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Soon There Won't Be Enough Money in the World to Fund US Debt
http://libertarian-neocon.blogspot.com/2012/11/soon-there-wont-be-enough-money-in.html ^ | libertarian neocon

Posted on 11/19/2012 1:36:14 PM PST by libertarian neocon

I just started reading After America by Mark Steyn which I highly recommend to anyone.  It is probably the most humorous book on the economic apocalypse you'll ever read.  Anyway, Mark Steyn refers to a paper called "Financing US Debt:  Is There Enough Money in the World - and At What Cost?" by US Treasury official (and former Chief Economist of the Office of Management & Budget) John Kitchen and Menzie Chinn of the Robert M. La Follete School of Public Affairs at the University of Wisconsin.  Using estimates from the CBO, they calculate how much US Treasury debt foreign governments will have to buy over the coming years to keep funding our government at current interest rates.  The results are simply not pretty.  It is becoming increasingly evident that the US debt is just so enormous that we will eventually not have enough people around to actually buy our debt from us.  Check out this key chart:





As you can see, the way we are going, foreign ownership of US debt will have to be  over 20% of non-US world GDP by 2020!  The worst part about all this is that this figure was in the low single digits just a decade ago.  We are headed for a crisis and soon, probably in the next four years (though exactly when is unknown as nobody knows which level will be the tipping point).

Don't believe me?  I know one of my lefty friends likes to point out that things can't be so bad otherwise US debt wouldn't be trading at such a low yield right now.  As if complacency amongst the masses is a good justification to be complacent yourself.  I would just like to point out that Greek 10 year debt was trading at a 4.5% yield in August of 2009 and was trading at 29% just two and a half years later!  When things stop working, they can stop working very very quickly.

There just simply isn't enough money out there.  Just think about the graph above.  In a given year, about 20% of our debt has to be refinanced, so at 20% of world GDP, that means that foreign governments will have to expend 4% of their GDP every year just for us to roll over our debt!  Considering most governments account for 30-40% of GDP, we are talking about at least 10% of government budgets that would have to be allocated towards US Treasury purchases.  Why exactly would they do something like that?  Especially with such uber low interest rates on US debt?

The worst thing is that we are already seeing the largest foreign owner of our debt start to actually reduce their holdings.  China, who we seem to assume will constantly be willing to buy our debt because our economies are so linked, has actually reduced its holdings of our debt by $115 billion in the last year, that's a 9% reduction in just one year.  Without China providing incremental demand for our debt, where are we going to find additional buyers?  Remember, most of the larger economies are also struggling to pay off their social safety net promises and don't have the excess cash to spend on us, not in any meaningful way.

Like it or not, we are likely to see a combination of these three policies in the next few years by our government to deal with  the coming crisis:

1.  Money printing from the Federal Reserve, which has pretty much already begun.  In 2011, as part of QE2, the Federal Reserve bought a whopping 61% of US debt issuance in that year.  Eventually Brazilian type hyperinflation will be rearing its ugly head.  This will hurt the poor especially as they won't have any real property that will increase in value to counterbalance the across the board increase in expenses they will face.
2.  Interest rates on our debt will simply have to increase to attract more investors.  1, 2 and 3% yields will be a thing of the past as those aren't even close to attractive returns on investment.  Unfortunately, increasing yields will kill our real estate market (again) and balloon our deficit further as our interest expense burden will mushroom.
3.  Severe austerity will be forced on us.  If this austerity is tax heavy, expect it to kill the economy and not actually close the funding gap much, which is a phenomenon we've seen in Greece.  Eventually, even entitlements will have to be cut, but the longer we wait the less help it will do and more pain it will cause.

Most people have been thinking the problem will only come to a head in 20-30 years.  Based on the foreign holdings data, that crisis is coming very soon and unfortunately we have the very worst President possible to deal with that crisis.


TOPICS: Business/Economy; Government; Politics
KEYWORDS: china; debt; deficit; obama

1 posted on 11/19/2012 1:36:19 PM PST by libertarian neocon
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To: libertarian neocon

Well, if they can’t print it, I suppose they could just add a few zeros onto the EBT transfer cards. Computuer programs that are running on tetrabytes will just have to make a few more zeros. No one is fooling anyone, we just know the value of a zero.


