The Fed is printing up $85 billion a month to buy U.S. treasuries yielding a few measly points in interest rates. But wait! Can the Federal Reserve collect (real) interest income payments from U.S. taxpayers simply by printing up some bogus bucks to loan out to the U.S. treasury? I think not! The Fed has no intention of collecting interest income...nor of collecting principle for it's free money lending to pay for the government's unpayable spending habits.
So when the Fed Reserve decides enough is enough and stops the free lending, who will pick up the slack for the Fed's purchases of more than 80% of newly issued federal debt. And Lord forbid if the Fed decides to start unloading federal treasury bonds from it's (at the end of 2013) $4 trillion balance sheet of federal securities. Yeah....I have lots of confidence that things will eventually be swell...just like days of old and the economy will eventually jump start itself. Just like "Waiting for Godot"!
But just suppose interest rates on government debt return to their 40 year historic level of 6%. That would mean the interest rate expense on today's government debt would rise above 50% of tax revenue collected in this obviously declining economy with rises in interest expense increasing with each day of government over-spending. Government loves to spend! If the interest expense exceeds 50% of taxable income, there would not be enough taxable revenue coming in to pay for social security, medicare, or Obamacare....let alone any other government agency including the defense department. How do you say "game over"?
Just how soon do we Americans concede...."game over"? There will be a brave new world when government debt collapses and then silver and gold reveal themselves as basic anchors to a new currency system. The declines in metal prices we see today will be short lived. Injecting "free" fiat paper into the financial system (occurring all over the world) is not the answer....and never has been!