How long will the Federal Reserve be able to prop up the U.S. economy by buying our debt? It is a good question that few seem to be able to answer. I have in front of me a number of articles. One article warns that: “the Fed purchased a stunning 61 percent of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.”
The article was written some time ago, but even then the writers were warning that: “the U.S. government is growing increasingly more dependent on borrowing to finance itself.” In the past, foreign investors like Japan and China purchased America’s debt. They are no longer buying as much, but they do hold an increasing amount of our debt nevertheless.
This leads to the question in another article. When it comes to financing America’s debt, “Is there enough money in the world—and at what cost?” Mark Steyn mentioned this article in one of his columns. He believes that the “fact that sane men are even asking this question ought to be deeply disturbing.”
The answer from the authors is that technically there is probably enough money in the world to finance America’s debt. But realistically, that is unlikely. By the year 2020, it would take 19 percent of the GDP of the world’s governments to buy our debt. While that may be theoretically possible, it is very unlikely. At some point our creditors will simply give up on the United States of America.
Most Americans would be very concerned if they understood our current financial circumstances. They aren’t because no one seems willing to tell them the truth. Have you heard the president talk how much debt the Federal Reserve is buying? Have you heard any congressional leaders talk about this? Has the mainstream media explained the possible threat?
The next time you hear politicians talking about budgets or the debt ceiling, remember that they are ignoring a much greater financial problem. And the next time you see the media obsessing about the latest scandal, remind yourself how they are avoiding talking about what is really important.