn’t $16T – it’s more like $88T. Call it $90T, just to make it easy. That’s about 6 times our GDP, gang.

    If we had a budget, these $’s would have to be included as part of the ledger. Why do you think we don’t have a budget? (actually, this is one of a dozen reasons, including “Barack Obama is a liar.”)

    Monetizing the debt is, at this point, pretty much the only way out. Who thinks that we can simultaneously maintain the entitlements AND pay this debt down any other way?

    We’ve been over the “fiscal cliff” for something like 20 years. Read Samuelson’s last article…

  • Sam Adams

    RobM1981 says:
    December 4, 2012 at 10:17 am
    ___________

    Big difference is that, until a few years ago, the debt was sold to investors. Now that debt is being bought by the US Government’s central bank.

    Of course the reason that the debt isn’t being sold to private parties is that the US bonds don’t pay enough to attract investors, and there isn’t enough investment capital out there to buy our debt. If the government actually let interest rates rise enough to attract private capital, we would be paying a trillion or more per year in debt.

  • Sam Adams

    From the linked article:

    Even after U.S. public borrowings outstanding grew from less than $9 trillion in 2007 as the U.S. raised cash to pay for spending programs designed to pull the economy out of the worst financial crisis since the Great Depression,

    It should be apparent to most of even the dim Christmas light out there that spending programs do not pull the economy out of any recession. They weren’t successful during the Great Depression, and spending another 6 trillion dollars over the past 4 years has clearly been unsuccessful.

    In science, when a theory is proved to be false, you abandon it. Not so with the politicians. They love thoroughly discredited Keynesian economics because it provides them an excuse to spend unlimited amounts of money.

  • AC

    Keep your powder dry.

    When the hyperinflation hits and the food stamps either don’t go out or can’t keep people fed then things will turn very ugly, very fast.

    The result will be an epidemic of home invasion robberies and violent muggings.

  • Jay in DC

    “Keep your powder dry.

    When the hyperinflation hits and the food stamps either don’t go out or can’t keep people fed then things will turn very ugly, very fast.

    The result will be an epidemic of home invasion robberies and violent muggings.”

    This will never happen, and seems to be a fantasy of those that want a Mad Max style scenario. The government will come for YOUR money in the form of 50%+ income taxes because they know you will bend over and take it like you are doing right now at a 30+% tax rate. They will do this LONG before they unleash the feral hordes that have kept them propped up in high places. So you keep on with that post-apocalypse fantasy when all that is really going to happen is that you will be taxed into oblivion and you will like it.

  • AC

    That is not how hyperinflation works, historically.

    Hyperinflation makes the money WORTHLESS. They don’t come for people’s money because it is easier to print it up. Besides, what I have in my bank accounts now wouldn’t buy a postage stamp in hyperinflated currency.

    They could outright confiscate 100% of the money of the 1% and it wouldn’t help.

    Why?

    Strong money serves as a medium of exchange and a store of value. In hyperinflation, the money loses its role as a store of value and becomes an instant trading ticket. These tickets are doled out by the government according to perceived need.

    My land won’t feed the starving masses. My house won’t feed the starving masses. My gold won’t feed the starving masses.

    Only food will feed the starving masses, and there won’t be enough of it to go around once producers throw in the towel and refuse to be paid in monopoly money and distributors fail to see the point in spending their time buying high and selling low as society circles the drain. A supermarket turns over its stock in three days. Good luck convincing all of the production and supply chain to continue slaving away for worthless paper.

    Even if the stamps keep up with the rate of hyperinflation will there be anyone willing to accept them?

    I can’t see a farmer sending his crop or his herd into town to receive garbage paper in return. Should nationalization be threatened…..ask the Ukrainians how well that works.

    Should hyperinflation break out and Bernankebucks can’t be traded for food then you will be robbed and possibly murdered for either your food or something of tangible value which can be traded for food.

    Every hyperinflation in history has been ugly and violent – and none of the recorded cases happened in a nation with a completely dependent and agitated underclass like we have here.

  • Sam Adams

    Jay in DC says:
    December 4, 2012 at 2:35 pm

    So you keep on with that post-apocalypse fantasy when all that is really going to happen is that you will be taxed into oblivion and you will like it.
    ___________

    Funny thing is that attempts to tax people into oblivion result in hard working people stopping working. You probably don’t remember the heady days of Jimmy Carter when inflation was above 10% and tax rates on the rich were above 70%. Higher income people spent a lot of time and money learning how to use tax loopholes to decrease their tax burden (rather than using that time and money to make more money…and pay more taxes). High income earners would just stop working about September or October, since working more would just put them in a higher tax bracket and they would be working essentially for free.

    That’s how progressive income taxes work. They punish the working, so the working start working less….producing less tax revenue.

  • Sam Adams

    AC says:
    December 4, 2012 at 3:13 pm

    Should hyperinflation break out and Bernankebucks can’t be traded for food then you will be robbed and possibly murdered for either your food or something of tangible value which can be traded for food.
    ___________

    Guns, Gold, God, and Gardens.

    People should have a one year food supply. Such a supply is useful even if the Zombie Apocalypse doesn’t break out.

    People should have a garden where possible to raise foods to supplement your food supply.

    Items of intrinsic value can be traded for food. Personally I like .22 shells. I save larger caliber shells for those who don’t know how to ask politely.

    God….yep…not only do we need to rely upon a higher power, we need to understand that those who do their best to live like him are happier than those who don’t.

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