"I have maintained for years that the ongoing U.S. federal deficit is being actively funded by the Fed, through their primary dealers. More evidence has emerged today due to some great reporting by Bloomberg.
"It's quite simple, actually. The U.S. government has a spending problem. Again this year, it will spend about $1,500,000,000,000 more than it takes in in tax revenue. OK, so where do we get that $1.5T? By borrowing, of course. The problem is: Folks aren't exactly lining up to loan the U.S. billions and billions of dollars at 1-2% interest. In a free and fair market, rates would rise to the point where buyers would emerge and a new equilibrium would be reached. However, rates cannot be allowed to rise so, what to do?"