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$15t On-Budget (Admitted) Debt Limit Breached

Written by Gary North on November 18, 2011

The on-budget debt of the United States government breached the $15 trillion mark this week. This is the debt that is counted. It does not include the unfunded liabilities of Social Security and Medicare, which are now in the $100 trillion range over 75 years. Some estimates are higher.

More important is the sources of these loans. The main source is trust funds of the government. These total over $4.7 trillion. Next in importance is the debt held by the Federal Reserve: $1.66 trillion. Next is China. It is in the $1.1 trillion range.

China stopped buying a year ago. This means that the FED has had to accelerate its purchases.

The Chinese central bank bought these IOUs by creating fiat money — yuan — and then buying Treasury debt. The Federal Reserve did the same: digital money creation.

So, the growth in debt is based mainly on captive buyers:  U.S. government trust funds and the American central bank.

Because the money is being used to fund the federal government’s boondoggles, this is wealth siphoned out of the private capital sector and squandered. The money created by central banks or taken from the trust funds is not capital voluntary saved by investors. There has been no new thrift.

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