2 posted on 11/19/2012 1:38:43 PM PST by rovenstinez
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To: All

We sure need some here.
FReepathon Day 50!

3 posted on 11/19/2012 1:39:27 PM PST by onyx (FREE REPUBLIC IS HERE TO STAY! DONATE MONTHLY! IF YOU WANT ON SARAH PALIN''S PING LIST, LET ME KNOW)
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To: libertarian neocon

There ALREADY isn’t enough money in the world to fund US Debt. The Federal Reserve has to buy (ie. print) 70+% of US Debt issuance now.

try to imagine where interest rates would go if the FED did not buy US Debt.

That is why the Federal Reserve is the first and most important pillar of Progressive plans for Government. No FED means no money printing, which means the Gov’t must pay real interest rates on debt, which means Gov’t spending would be eventually be checked by the market, which means the Gov’t would not be able to run massive, long-term deficits as they are now, which means they can’t fund the welfare state.


4 posted on 11/19/2012 1:42:35 PM PST by PGR88
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To: libertarian neocon

We should round up every single idiot that voted for obama and have them arrested!!!!! They are just as responsible for this debt as obama!!!!


5 posted on 11/19/2012 1:43:12 PM PST by Arpege92 (If you don't stand behind our troops...please feel free to stand in front of them!)
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To: libertarian neocon

Obama’s America.
He promised to foundationaly change America.


6 posted on 11/19/2012 1:43:12 PM PST by Rightly Biased (Avenge me Girls AVENEGE ME!!!! ( I don't have any son's))
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To: rovenstinez

You can ALWAYS print more.

Prices will be adjusted accordingly.

Maybe Zero can get his mug on the new 100,000 dollar bill? You know the one you will need for a loaf of wonder bread..

oh wait..

Bimbo bread.


7 posted on 11/19/2012 1:43:12 PM PST by cableguymn (The founding fathers would be shooting by now..)
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To: libertarian neocon; All
Every day we get more laws, more government , more debt. That is incremental socialism and that doesn't work.

They even banned 100 watt lightbulbs are are forcing us to buy mercury laden curly bulbs , banned big sodas, and a million other freedom robbing laws. They banned light bulbs because of decades of fake government funded research on the hoax called global warming. this alone proves socialism doesn't work that they have funded trillions of $ of global warming research. Oh so we now see there is no global warming so they rename it to climate change.

This country became great because it was the freest and had the most limited government.

A vote for democrats is a vote for tyranny, slavery, and economic failure.

8 posted on 11/19/2012 1:44:23 PM PST by rurgan (give laws an expiration date:so the congress has to review every 4 years to see if needed)
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To: Arpege92

eff that.

Round um up and put um to work! They have a huge tab to pay off. My kids sure as he77 don’t want to pay it off for um!


9 posted on 11/19/2012 1:44:54 PM PST by cableguymn (The founding fathers would be shooting by now..)
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To: PGR88

“try to imagine where interest rates would go if the FED did not buy US Debt.”

No need to imagine it. It’s happening. Gold will skyrocket, the economy will flatline, inflation will eat us and the housing market (most common source of wealth for the middle class) will stay underwater until interest rates are forced up...then we will have what is already what we have if there were rational thinking...a double dip.


10 posted on 11/19/2012 1:46:07 PM PST by jessduntno ("Socialism only works...in Heaven where they don't need it and hell where they have it." - RR)
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To: libertarian neocon
Soon There Won't Be Enough Money in the World to Fund US Debt

 

Nonsense. Just print up a butt-load of these...

Problem solved.
 

11 posted on 11/19/2012 1:49:13 PM PST by Responsibility2nd (NO LIBS. This Means Liberals and (L)libertarians! Same Thing. NO LIBS!!)
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To: libertarian neocon

Of course there will be “enough money”!

