The Shell Game - How the Federal Reserve is Monetizing Debt

08-25-2009 • Chris Martenson

The Federal Reserve is monetizing US Treasury debt and is doing so openly, both through its $300 billion commitment to buy Treasuries and by engaging in a sleight of hand maneuver that would make a street hustler from Brooklyn blush. There are three major tripwires strung across our landscape, any of which could rather suddenly change the game, if triggered. One is a sudden rush into material goods and commodities, that might occur if (or when) the truly wealthy ever catch on that paper wealth is a doomed concept. A second would occur if (or when) the largest and most dangerous bubble of them all, government debt, finally bursts. And the third concerns the dollar itself. On the surface, the above chart hints at a potential disaster for a country that is embarking on the largest-ever federal debt binge in history. After all, if US assets are being shunned by foreigners, how will we find enough buyers? And what will happen to the dollar? The answers are: "We won