Sequestration – Day 4: the government held hostage.

It the fourth day of the Sequestration crisis.  It’s Monday.  And the sun still came up, the stores are open (even though few people are making purchases), and I am still online.  Not to mention the fact that the media is beginning to report the truth, that the cuts aren’t as severe as the temper-tantrum throwers in Washington want you to believe.

Heck, even the mayor of New York knows it ain’t so bad.

But here’s where all of the politicians and PhD economists are wrong:

Furthermore, while saying the federal deficit does indeed need to be curtailed, Mr. Bloomberg argued the United States could owe “an infinite amount of money” and there is no specific amount that would cause the country to default.

“We are spending money we don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.”

See, it doesn’t matter that the government keeps borrowing money that it can’t pay back.  Because the Chinese and other investors will keep lending money to the U.S. government.

Waitaminute!

The Federal Reserve is buying 90% of the U.S. Treasuries that are for sale.  In fact, the ‘investor’ that holds the largest amount of U.S. government debt is the Federal Reserve.  The Chinese, Japanese, and other ‘investors’ are actually reducing the amount of U.S. securities that they hold.  No problem, right?  After all, the Federal Reserve is part of the government, so they are just shuffling money around.

Wrong.  The Federal Reserve is a private banking cartel owned by the largest banks in the U.S.  The way the scam works is that the Fed ‘prints’ money that it gives to the federal government in exchange for the government securities.  The government gets money to spend without raising taxes, and the Fed gets interest payments over the life of the securities.  The problem is that as the national debt gets larger, the amount of interest owed also increases.  The U.S. paid over $220 billion in interest on the national debt in 2011.

As to the assertion that our lenders can’t stop giving us money, that statement is just ludicrous.  As I already mentioned above, the Chinese and other lenders are already starting to cut back on lending the U.S. government money.  If it wasn’t for the Federal Reserve buying 90% of new debt offered, the government would have already had to cut back spending, without all of the rhetoric, finger-pointing, and crying in the media.  And if the Federal Reserve stops buying U.S. government debt, well, it’s gonna make The Hunger Games look like Winnie the Pooh.

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Categories: Borrowing, Debt, Government Shenanigans

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