Who is buying our Federal debt?

The Second Great Depression?

Another $100 billion of Treasury debt is being sold this week at historically low interest rates. The Federal Reserve (which is an independent entity, not a department of our federal government) sells US Treasury debt and returns to the Treasury the currency received to fund the operations of the Federal Government. The Treasury needs these sales because tax receipts collected are not nearly enough to cover current expenditures. The shortfall this year is over 1.5 trillion dollars, with no end in sight. To put that into perspective, you could have spent over 2 Million Dollars a DAY since the birth of Christ, and you still would not have spent what our budget deficit is for this year alone.

The historically low interest rates that the Treasury pays supposedly is because there is such a large demand that the Treasury does not have to offer higher interest rates to sell the Bills, Bonds and Notes.

There is only one problem. According to the latest TIC (Treasury International Capital) report, China, Japan and the oil-exporting countries are systematically and discretely dumping our Treasuries. These countries have historically been the largest buyers of our debt. By analyzing the data provided by various published government reports, one cannot determine an answer as to who is actually now buying most of our debt; you can only determine who is not buying most of it.

PIMCO (Pacific Investment Management Company), the largest bond fund in the world, has analyzed the situation and believes the Federal Reserve could be secretly purchasing up to 80% of the Treasuries sold. Eric Sprott of Sprott Asset Management likens what is transpiring in the Treasury market to a Ponzi scheme (remember Bernie Madoff). Ben Bernanke, the Chairman of the Federal Reserve, has arrogantly stated, “the US Government has a technology, called the printing press that allows it to produce as many US dollars as it wishes at essentially no cost”.

Buying our own debt thru “phantom” entities is currency debasement. If true, as PIMCO and Sprott suggest, the Federal Reserve and our federal government, through the Treasury, are committing financial fraud on an international scale.

All roads of my investigation end in the same place. Take your pick of the following: undercover quantitative easing; creating dollars out of the ‘clear blue sky’; or debasement of our currency. They are all the same. They all lead to perdition.

As we all know, Ponzi schemes eventually have to collapse. I worry that when this massive fraud becomes general knowledge, the wholesale selling of US treasuries will commence in earnest. The massive dumping of US Treasuries will be like everyone running to the exits of a burning theater at the same time. The first lucky few will make it through the exit in time. The vast majority will not.

Reckless money printing will eventually render a country’s currency worthless. The cost of borrowing will skyrocket. Savers will be destitute. Prices will spiral upwards. Commerce and trade, as we now know it, will cease. It has happened many times before in other countries that have recklessly debased their currency.

I truly fear that we are at the precipice of a currency collapse of biblical proportions.

Bill Willkomm
7/30/2010

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