Yeah, definitely. The debt ceiling will come; in one form or another, at one time or another. Better now that later, just like better 10 years sago than now.
Aren’t all of its existing bonds already owned? I guess if the current bondholders want to sell them, the Federal Reserve could buy them up. Is that what you’re talking about? Or what?
Bump… do you have an answer to this question, Esuric? Or anyone else?
If the debt ceiling isn’t raised, then the budget will have to be balanced immediately, probably through a combination of tax hikes and spending cuts.
So then the US government couldn’t purchase its outstanding debt, because it’s already owned by others?
Why wouldn’t it be able to purchase back it’s own debt?
Well, I was presuming the current holders of the debt wouldn’t want to sell it. I guess it depends on the price, though. Is that your point?
No, that’s not my point. Why are you presuming that the current holders of debt wouldn’t want to sell their debt?
I’m no longer making that presumption. That doesn’t mean the US government would necessarily be able to buy back all of its debt that’s held by other parties. Some or even all of them may not want to sell it at the price being asked for.
I got some clarity on this, finally, [from Peter Schiff, of course].
The Fed and the Treasury are legally 2 different entities. The Fed is the one that prints the money and is theoretically privately owned. Now if the govt is broke and needs to borrow more money, that means the Treasury needs more money. And if there is a debt ceiling, it means that the Treasury already owes too much money [=has issued too many bonds] to people.
Now if the Fed buys up all the old bonds, that does not erase the Treasury’s debt. It simply means that now the Tresury owes it to the Fed, a private entity.
[Of course the Treasury cannot buy back its bonds, because we are talking about them being broke, right?]
Peter also discussed the legality of the Fed’s simply tearing up the bonds after it buys them, and erasing the debt that way. But he concluded that it’s illegal, was a bit over my head.
He also mentioned that the govt has another trick up its sleeve, called borrowing money off budget, but ther is a limit to how much they can do of that.
As others have said, Schiff has publically addressed this…
