Obama info please

[servalan]

Political question:

So, I saw in the WSJ about this massive "stimulus package" that's going out. Complete with tax cuts. But all the WSJ really covered was the lobbyist infighting over who's getting which portion of the money.

Now, since there are tax cuts included, I have to wonder -- Where is this money coming from? It this foreign debt that we

Comments

[darthparadox]

I'm pretty sure it's going against the national debt.

[wcg]

It's a combination of new Treasury bills and new money to be printed up by the Federal Reserve Bank due to a change in fractional reserve requirements. As you surmise, the expectation is that a lot of the Treasury bills will be bought up by foreign investors.

[beingjdc]

Yes, precisely this. About 25% of the US deficit is financed by China. A whole lot of it is foreign governments, anyway. Doesn't really make any difference whether you do it by cutting taxes or raising spending (well, raising spending is a better stimulus for various reasons, but more distorting of the economy in the long-term, and harder to undo).

And then you will be printing some money. Arguably not a problem since V is falling and massive amounts of shadow money are being destroyed, so it's just replacing that. Moving private debt to the government balance sheet is probably the only possible response to a credit bubble bursting other than donning sackcloth and hiding in a bunker from the starving mobs. Not, however, so that private debt can be kept high, but so that it can fall. This latter part has not sunk in in the UK yet, I think Obama gets it and has the advantage of being four years away from re-election.

[wcg]

Following up on the earlier comment, Bloomberg had a good article about the T-bill auctions earlier this week. It explains a lot. If I find more I'll get back to you.

[shardavarius]

The magic charisma fairy.*

*Any man who may or may not be located on the far side of any curtains which may or may not exist should in no way be paid any attention.