Remember two years ago when Glenn Beck was warning us all that the US was monetizing its debt…:
…but then Ben Bernanke told us all, “Glenn Beck is full of shit, we aren’t and will not monetize our debt, as our Messiah Barack Obama is my witness”?
(OK, he said SOMETHING like that anyway.)
Well…check this bar graph out.
The analysis? We’re screwed:
OK, in plain English, the Fed is essentially monetizing it’s own debt – in other words, purchasing debt with debt. Parenthetically, I am sure this is the point where the Fed would want me to say that it shouldn’t be considered a complete monetization of debt on account the Fed is supposedly using proceeds from mortgage backed securities it purchased through QE 1, in order to fund the purchase of QE 2 i.e. the $600 Billion in treasuries from retail banks. Damn . . . that was a long parenthetical statement. But it is an important one. This is how the Fed sleeps at night, thinking that they are using capitalized “profits” to fund the purchase of its own debt. To be fair, I would say this ostensibly makes sense however, I ain’t much into the ostensible as much as the practical . . . and well, the “ostensible” version smells like something is rotten in the State of Denmark, if I may borrow a paraphrased line from Hamlet.
But just remember if gas goes to $6 a gallon, it’s Sarah Palin’s fault.