$2 Trillion Treasury Issuance Will Cause Gold and Silver to Explode in 2010
January 21, 2010 by Editor · Leave a Comment
One of the most important events in 2010 will be the issuance of nearly $2.2 trillion in Treasury bonds to fund government spending and the major impact it will have on the markets. Words: 465
In further edited excerpts from the original article* Jeffrey Lewis (www.silver-coin-investor.com) goes on to say:
The Situation in 2010
The Federal Reserve has only $200 billion remaining in its quantitative easing fund to buy agency debt and US Treasuries, and the funds will only last until March under the program enacted early last year. This leaves a total of $2.05 trillion unfunded that must be borrowed to keep government programs in the black – at least with capital and not actual earnings.
Therefore, in 2010, the US Treasury will need to borrow more than $2 trillion without the help of the Federal Reserve. China has already said it is limiting its purchases of US Treasuries, and the government is proving its resolve by redeeming long-dated bonds and rolling them into short term debt. Other purchasers, such as Japan, have their own financial problems. The remaining countries, institutions, and other investors aren’t too keen on earning low rates on what is quickly becoming riskier debt.
The Fed Will Have to Step in with its Printer
What is the solution? The Fed will simply need to print more money. Remember, this recession was triggered due to a shortage of credit. To aid in both creating credit, as well as providing short-term loans to businesses and government, the Federal Reserve began to create money to ease the burden. As a result, the Fed bought more debt than anyone else by a factor of 10. In 2010, with the same credit problems and net issuance of $2.25 trillion, the Fed will have to further its quantitative easing (inflation) programs to keep the Treasury markets liquid.
Should the Federal Reserve continue to print money to gap a shortfall in Treasury sales, the creation of $2 trillion would create inflation of 25% overnight. Obviously, as in all markets, inflation will not come out of the woodwork for a period of months and possibly up to two years, but it will eventually reach the market. Subsequently, in 2010, investors of all types need to be incredibly prudent with their money and protect their assets with precious metals.
*http://www.gold-speculator.com/dr-jeff-lewis/18219-gold-silver-explode-treasury-issuance-2010-a.html
Editor’s Note:
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