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05.02 11 Baltimore City Students Win Awards in Md. History Day Competition
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05.15 Horrific Injuries Linked to BP Dispersant Corexit
05.15 'Last Call at the Oasis': Why Time Is Running Out to Save Our Drinking Water
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05.02 Common Pesticide “Disturbs” the Brains of Children
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Ref. High health-care costs: It’s all in the pricing - graphic
Ref. Dollars for Doctors - How Industry Money Reaches Physicians
Ref. 2010 Comparative Price Report Medical and Hospital Fees by Country - Graphics
Ref. Health at a Glance 2011 - OECD Indicators
Ref. : Why is Healthcare Absurdly Expensive in USA (Part 2) [Graphics] (Part 1 is here)
Video Health Care Systems in Less Corrupt Countries
05.01 News Corporation has sought to undermine elected governments
Daily The Daily Howler
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05.03 Supreme Court Favorability Reaches New Low
05.01 Eliot Spitzer’s challenge to DOJ as it investigates Wall Street: ‘Bring some cases’ - video
05.01 Laissez-faire with strip-searches: America's two-faced liberalism
05.16 5 Ways Conservatives are Destroying the Institution of Marriage
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05.16 The Economic Case for Same-Sex Marriage
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05.15 WEDDING BELLS
05.15 Memo to Mitt: Time to Fess Up on Bullying
05.14 “The truth will set you free. But first, it will piss you off.”
05.14 Hedges: How Our Demented Capitalist System Made America Insane
05.11 Why Atheists Have Become a Kick-Ass Movement You Want on Your Side
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05.11 Breaking Up Four Big Banks
05.11 Wall Street’s immunity
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05.10 Real Estate 4 Ransom -- locking up the Great American Dream
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05.14 Noam Chomsky on:
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Occupy Wall Street "Has Created Something That Didn’t Really Exist" in U.S. — Solidarity [video]
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05.01 Occupy Wall Street Plans Global Protests in Resurgence
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FISCAL ANALYSIS:
Thinking about Dilemmas
This was the third session since Ben Bernanke replaced Alan Greenspan as the Chairman of the Federal Reserve on January 31, 2006. Controlling the level of inflation is a major priority for him (and for the Board of Governors of the Fed). This means we could see yet more interest rate increases in the near term. We also know from Bernanke’s earlier writings and speeches that he greatly fears deflation—the situation where the price of goods/services drops because consumers are not buying. They just do not have the funds, and they cannot get them. Rate setting is very important to the functioning of the American/global economy.
To forestall a recession some five years ago in the aftermath of 9-11 and the bursting of the dot-com stock bubble, the economy was flooded with liquidity, the Fed’s rates dropped to 1%, and they languished there for years. Cheap money did keep our economy "rolling,” and a recession was deferred. The expanded consumption of goods and services that ensued was not driven by a growth in production, productivity, or a real expansion of the domestic American economy; it came from an exponential growth of debt at the federal, state, local, and household level(s). The short-term “solution” has now given rise to a bigger long-term “dilemma.”
America’s growing debt was not financed from within. Cumulative domestic saving has been at zero—or has been negative. The US is presently “thriving” only because of the largesse of foreigners. The Japanese, the Chinese, the Arab OPECs and the EURO zone hold roughly 45% of our outstanding privately held (national) debt. As of June 22, our national debt stood at a record $8.340 TRILLION of which $4.787 TRILLION was privately held, and the remaining $3.553 TRILLION was the cumulative trust fund surpluses (mostly Social Security) that have been raided/spent by Uncle $ugar on everything but their legally mandated purposes.
As of April 30 (reported by the US Treasury/Federal Reserve Board on June 15, 2006), the top ten foreign holders of treasury securities were as follows: Japan $ 639.2 BILLION, China $323.2 BILLION, United Kingdom $166.8 BILLION, Oil Exporters $99.1 BILLION, Korea $70.9 BILLION, Taiwan $68.9 BILLION, Caribbean Banking Centers $61.0 BILLION, Hong Kong $ 49.4 BILLION, Germany 46.8 BILLION, and Mexico $41.9 BILLION.
Since the last FOMC meeting, other central banks across the globe have raised their own benchmark rates. While Wall Street and Main Street clearly oppose any further rate increases—because of the devastating impact on their monthly interest costs—the Fed/Treasury cannot afford any exodus of the foreign source funds. That money has to stay invested here, and therein is another dilemma.
I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.
To “audit” this column and to learn more about the subjects discussed, check out:
- Changes To The Fed Funds And Discount Rates January 1, 1990 - May 10, 2006
- The Debt to the Penny and Who Holds It
- MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES (in billions of dollars)
Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.
This story was published on June 30, 2006.