Bernanke can pull up the necessary app on his workstation, and create as much ‘money’ as he wants to. Now, if the ‘money’ had to be converted to hard cash for any reason, that could be a problem as there wouldn’t be enough physical capacity to print it all in a timely matter. Hell, we’d probably run out of trees/cotton right now if we tried paying off our national debt in cash. Our creditors will just have to accept our binary ‘digi-dollars’, or wait awhile.


12 posted on 11/19/2012 1:51:55 PM PST by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
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To: libertarian neocon

I can’t be overdrawn, I still have checks?


13 posted on 11/19/2012 1:52:22 PM PST by showme_the_Glory (ILLEGAL: prohibited by law. ALIEN: Owing political allegiance to another country or government)
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To: libertarian neocon

>> There just simply isn’t enough money out there... foreign governments will have to expend 4% of their GDP every year just for us to roll over our debt!

If they fail us, America’s Sugar Daddy Ben Bernanke has an ENDLESS appetite for treasuries.


14 posted on 11/19/2012 1:52:32 PM PST by Nervous Tick ("You can ignore reality, but you can't ignore the consequences of ignoring reality.")
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To: cableguymn

Perhaps he’ll coin a new denomination and call it Obama Bucks. One Obama Buck will be equal to $100,000 US dollars.


15 posted on 11/19/2012 1:54:58 PM PST by ez (When you're a hammer, everything looks like a nail.)
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To: libertarian neocon
Mostly correct.

However, this article like many, about sovereign debt, misses the main point. The main point is that USA and other nations no longer plan to borrow money from any known source. They plan to, if fact have started years ago, borrow money-out-of-thin-air (MOOTA). That's right, when they want more money they just call up their pseudo-national bank and request a loan. Their pseudo-national banker says fine&dandy and pulls up their exclusive money transferring screen wherein they transfer the requested _money_ TO the government (GOV), FROM nowhere! They most assuredly record this transaction as a debt owed by GOV, in their spreadsheet.

Since it is guaranteed that this kind of transaction will, and is, completely unraveling the worlds’ economies, businesses and soon the very lives of those who live upon the world, there are a whole lot of people who need to get a small clue...

16 posted on 11/19/2012 1:55:08 PM PST by veracious
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To: cableguymn

“Round um up and put um to work!”

lol liberals working...such an oxymoron!


17 posted on 11/19/2012 1:56:18 PM PST by Arpege92 (If you don't stand behind our troops...please feel free to stand in front of them!)
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To: libertarian neocon

“Soon There Won’t Be Enough Money in the World to Fund US Debt”

Ha! The amount of money that the Bernank can create is limited only by the number supply.

QE-ternity can expand the money supply to infinity and beyond.


18 posted on 11/19/2012 2:02:59 PM PST by Skepolitic
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To: libertarian neocon

As others are saying, the Fed will just print more money and “buy” T-bills.


19 posted on 11/19/2012 2:05:07 PM PST by Blood of Tyrants (Why is the government more concerned about protecting a microbe on Mars than an unborn baby here?)
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To: PGR88

“which means Gov’t spending would be eventually be checked by the market”

It will be, anyway. The market, like murder, will out.


20 posted on 11/19/2012 2:07:24 PM PST by Tublecane
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To: cableguymn

“You can ALWAYS print more”

Tell that to Weimar Germany.


21 posted on 11/19/2012 2:10:09 PM PST by Tublecane
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To: veracious
I'm really trying to get a handle on this.

If I borrow money that I can't re-pay and I borrow more (that I can't re-pay) to cover what I can't re-pay .. I eventually run out of money to borrow and get to the point of facing the leg-breakers.

(Sorry .. it's the best I can do)

And THEY say, "Give us our money or we break your legs"

Obviously I can't give any money so ... what? ... I get my legs broken?

And they leave me there to heal, but come back after re-hab and again say, "Give us our money or ... "

what? ... you'll kill me ?

OK .. they kill me ... my family has long ago fled THIS Joe MSZPKXFT (probably spelled wrongly), so there's no where to go.

OK .. I'm dead, the money's not paid and .. what now?

My house?

Worth aboth $300 on the open market ... piece of shit in the wrong part of town.


So, besides someone controlling my estate (America), what can happen?


