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Strategies & Market Trends : New US Economy Policy
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To: Arthur Tang who wrote (135)4/1/1998 5:07:00 AM
From: Arthur Tang  Read Replies (1) of 435
 
Why the new economy can help Federal reserve to buy back the treasury instruments and save this country from bondage?

If interest rate is 6.5%, 30 year bonds will payout 3 times the face value. Current US debt or issued bonds are in the order of $3.7 trillion. 30 years from now, the payout will be $11.1 trillion. All our children will be in bondage, because our government budget is only $1.7 trillion.

Federal reserve has the responsibility to provide liquidity by loaning to member banks 8.5 dollars per dollar of deposits. when the new economy hits $10 trillion, if liquidity is provided for $11 trillion; the surplus will inevitably buy the existing treasury instruments. When the banks payback the Federal reserve overnight discount loans; lo and behold, they are taking back treasury instruments. Thus further interests will not have to be paid out. It will take 3 to 4 years to buy back all the bonds issued out, as we further expand our economy at the current rate.
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