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The Road to a US Insolvency Crisis

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December 03, 2010 – Comments (1)

Today's auction of 10- and 30-year US Treasury notes and bonds won't tell us as much about the US economy as auctions used to -- because the Federal Reserve has started buying up the notes as part of Fed Chairman Ben Bernanke's "quantitative easing" effort.

Until recently, a plentitude of bidders for long-term US government debt was a sign the US economy was strong. But Bernanke is buying that debt in what he says is an effort to make the economy stronger.

This has a lot of people nervous -- and the news that the Fed may spend up to $800 billion on this, rather than the $600 billion figure initially given, doesn't help.

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1 Comments – Post Your Own

#1) On December 03, 2010 at 1:42 PM, rfaramir (29.30) wrote:

This manipulation of the interest rate is exactly what causes bubbles. The interest rate is core information leading entrepreneurs to evaluate what threshhold of profit potential business deals must have. Lowering it makes them choose unwisely, even if they know it is artificially low.

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