This post by Chris Martenson shows one small way that the Federal Reserve and Treasury obscure the true condition of our public finance. Bids and bid coverage are important measures of the marketability of our federal debt. Rigging the market so that "buyers" are actually front men for the Federal Reserve ultimately corrupts the whole process. Worse, this nefarious game is hidden from all but the most sophisticated observers.
The US denominates its debt in US dollars - the world reserve currency. All countries have a stake in this unit of interational trade, so our failure at financial governance could be a worldwide financial disaster. The tried and true method of resolving excess public debt is long term debasement of the currency. Witness the loss of 95%+ of the purchasing power of the dollar over that past 90 years. Currently, our public debt accumulation is so rapid that it will take a very large bush to hide this elephant.
This week's auction features the planting of some new hybrid foliage. TIPS (Treasury Inflation Protected Securities) have been a minor feature of our auctions for some time. At the request of the Chinese, they are about to become much larger. The Chinese and others have been grumbling loudly about the risk of devaluation of our currency. TIPS would give them the inflation protection they desire.
This is a clever scheme, because it "kicks the ball down the street." It obscures the fact that this is in reality a de facto denomination of our debt in other currencies. Is a measured decline into a worthless currency the best we can do?
How deperate we are for a regime that can control tax and spend. Support the Hedge Tax.
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