Gov't Run Ponzi Scheme

[snafu]

Say it isn't true! the International Media writes that the US Government is buying it's own US Treasury Notes to finance the horrendous deficit. If that is incorrect, who is buying US Treasuries?

[maat55]

Last I heard the fed had about 5 trillion.

[disneysteve]

How does that work exactly? How do you borrow money from yourself?

[GrimJack]

China owns most of our debt.
I doubt that the Treasury can issue Treasury Notes to buy Treasury Notes - what is the context and/or source of your statement.

With regards to 'horrendous deficit', I found this image. This is a picture of where our debt is.

[kork13]

hmmm, that's funny... When I saw "government-run ponzi scheme", I thought you guys were talking about Social Security... but what do I know?

China owns most of our debt.

To be completely accurate, this statement is not quite correct (in spite of its status as a rallying call for many). China is the largest single international location of American debt holders (incl. governments, institutions, and individual investors). The majority of the national debt is held within the United States. It is held by federal/state agencies, American companies, investors (institutional and individual), and so on. I don't know the exact figure, but I've seen between 25-40% of the total national debt is held internationally. The rest is still domestic.

[PaydayLoner]

I don't see how that would work either. If the government is buying treasury notes, that would cost them money, not finance the deficit. They should be issuing more treasury notes to fund the deficit.

I know at least two people who are buying treasury notes, LOL! My parents. They have some in their retirement funds.

From the second page that GrimJack posted, it looks like China owns just a little under 5% of our debt, with Japan slightly less, and then other countries on down from there. Did I figure that right? 798.9 billion dollars divided by 18 trillion dollars?

[YISave]

For years we were the LENDER nation and now we are in debt to others. Some debt is not bad but not the amount we have now.

[maat55]

Here is a graph of the debt ownership. The fed owns 49%.



File:Estimated ownership of US Treasury securities by category 0608.jpg - Wikipedia, the free encyclopedia

United States public debt - Wikipedia, the free encyclopedia

[maat55]

How does that work exactly? How do you borrow money from yourself?

When the government cannot finance its expenditures with tax revenues it sells bonds. These bonds are printed by the fed and either sold to foreign or national investors.

When there is more spending than buyers for bonds, they go on the feds balance sheet. This is where inflated printing can occure. The fed creates money out of thin air for the government to sell or spend into the economy. Most of this money ends up in bank balance sheets.

The way the government contracts these funds is to raise interest rates just like they did during Reagan. When the government cannot contract these funds they cause inflation in the economy. This is the cruel hidden tax you have heard about.

This is why I do not support government programs. The government is notorious for spending more than they can tax and end up hurting the saver and future generations with excessive interest debt.

The sick part of this is that many of the national investors like Goldman sachs recieve interest from the taxpayer by lending to the government fiat currency. Our constitution allows the government to create its own funds for free.

[maat55]

The fed was established in 1913 with only three votes in congress, while many congressmen were away for Chistmas. They did not anticipate this vote while they were gone.

The purpose of the fed was to stabilize the money supply in the market. It was believed that the market needed an backstop against bank runs and stable funding for the economy.

As history has proven, the fed has failed to perform this function properly. Anytime you introduce fractional banking, you introduce risk. The fed has been given a free hand in influencing the market with no accountablility.

To further complicate the system, the government steps in and backstops lending institutions while promoting poor lending practices, hence the housing meltdown.

The national debt is not a ponzi scheme itself, but an bi-product of government guaranteeing the money it overspends. SS on the other hand is, picture Madoff with an printing press(national debt,2.5 trillion in non-marketable IOU's) to cover his broken promises.

[jasonnoguchi]

Can't see how buying their own T-bills is a ponzi scheme..hahhaha... anyways, China is US's biggest creditor. Also, the government can print more money to buy their own T-bills. This is done due to the fact that additional money needs an engine to go to the economy and that's either by supplying cash to banks (which they obviously are not needing right now and are not asking for more) or buying their own debt.

[cptacek]

Japan took the lead in February:
Japan Overtakes China as Largest Holder of Treasuries (Update1) - Bloomberg.com

Don't know the status as of now, though.

[maat55]

Can't see how buying their own T-bills is a ponzi scheme..hahhaha... anyways, China is US's biggest creditor. Also, the government can print more money to buy their own T-bills. This is done due to the fact that additional money needs an engine to go to the economy and that's either by supplying cash to banks (which they obviously are not needing right now and are not asking for more) or buying their own debt.

No, China is not the largest creditor, they are the second largest foreign creditor.

[GrimJack]

The US gov actually owns most of its own debt. The pretty pics I posted were of foreign ownership. Here are some pics of how WE own our debt.

[ea1776]

Not sure if you guys have taken a look at the debt clock webpage. Tons of information on there:
U.S. National Debt Clock : Real Time