SGM Metals: Federal Reserve Holdings of US Govt. Debt Jumped 452% Under Obama!

June 12, 2012 - PRLog -- CNSNews.com reports: [ Since President Barack Obama was inaugurated in January 2009, the Federal Reserve’s holdings of U.S. government debt have quintupled, according to the Fed’s official monthly balance sheet.

On Jan. 28, 2009, a week after Obama’s nomination, the Fed owned $302 billion in U.S. Treasury securities. On April 25, 2012, the latest date reported, the Fed owned five and a half time that much in U.S. Treasury securities--$1.668 trillion.

That is an increase from January 2009 of $1.366 trillion—or 452 percent.

Under Obama, the Federal Reserve has become the single largest owner of U.S. government debt. When Obama entered office, entities in the People’s Republic of China were the largest holders, followed by entities in Japan. At the end of January 2009, China owned $739.6 billion in U.S. government debt and Japan owned $634.8 billion. By the end of March 2012, China’s holdings of U.S. debt had grown to $1.1699 trillion and Japan’s holdings had grown to $1.083 trillion

The total U.S. government debt grew from $10.6179 trillion to $15.6233 between Jan. 28, 2009 and April 25, 2012. Leaving out the intragovernmental debt—which the federal government owes itself—the publicly owned part of the U.S. government debt has climbed from $6.2955 trillion to $10.8607 trillion, an increase of $4.5652 trillion.

The $2.2445 trillion of that new publicly owned U.S. government debt that was purchased by the Fed, China and Japan equals 49 percent of all the new debt the U.S. government has sold to the public since Obama took office. ]

Again, the truth about how this ‘recovery’ has been propped up behind the scenes in hopes of you feeling that all is well and investing your dollars into Wall Street and spending the rest at WalMart! Now you can see how this charade has been facilitated behind the scenes with the in house bankers buying up the government debt that can’t be sold abroad, but has to be in order to get the bankers to release the funds to the govt. It almost becomes a laughable scenario when you consider that the arrangements for the govt. borrowing money from the FED requires that the govt. be able to sell debt collateral Treasuries abroad to give the FED the confidence to lend the money to the govt. You see if the world markets don’t feel comfortable buying US Treasuries because they are afraid the US will be unable to get back on its feet economically and therefor make good on the bonds payments, then the FED as a bank must weigh out the risk associated with the loan in the new light of distrust and the new arrangements must be made.

There is a bit of irony here if it makes you feel any better. The irony is that the United States in 50 years has gone from the greatest creditor to the world to the greatest debtor nation on the planet, in all of history. This reversal of roles comes as a result of nations 5 decades ago rushing to purchase US Treasuries as a rock solid asset that paid a premium dividend, and holding them on their balance sheets for a full 30 year term. Now there are few, if any, nations that would currently consider the purchase of a US originated debt instrument, much less one with a 30 year shelf life. This brings us back to the FED who is now painted into a corner and must unravel the the mess that is the current deficits, slowing economy and a wave of inhospitable inflation on the horizon.

These problems are a huge undertaking by themselves in a constantly changing environment like economics. Now that the emerging economies have learned to use our greed to exploit slave wages their nations offer against us, the project of stabilizing the US economy is becoming very hard to accomplish since it has traditionally been done at the expense of other nations, primarily the emerging economies. Because they have absorbed a majority our manufacturing sectors into their economies they now have an export market that gives them leverage in the global marketplace as well as a central bank that has learned from the FED and is trying very hard to stabilize their currency on the open market to protect their export based profit margin. These efforts to protect the emerging economies again are a carbon copy of exactly what the FED is attempting to do for the past three years since the housing crash here in the US. The lack of stability at home up to this point is directly tied to the efforts in the emerging economies to protect their economies and so we have a classic ‘catch 22’.

How long can this continue? It doesn’t appear that it will be much longer as things are getting very dangerous, very quickly. For this reason alone, I don’t suggest that people date a banker and try to figure out how they think so you can build an investing strategy based on their logic. Instead I suggest investors simply realize this time things are different, very different. The odds of us as a nation getting through this one unscathed are slim and none, and slim has long been out of town. Understand that this is a huge disaster and we have only seen the start of the new economic landscape that the world is evolving into and at the risk of sounding ‘unpatriotic’ (I’m actually a disabled veteran so that’s impossible) I’m afraid that we will not be at the top of the economic food chain any longer, at least not alone. For this reason I encourage you to simply admit things are not as the talking heads on the TV are telling you and you may need to play it safer than you ordinarily would. The act of removing some of the leveraged paper derivatives you have in your stock/bond/annuities portfolio that has ALL of your retirement dreams and funding for those dreams tied up in them and into a 6,000 year old money that has gone up 18% annually for a decade is a sensible suggestion. The classic “all your eggs in one basket” mantra seems obvious here. At this point US investors have approximately 98.5% of their assets in paper derivative investments, therefor when the panic begins US investors will have 98.5% to lose. This should make for an interesting trading period because when the entirety of the population is panicking and running to you in the tiny precious metals market it should make for some fairly attractive periods of price appreciation in gold & silver bullion.