Tuesday, February 23, 2010

Wildlife minute

And now for something completely different: This is video footage of Black Skimmers feeding at sunset off of Sanibel Island, Florida, where I visited earlier this month. (I recommend going full-screen and then selecting 720/HD resolution.)

Friday, February 19, 2010

Running out of lenders

When the Federal government spends more than it collects in taxes, it has to do one of three things to make up the difference:
  1. Borrow money from American investors by selling Treasury bonds
  2. Borrow money from foreign investors by selling Treasury bonds
  3. Create more money via the Federal Reserve Bank ("printing money")
It was reported on Tuesday that foreign holdings of Treasury bonds fell by a record amount in December, which means that foreign governments and individuals are now selling U.S. bonds faster than they're buying them. In other words, item #2 in the list above is going in the wrong direction, meaning we're going to have to rely more on #1 and #3 to make up the difference.

However, with economic growth on hold, state and local governments out of money, and unemployment still near 10%, it's hard to see how American investors will find the money to increase their bond purchases. If we can't sell bonds to ourselves or to foreigners, then we're stuck with printing money to pay for the massive Federal budget. Can high inflation be far behind?