Wednesday, September 16, 2009

Proof that the Fed is Monetizing the Debt

I hear a lot of people who're saying that nooo, the Fed is not monetizing the debt, because there are many buyers interested in our debt. For those who don't know what monetizing is, it means that when the Treasury doesn't have investors to finance our national debt, the Fed prints the money and buys the debt. Printing the money just creates fictitious money which only results in inflation.

And here's an easy proof of what's going on. First check out this Treasury debt sale:

It's on July 30th, note the instrument's ID: 912828LD0.

Then go to the New York Fed's search page (that's the office which runs open market operations for the Fed):

As date range, enter 8/6/2009 - 8/6/2009. It's one week after the Treasury debt auction mentioned above. And look in the results. 3rd row from the top, surprise! The same 912828LD0 debt instrument that was sold barely a week before to interested investors!

If that's not obvious that we're heavily monetizing debt, then I don't know what is. Instead of the Fed buying the debt outright and admitting monetization, it's using a 3rd party to hold the debt for a week before buying it back. I wonder who that 3rd party is, and if this wouldn't qualify as conspiracy.

Remember folks, this happened when they had trouble selling $300 billions of debt. Few people were interested to buy it. What will happen with the other 9 trillions that Obama is planning to spend??

Credit for this story go to Glenn Beck and Chris Martenson.

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