The U.S. Does Not Have a Debt Problem

The Fed buys their Treasuries from dealers who do bid on the bonds at the Treasury Auction. So again, this is the second time you've tried to deflect with process, instead of addressing policy. So once again, Interest rates are being kept low purposefully through the method of the FED buying the majority of the Treasury bonds.

 

http://finance.fortune.cnn.com/2013/01/30/goldman-sachs-bond-market/

 

If by "interest rates" you mean the rate at which banks are willing to lend money, then yes, that is one of the Fed's current objectives in an attempt to get money (and the economy) moving. But if you're using "interest rates" to refer to the yield on T-notes, then you're wrong.

But even if you don't believe me, we're left with your claim that investors are "fleeing U.S. debt," and your only evidence is what you've implied from the Fed's actions ("the Fed's buying up treasuries because no one else wants them!"). Stop embarrassing yourself and just admit it's a bogus claim.

 

The government can no longer sell its bonds to anyone but the Fed, and the Fed is printing money to pay for them.

But no, that's not a problem.

 

Google "portfolio balance channel."

 

Ahh you really need to get your facts straight, the Democrats controlled the House and were led by Byrd the vote was 219-213. Not one Republican in Congress voted for the tax increases along with a number of Democrats dissenting, in the Senate VP Gore had to vote to break the tie getting them barely passed

The tax rate cuts produced record revenues 40% higher that the low of the recession and 20% higher than before the recession. They also helped produce 52 months of full employment and a deficit of just a measly $161B by 2007. To what exactly are you objecting. You prefer the high sustained unemployment Obama and the Democrat policies have given us? You prefer the TRILLION DOLLAR plus deficits Obama and the Democrats have given us with their policies or lack thereof?

$161B versus $1,400B deficits, which do you prefer? And BTW war is the FIRST thing we pay for, everything else is secondary.

 

Sorry, I mis-remembered the tax increases as coming later in his presidency.

Got an objective source for that data say from the OMB?

No, we didn't pay for the wars, we borrowed the money to pay for those wars. During the Bush Admin, the wars were paid for with supplemental appropriations which did not show up in the official budget numbers. Obama put those numbers back on the books when he took office, which increased the deficit by $853 billion. http://www.washingtonpost.com/busin...h-vs-obama/2012/01/31/gIQAQ0kFgQ_graphic.html

 

Government is not legally allowed to sell their bonds to the Fed. Gotta think of something knew.

 

I think the fact that the Fed is the majority bond buyer speaks for itself.

 

It's such a simple argument to understand. The Fed wants yields on treasuries to be as low as possible so money will flow in to other sectors of the economy. The last thing the Fed wants right now is to provide any incentive for people to save money.

- - - Updated - - -

In return banks get interest bearing reserves. Explain to us why you think the Fed is buying all these bonds, lol. They obviously are trying to drive down yields. Now think like a logical person, why would they want to drive down yields and make treasuries less attractive to investors?

 

When Warren Buffet bought $11B worth of IBM shares in 2010 did you assume he was the only one interested in buying that stock?

 

They are the majority bond buyer for a reason. You have yet to state the reason. They are not the majority buyer because no one wants to buy our bonds. They are literally trying to remove bonds from the marketplace so that no one buys them, lol. And they sucked up all the short term bonds, now they are targeting more longer term bonds to hit their long term rates. Them buying bonds have absolutely nothing to do with the solvency of the United States or a lack of buyers. It's simply to target interest rates.

 

The government really requires low yields because it wants to keep deficit spending. They have done a good job getting away with it since interest rates are so low; actually these are historic lows. I've explained this to you before but you are a distracted student! Interest on the debt was 224.8 billion dollars for 2012. That’s about 6% of the budget on a debt of almost 16 Trillion dollars. Now in 2000, interest was 12% of the budget; double the percentage of the current budget. However the amount of interest we were paying that year was 215.2 billion dollars. Just a little less than what we are paying now, even though the debt at that time was about 5 trillion dollars. So how is it that we are paying almost the same in interest now when the debt is 3 times as much? Our interest rates. 10 year Treasury bond yields in January 2000 were 6.66%. AS of January 2012 they were at 1.97%. Those are interest rates at historic lows. The chart I was looking at went back to 1953 and interest rates now are at the lowest rate they’ve been since then. If we were paying the same interest now as we were paying in 2000 our payment on the interest on our debt for this year would be over 700 billion dollars. That’s a pretty large amount of money to spend every year in which you get nothing out of it.

Oh and one more reason: That QE3 money is flooding the stock market, making our GDP look much better than it is (and frankly it's not looking to hot even with the QE3 help).

