The Corner

Hitting the Real Debt Ceiling

My weekend column is about “the debt ceiling” and how, even as the Treasury issues more and more debt, there are fewer and fewer people willing to buy it. I forgot to mention the really startling number. Pimco (which has now dumped US Treasuries) estimated last month that, under QE2, 70 per cent of the US Government’s debt is being bought by the Federal Reserve.

In other words, under the 2011 budget, every hour of every day, the federal government spends $188 million it doesn’t have, $130 million of which is “borrowed” from itself.

QE2 has been by all accounts a flop and is due to finish at the end of June. What happens then? Who makes up the difference? Will interest rates rise to make US debt more attractive? Or has American government now run up against the real “debt ceiling” – the willingness of the world to fund it?

Mark Steyn is an international bestselling author, a Top 41 recording artist, and a leading Canadian human-rights activist.

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