How Retirement Accounts Could Boost Treasuries

[bobbyw24]

Trace Mayer, JD

The Federal Government is running massive budget deficits which is creating a massive supply of Treasuries. But there is no demand and so the Federal Reserve is monetizing the debt. But these colored coupons merely amount to certificates of confiscation. Where will Congress find the capital to buy Treasuries? Most likely, your retirement account and screwing up your retirement calculator.

MASSIVE BUDGET DEFICITS

The Obama administration is on track to need approximately $2T of new debt sales or about 300% of 2008 debt to fund their aggressive spending. But an disproportionately large amount of purchases come from the ‘Household Sector’. Eric Sprott of Sprott Asset Management (.pdf) enlightens us:

We must admit that we were surprised to discover that “Households” had bought so many Treasuries in 2009. They bought 35 times more government debt than they did in 2008. … Amazingly, we discovered that the Household Sector is actually just a catch-all category. It represents the buyers left over who can’t be slotted into the other group headings. …

Our concern now is that this is all starting to resemble one giant Ponzi scheme. We all know that the Fed has been active in the market for T-bills. Under the auspices of Quantitative Easing, they bought almost 50% of new Treasury issues in Q2 and almost 30% in Q3. It serves to remember that the whole point of selling new US Treasury bonds is to attract outside capital to finance deficits or to pay off existing debts that are maturing. We are now in a situation, however, where the Fed is printing dollars to buy Treasuries as a means of faking the Treasury’s ability to attract outside capital. …

As we have seen so illustriously over the past year, all Ponzi schemes eventually fail under their own weight. The US debt scheme is no different.

http://seekingalpha.com/article/1817...ost-treasuries

[Johnnybags]

In order to pay part 1 off, part 2 needs to be mandatory buying of US Debt. What a scam. It is coming, fast. Congress will approve it all after a pretend dog and pony show. The return on the investment will simply be robbed by inflation and then some.