See ... all this seems so futile.

22 posted on 11/19/2012 2:11:51 PM PST by knarf (I say things that are true ... I have no proof ... but they're true)
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To: veracious
Since it is guaranteed that this kind of transaction will, and is, completely unraveling the worlds’ economies, businesses and soon the very lives of those who live upon the world, there are a whole lot of people who need to get a small clue...

Your summation was excellent. Right on spot!

23 posted on 11/19/2012 2:13:36 PM PST by Lysander (vices are not crimes.)
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To: Arpege92
We should round up every single idiot that voted for obama and have them arrested!!!!! They are just as responsible for this debt as obama!!!!

Y'know... I really do hate to point this out, but it was 'W' who signed the first TARP bill.

I always side with the conservatives, but I'm not sure the GOP has any moral high ground on this particular issue.

24 posted on 11/19/2012 2:14:20 PM PST by Oberon (Big Brutha Be Watchin'.)
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To: veracious

So long as you have a central bank and legal tender you will fund your government through it. That’s a law of human nature. That was always the point of the Federal Reserve; well, that and bailing out Big Business when malinvestment leads to recession. It’s not that so far we’ve been borrowing and soon we’ll have to rely on inflation. Oh, no. Inflation’s done most of the work all along. Borrowing, and to a certain extent taxation itself, are PR to prevent the general public from freaking out and collapsing the monetary system.


25 posted on 11/19/2012 2:16:51 PM PST by Tublecane
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To: veracious

Excellent post, and a lot of FReepers are out of date on this.
Bush was selling debt to China.
Baraq and Geithner just create it electronically.


26 posted on 11/19/2012 2:17:46 PM PST by nascarnation (Baraq's economic policy: trickle up poverty)
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To: knarf

“If I borrow money that I can’t re-pay and I borrow more (that I can’t re-pay) to cover what I can’t re-pay ...”

Not to worry. In the 21st Century you don’t need to do this in person. that’s what your CongressCritter is for...on your behalf..and that of your grandkids...


27 posted on 11/19/2012 2:19:31 PM PST by mo (If you understand, no explanation is needed. If you don't understand, no explanation is possible.)
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To: knarf

It’d help to imagine yourself as a counterfeiter. A really good one whose product is indistinguishable from the real thing. So good, in fact, that your debtors will continue to accept your funny money until the real thing becomes so obviously overabundant as to be worthless.


28 posted on 11/19/2012 2:21:45 PM PST by Tublecane
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To: Tublecane

Whoops, you are the debtors. I meant your lenders.


29 posted on 11/19/2012 2:22:36 PM PST by Tublecane
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To: nascarnation

Bush was creating it electronically, too. We’ve been creating it electronically or with paper since 1913.


30 posted on 11/19/2012 2:24:09 PM PST by Tublecane
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To: libertarian neocon

Depends on what you mean by money.

From 1796 to 1912, the “money question” (what is it, who decides, and how are interest rates set) was one of the top three political issues in every election.

We have become so inured to the novel form of “money” that we use now that it seems normal, when it decidedly is not.


31 posted on 11/19/2012 2:25:00 PM PST by Jim Noble (Diseases desperate grown are by desperate appliance relieved or not at all.)
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To: Tublecane; mo
Still ... we're told we're headed for a financial cliff (here come d'leg breakers ), and SOMEwhere along the line, the game has to end and someone has to lose it.

OK .. I lose the game ... what was the purpose?

32 posted on 11/19/2012 2:30:01 PM PST by knarf (I say things that are true ... I have no proof ... but they're true)
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To: libertarian neocon

They’ll just keep printing more. Heck they don’t even have to print it these days


33 posted on 11/19/2012 2:32:13 PM PST by GeronL (http://asspos.blogspot.com)
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To: knarf

“...what was the purpose?”

To “prove” to the world capitalism “doesn’t work” and that for the “sake of the women, children, blacks and the poor” it must be banned. And only Marxism/Communism, which is “fair” will be allowed.

Any other questions?


