Comment: Funny enough, did you know

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Funny enough, did you know

Funny enough, did you know despite the Fed now buying more debt, intragovernmental debt holdings actually shrunk! It went from a high of 50% of the debt to about 41%. The reason being, that SSI and Medicare are no longer running surpluses; they are no longer buying treasury bonds and are instead "cashing in" bonds. So while everything has gone it, they have mostly stayed flat!

So from a "demand" perspective, it changes nothing...even if you believe that is what is happening, the demand coming from SSI/Medicare/government pensions funds has been replaced, not even completely, by the federal reserve.

Secondly, the Federal Reserve is not buying debt in a typical fashion. The Federal Reserve is creating money while creating government treasury, which it holds. It then goes to the private sector, the banks, and exchanges their assets, including T-bills, for that created money. The Federal Reserve does not want the banks to buy bonds with that money...they want to the money to stay on the balance sheets at the banks, so that:

1) banks can have confidence that the Federal Reserve will bail them out
2) So that long-term interest rates go down, as banks can feel that they don't have to worry about liquidity issues caused by low reserves.

If the private sector banks purchased bonds, that would defeat the admittedly asinine purpose of increasing the reserves parked at the Fed.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a