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View Diary: 'Borrowing from China' -- another Romney debate lie (77 comments)

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  •  The US government does not (5+ / 0-)
    Recommended by:
    fuzzyguy, Odysseus, auditor, ozsea1, devtob

    borrow anything, it merely exchanges reserves for treasuries, both of which it created out of thin air in the first place please read this free book.  The US stopped borrowing (pegging) its money to anything in 1971.  Since then it is merely pretending it needs to borrow anything from anybody.  Every deficit dollar ever spent is nothing more than a part of existing reserves or treasury savings of the private and external sectors.  Without deficit spending there is no net reserves or savings at all!  Reduce the debt and you reduces the reserves and savings, nothing more.

    •  except (3+ / 0-)
      Recommended by:
      auditor, ozsea1, devtob

      Bonds are publicly traded--and those trades affect interest rates.

      Apres Bush, le deluge.

      by melvynny on Sun Oct 07, 2012 at 11:40:32 AM PDT

      [ Parent ]

      •  Not the interest rates of the bonds which the (0+ / 0-)

        Government can always set.  And besides there is no need to sell them when nothing needs to be borrowed.

        •  Bond interest rates (0+ / 0-)

          The government does not set interest rates on bonds. It offers bonds for auction at a certain rate based on what Treasury believes will be salable. If it guesses wrong and the bonds don't sell, the auction fails. To prevent that Treasury could (as has happened) adjust the rate upward.
          We came very close to a failed auction in 2010. It is entirely conceivable that at some point the foreign creditors who ordinarily buy our debt will balk, based on the size of the ever-growing deficit. At that moment, we turn into another Greece, with sharply rising yields (interest rates we would have to pay) and the eventual collapse of the dollar as a reserve currency.

          •  A failed aution is meaningless. (0+ / 0-)

            We don't need to sell (borrow) anything.  "It offers bonds for auction at a certain rate based on what Treasury believes will be salable."  In other words it controls the rate!

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