WSJ Op-ed: Federal Reserve buying 61 percent of U.S. Debt

March 30, 2012 by · Leave a Comment
Filed under: Opinion 

Being that our monetary units come into existence as a debt instrument ie: U.S. Treasury Bond, I can not fathom how issuing more “debt” is going to solve a fundamental problem of having too many obligations that only are paid with the issuance of new debt.  If you don’t believe me, then calls the U.S. Treasury and ask them where your tax money goes and what it pays for?  Hint:  It doesn’t go to pay this years current fiscal budget.   It is going to pay past budgets and interest tied to the bonds that were issued when we needed to do that spending.

It seems that our government is hoping that literally “buying” time is somehow going to get our economy the time it needs to repair the damage that has been done since the Vietnam War era that is a notable event that we started issuing debt to cover when we were not willing to tax the people appropriately to pay for.  If we did not have a policy and supports “free trade” which in turn has sent many living wage jobs overseas to drive down prices and increase profits to our corporations.  The problem with this line of thinking is that there is a breaking limit and we have crossed that line and now we are seeing income and spending by the average person shrinking while prices in areas we exclude in the CPI (Consumer Price Index) are rising (food & fuel).

I believe we are in a era of sustained high unemployment along with a majority of the American population being pushed into some sort of government assistance program.  This will not continue forever and the longer it takes us to address these fundamental issues, the harder the transition will be and more citizens will be hurt because of our collective lack of action.  If you wanted “my” solution to the bring it would go like this:

Some Solution Suggestions:

– Changed Debt based Monetary issuance into Asset based issuance, over time retire all our current obligation in good faith.

– Review and or Reform all entitlement programs

– Change the policy of “free trade” into “fair trade” where we recognize that our market is sought after and we would not allow corporations to dump finished products on our markets while evading wage and pollutions laws

– Set real limits to private financing of campaign elections (state & federal) so our representatives are forced to take more time for regular citizens and drastically less from lobbyists and wealthy donors

– Enforce the rule of law in all cases

– Support public education, we need more educated citizenry, this creates more informed voting and that should provide better policy decisions from the representatives that sway these more educated voters.

I could go on about a million more little issues that have compounded to create this large problem we are dealing with.  Lastly, read your history, it helps.  Happy Friday!

Money News – 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.”

Click Here to Continue Reading


Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!