Friday, March 4, 2011

Bond, U.S. Bond. Dry Martini, Shaken Not Stirred

Thanks to Cash McLovin for the link.  Some good econ meat to chew on.

First, the graphs.  From left to right, the purchasers of US Treasury Bonds.  Chart 1 shows historical, chart 2 is current, and Chart 3 is....what happens after June 30th?

Leaves me scratching my head.  Some may say that the Fed has been funding the government's deficit.  In other words, Congress spends over revenue (deficit) knowing that it's ok...the Fed will just buy it up.  But, I think that's a little simplistic.  I truly think the Fed has the economy's best interests in mind.  The government...well, not so much.  I think the government spends because it can.  There have always been people willing to buy the debt incurred.

But, as people lost confidence and as the 2008 crisis hit, the Fed moved in to try and save the day.  Well, as the article points out, not after June 30th.  The Fed is getting out of the US debt business.

So, who will step in?  The public?  Not me.  Not confident enough.  But there may be more confident people than me.  Maybe....maybe not.  And if "maybe not", who is going to fund the debt?  Are we willing to sell more of it overseas, and even if we are willing, are overseas funders interested?

And I think that's the point.  A very scary point.  D-day...indeed.

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