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News Link • Economy - Economics USA

US Bonds Downgraded From AAA To AA – Numerous Warnings Cited


For those of you who are unfamiliar with how international bond markets work, let me quickly explain why the following comments by foreign banks should have you extremely worried.

When the Fed and Treasury get together to print money, they do it by issuing trillions of US treasury bonds. The Treasury prints up the bonds and hands them to the Fed. The Fed then sells them off to foreign banks. So what ends up happening is the US exports its inflation to foreign countries. We give foreign nations treasuries, while they give us dollars to spend in return.

This process of printing money and exporting inflation by getting foreign nations to buy our crappy bonds can continue on for a while, but eventually our creditors will cut us off if they don’t think we are going to repay them with dollars that are worth anything.

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