Dec

18

 One part of the Civil War that escapes almost all notice is how the United States paid for a war with a debt explosion that dwarfs everything done since 1940 - Congress and Roosevelt's first war budget. The current crisis is trivial by comparison. By 1861 year-end the Treasury was spending in a day what it had spent in two weeks the year before. But where did the money come from? Murray Rothbard and many other believers in whole number banking say Greenbacks and Jay Cooke. Er, not quite. The total issuance of Greenbacks was 8% of the total war cists, and Jay Cooke was the underwriter, not the final purchaser. The surprising answer is the people of the U.S. The public bought the bonds.

My wacky thesis is that we are seeing the beginnings of a similar event: U.S. savers will fund the Treasury's borrowings. They may, as Mr. Gundlach predicts, demand 6%; that was the peak rate for the 10/20s that Cooke sold. But, the demand will be there from domestic holders of dollars.

"Who Exactly Mopped up $1.33 Trillion of New Us Government Debt Over the Past 12 Months?"


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