-- Published: Friday, 18 July 2014 | Print | Disqus
By Thomas Fink
As Federal Debt continues to accelerate in growth every year we come to wonder… “Who would want to continue buying the debt?”
Federal debt held by all foreign and international investors is roughly $6 Trillion. Federal Debt Held by Foreign & International Investors includes every foreign nation, and international and foreign person who owns U.S. Federal Debt.
Despite foreign demand remaining for U.S. Federal Debt from foreigners, the real important note to remember is after 2008 the Federal Reserve became the largest buyer of U.S. Federal Debt. At the end of June 2014 the Fed holds a record $4 trillion worth of U.S. Federal Debt on its balance sheets.
Since the Federal Reserve is the greatest buyer of U.S. debt, it is creating a dangerous situation for future inflation. The Dollars it has created to buy US bonds and treasuries through the process of debt monetization are mostly sitting at the Federal Reserve Banks. The $4 Trillion created by the Fed since 2008 are slowly beginning to flow into the economy and inflation has already begun to rage over the last couple months. This trend will likely accelerate over coming months.
Clearly we can see the Federal Reserve increased its monetary base since 2008. The Federal Reserve continues to buy $35 billion of U.S. Debt a month.
How will the Fed be able to stop its asset purchases in October? This brings us to Belgium.
Belgium has increased its treasury holdings exponentially over the past six months, who in Belgium could possibly be buying so much U.S. Debt? No individual has $362 billion. The GDP of Belgium is $483 billion, so it can’t be the Belgium government. The only conclusion we can draw is... it must be the European Central Bank, ECB. We can assume The Federal Reserve has only been able to taper and paint a rosy image to the public, because the ECB has begun to pick up the slack for the Fed by buying U.S. Treasuries through Belgium. Belgium is now the third largest holder of U.S. Treasuries.
Foreign and international investors remain big holders of U.S. Federal Debt and even accelerated their holdings after 2008. China still continues to be a significant holder of U.S. Federal Debt. The greatest danger is the Federal Reserve being the greatest buyer of U.S. debt; it will certainly lead to higher inflation in the future. It could possibly even lead to runaway inflation once foreign holders begin to seriously sell their positions, and start dumping the Dollar as they realize it is becoming increasingly worthless. The only things keeping the Dollar a float now are the Fed, ECB, and the Dollar's Petro Status.
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-- Published: Friday, 18 July 2014 | E-Mail | Print | Source: GoldSeek.com