34 posted on 11/19/2012 2:46:09 PM PST by mo (If you understand, no explanation is needed. If you don't understand, no explanation is possible.)
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To: mo
And the percentage of people wanting to "prove" are what? ...

.000000001 % of the population?

I guess I'm leading up to ... without getting banned from FreeRepublic to stating ... I'm pretty sure I won't allow anyone to do that to me.

Read into that what you will.

No one wants to say words that we swore we'd say IF the election went the wrong way.

Helloooo ...

McFlyyyyy ....

35 posted on 11/19/2012 2:57:05 PM PST by knarf (I say things that are true ... I have no proof ... but they're true)
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To: showme_the_Glory

Isn’t it scary that people who think like little children can vote?

Kid: “Daddy, can I get a new bike?”

Daddy: “I don’t have the money right now.”

Kid: “Write a check.”


36 posted on 11/19/2012 3:01:02 PM PST by Terry Mross (I haven't watched the news since the election. Someone ping me if anything big happens.)
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To: libertarian neocon
unfortunately we have the very worst President possible to deal with that crisis

It is not his intention to "deal with that crisis", he is fully aware of what he is doing as he heads for the precipice with his foot flat out on the gas. It is his intention to destroy our economy. I base that assumption on his performance to date, there is no other explanation.

Regards,
GtG

37 posted on 11/19/2012 3:02:25 PM PST by Gandalf_The_Gray (I live in my own little world, I like it 'cuz they know me here.)
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To: KoRn

Digi-dollars, absolutely correct, The audit of the Federal Reserve books showed it leant out $16 trillion over a 3 year period to foreign and domestic banks. This amount, greater than the entire accumulated national debt at the time.

No money was printed, they wired electronic ones and zeros. The greatest financial fraud in history occurred and no one noticed.


38 posted on 11/19/2012 3:08:39 PM PST by dscott8186 (dscott)
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To: Gandalf_The_Gray

“It is not his intention to “deal with that crisis”, he is fully aware of what he is doing as he heads for the precipice with his foot flat out on the gas.”

I agree. Unlike some, I will not ever consider him to be my President.


39 posted on 11/20/2012 5:04:50 AM PST by libertarian neocon
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To: knarf

in case you were wondering exactly who they are...and what their plans for you and I really are...

“I want you to imagine sitting in a room with 25 people, most of which have graduate degrees, from Columbia and other well-known educational centers, and hear them figuring out the logistics for the elimination of 25 million people.

And they were dead serious.”

http://littlegreenfootballs.com/article/31662_Bill_Ayers_Terrorist_Group_Discussed_Genocide_of_Americans


40 posted on 11/20/2012 9:56:59 AM PST by mo (If you understand, no explanation is needed. If you don't understand, no explanation is possible.)
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To: libertarian neocon

Here are the simple questions that all Republicans should be asking Obama:

Mr. President, are you consciously trying to wreck the American economy?

Mr. President, everyone agrees that the present course is unsustainable. Why do you continue to push us along this path?

[Want a solution? Here’s a start. Get rid of baseline budgeting, which guarantees annual increases. Freeze all budgets in place. Then start cutting waste and redundancy. I believe that Romney would have done something like this.]


41 posted on 11/21/2012 12:49:28 PM PST by BruceDeitrickPrice (education reform)
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To: BruceDeitrickPrice
Mr. President, are you consciously trying to wreck the American economy? Mr. President, everyone agrees that the present course is unsustainable. Why do you continue to push us along this path?

At this point, the media, and those on the dole, know everything that they need to know. Obviously, they don't care.

And the Republicans won't fight.

So we're all sitting here waiting for the inevitable.

The only remaining question is how the inevitable plays out. My guess is that hyperinflation will cut American living standards by 50%. Done over the course of a couple of years, and with the complicity of the media, the layabouts, and most workers, won't be able to identify the cause of the problem.

The military will be cut by 70-90%.

Wealth and estate taxes on "the rich" will rise to 90%.

No government agencies will be eliminated. Entitlements will be cut substantially, as will the salaries of government employees.

42 posted on 11/21/2012 12:57:15 PM PST by St_Thomas_Aquinas (Viva Christo Rey!)
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