Who’s Going to Lend the Money?

The Obama administration has embarked on a spree of borrowing that eclipses anything seen in world history. The Democratic Congress is nervous, but seems willing to go along. But this borrowing is not occurring in a vacuum; many other governments are also floating debt. So, who’s going to lend the trillions of dollars that governments need to disguise the fact that their ideas are bankrupt? Maybe nobody.

Yesterday, the British government offered its “gilt-edged bonds” for sale. For the first time in over a decade, the auction failed as not enough buyers appeared to cover the bonds that were offered:

Fears are growing on the financial markets that Britain may not be able to repay the billions of pounds in debt it is amassing to rescue banks and revive the economy.
The Government admitted yesterday that, for the first time since 1995, investors had been unwilling to buy the full complement of its so-called gilt-edged bonds at one of its official auctions.

Britain’s failure roiled Wall Street, as Noel Sheppard reports:

Wall Street got rocked Tuesday by a “debt bomb” economists have worried about for decades.

Hours after the United Kingdom failed to attract enough buyers for its auction of $2.5 billion of 40-year bonds, the United States Treasury had similar difficulties with its sale of $34 billion worth of five-year notes and was forced to raise their interest rate to a much higher yield than had been anticipated.

Such problematic debt offerings came on the heels of Germany having two failed auctions of its bonds already this year.

The amount of debt the Obama administration intends to float dwarfs any historical experience. More from Bloomberg:

Treasury 10-year note yields rose the most in more than two weeks after an auction of $34 billion in five-year notes drew a higher-than-forecast yield, spurring concern record sales of U.S. debt are overwhelming demand. …

President Barack Obama’s government is selling record amounts of debt to revive economic growth, service deficits, and cushion the failures in the financial system. Debt sales will almost triple this year to a record $2.5 trillion, according to estimates from Goldman Sachs Group Inc.

What most Americans may not yet understand is that the vast majority of the debt that the Obama administration intends to incur, not just this year but for years to come–assuming it can find the requisite creditors–has nothing to do with the present financial crisis. Rather, Obama intends to finance a grotesquely swollen federal government, with socialized medicine just one item on the agenda, by borrowing the money. How to pay it back? Hey, not our problem–Obama will be out of office by 2017 at the latest, so paying off trillions in needless debt will be up to our children.

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