the value of nothing

Treasury Securities such as T-Bills, notes, bonds, and TIPS will be issued to raise much if not all of of it- see:  The Basics of Treasury Securities

In other word Treasury will borrow it by selling those instruments, with probably most sold to foreign investors, although pension funds might buy some of that debt. I don’t know if things like Social Security and Medicare are financed partly through buying such instruments.

Investors will have no problem buying those debt instruments as long as they have confidence that Treasury will not default on them down the road and that they will be redeemable.

How will US raise all that money?

While the Fed has access to its fat piggy bank to support its effort to prop up financial companies, the Treasury Department will have to whip out the credit card for the support it is pledging to buy up bad mortgages and other debt.

Treasury will have to borrow the money because it doesn’t have the deep reserves that the Fed does. That’s because the country is running a huge budget deficit, which has been soaring because of the economic slump and this year is expected to hit $400 billion, more than double last year’s $161.5 billion. The administration is projecting that the deficit for the 2009 budget year, which begins Oct. 1, will soar to an all-time high of $482 billion.

Those deficits will present a major challenge for the next president. Republican John McCain and Democrat Barack Obama have a list of their own spending priorities that they want to enact, not to mention their promises to provide tax cuts.

The Tax Policy Center, a nonpartisan think tank, estimates those will cost $4.2 trillion over the next decade in the case of McCain and $2.9 trillion in the case of Obama.

Those campaign promises, on top of all that the current administration has done to contain the fiscal crisis, could really put a strain on the government’s balance sheet.

In addition to its recent pledges – including $200 billion to cover losses at mortgage giants Freddie Mac and Fannie Mae and an $85 billion emergency loan to AIG, the nation’s biggest insurance company – the government already had put billions of dollars in assistance on the table to help battle the worst housing slump in decades.

The Fed extended a $29 billion loan to facilitate the forced-sale last March of Bear Stearns, at the time the nation’s fifth-largest investment bank, and in the housing bill that Congress passed last summer the Federal Housing Administration was given the power to insure up to $300 billion in refinanced mortgages.

And that doesn’t count the billions of dollars the Fed has pumped into commercial banks and investment banks over the past year as it has struggled to make sure they have the resources needed to keep loans, the lifeblood of the economy, flowing.

Analysts said if the Fed had not gotten help from the Treasury to auction off more debt, it ran the risk of pushing the federal funds rate lower than it wants it to go and thus increasing the threat of inflation down the road.

So far investors, including those overseas, have shown no reluctance to buy Treasury debt. In fact, all the financial turmoil of recent days has driven Treasury’s borrowing costs lower as investors have flocked to the safety of Treasury securities.

Ultimately, like any other borrower, you or me for example, the government will become “owned” by its creditors, the people who buy those Treasury Securities.

And the only way ultimately the government can raise the money down the road to service that debt is through taxing people and through not providing services to them, perhaps Social Security included….

Ain’t it great? :-/

Even if it gets off the ground, there is nothing to keep it in the air.