Financing Government Out of Thin Air

 

In 2011 the Fed purchased 61%  of all debt issued by the Treasury Department.

The Federal Reserve is propping up the entire U.S. economy by buying 61 percent of the government debt issued by the Treasury Department, a trend that cannot last, Lawrence Goodman, a former Treasury official and current president of the Center for Financial Stability, writes in a Wall Street Journal opinion article published Wednesday.
“Last year the Fed purchased a stunning 61 percent of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis,” Goodman writes.
Goodman also warns that U.S. economy and markets are “at risk for a sharp correction” if conditions aren’t “normalized.”
“This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.”

So we have the Federal government borrowing from an arm of the Federal government, the Federal Reserve System, that creates the funds to purchase this debt by conjuring funds out of thin air.  I have seen men go to prison for fraud schemes more fiscally sound than this.   This will not end well.

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