Interest rates are the real time bomb of our debt crisis; just ask the Greeks (paying 24% on their bonds). Under the conservative CBO Baseline interest on the debt exceeds defense costs in 2019. Of course, the CBO’s predictions on interest rates are no better than mine, that is to say, crappy. There are too many factors involved that goes in to interest rates. But I don’t see how we can avoid the inevitability of Treasury bond interest rates returning to the normal 4% to 6 % range. In fact, interest rates returning to these levels would instantly add 4.9 Trillion to our national debt.

- - - Updated - - -

Nope, and I didn't say the FED is the only customer of Treasuries, but we have a need to sell to finance the deficit that exceeds the world market demand, hence the FED purchases.

[

 

You're just making this up. The Fed doesn't buy Treasuries to finance the deficit.

 

He'll never understand no matter how much we explain it to him. Because if he did understand, it would completely invalidate his party politics and make the country seem like it's doing well rather than in a desperate situation. His entire theory hinges on making America look as bad off as he can. The Fed doesn't need to buy bonds to finance the deficit, lol.

 

You just made this up. The Govt does not require low yields at all to keep deficit spending. Yea, they are historic lows because we had a historic decline in economic growth due to a severe financial crisis. They are doing the opposite of what they did in the great depression. Seems like they know what they are doing now. So I'm not sure what your point is that interest rates are at historic lows. Seems kind of obvious to anyone with any type of economic knowledge why they are at historic lows.

Show me one credible source that proves that QE3 is flooding the stock market. I guarantee you can't find one. Other than maybe a .com site that has your same misunderstanding of the Fed. Not a single dollar in QE3 goes to the stock market, lol.

The Greeks have a completely different monetary system. One reason why they pay 24% on their bonds and we pay 1%. Interest rates on the national debt are the least of our worries. What would cause interest rates to return to 4-6% and how much would GDP and the money supply be at that time?

 

And those tax rate increases slowed the rate of the recovery he inherited both GDP and revenue growth.

cbo.gov. Download that latest spreadsheet for the historical budget data and run the numbers.

War is the first thing we pay for. When we are engaged militarily in a hostile action that gets paid for before anything else. Everything else is ancillary.

At a little under $100 billion a year even if you add that in, the worst deficit during the 2000/2001 reccesssion, $500 billion. Obama and the Democrats in the 2008/2009 $1,400B almost three times higher. Bush, that was one year and then even adding in the war the deficit fell to $261B. Obama every deficit since over $1,100B four times as high. Obama's one year stimulus was almost as much as BOTH wars over ALL the years. Did he pay for that? Has he paid for his $Trillion dollar deficits?

War is not a budget item. You spend whatever is necessary to conduct it in an ongoing basis. But as noted above, even adding in that spending the performance of the Bush policies versus the Obama polices is quite clear. How the Obama supports believe they had a leg to stand on complaining about Bush deficits when we see the atrocious performance of Obama is just amazing.

It did nothing of the sort and your cite says nothing of the sort while it makes the fallacious claim that the Bush tax rate cuts cost us money when in fact they were responsible for record revenues

 

LOL! I just made this up? You're hilarious!

Ha! I don't have a credible source....

Gee you never gave your reason. Although the fact that they don't have control over their own monetary policy is an issue, if they did have control over their monetary policy the only other alternative it would give them is to monetize the debt, which would ease their debt pressure, but not their interest rates since investors would require those returns compensate for the inflation.

As for the interest rates, I've yet to read from any economist, including that crackpot Krugman, that thinks our current historical low rates are the new normal. If you think they are, or are aware of some research that forcast that we'll have those low interest rates indefinably, be sure and notify the CBO, because I think you are keeping them in the dark on that.

Of course your "debt doesn't matter" philosophy shouldn't depend on interest rates. You should stand by that regardless of what interest rates are.

 

It's not a problem until it is.

And when it is, it will happen fairly suddenly.

And those who said it wasn't a problem will then blame someone other than themselves for the chaos.

 

You did make it up. The Govt does not require low yields to deficit spend. The Fed's actions have nothing to do with funding Govt spending. So yes, either you lied about it because you know it was wrong, or you just made it up.

Of course you don't

I never said current interest rates are the "new normal". And yes, interest rates are nothing more than another expense. If you are so scared of interest rates you should buy up tons of Govt debt so you get paid all those juicy interest payments, lol. You have literally no clue what you are talking about. Interest rates will rise when economic growth rises, so interest expenses will still be relative normal despite their nominal value being higher. That's just common sense.

 

What will cause this "sudden" problem you are talking about?

 

Don't know.

We wake up one day and find foreigners are longer buying our debt and we have a currency crisis perhaps.

 

Why would we care if foreigners are buying our debt or not? Are you saying, we can't spend our own made up money unless foreigners give us our own made up money back that we gave them?

 

Every single one of us benefits from debt. If you have money, then you have benefited from debt.

 

Foreigners own half our debt. If they decide they no longer want to buy it or to dump it indiscriminately, you could see a dollar crisis and interest rates spike, causing disruption in financial markets and the economy.