“A government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the one we have today, can produce claims without limit”. Alan Greenspan, 1997
The Fed continues to create new dollars, yet the economy is not growing. The fed has tried Operation Twist, QE1,QE2, QE3, QE4, Zero Interest Rate Policy(ZIRP) - all of it has failed to stimulate the economy. Our debt obligations and interest rate obligations are growing every year.
To pay for our increasing obligations, we print more money and get into more debt.
To add to the woes, our political leaders have no clue as to properly solve this issue and are accelerating the problem. The Deomcratic party has had power in the White House and Senate since 2008, their efforts and legislation they have passed have met fierce opposition - and rightfully so because their policies have made it worse. Another entitlement in Obamcare passed the Supreme Court by one vote. We will find out in 7-10 years when Obmacare is fully implemeted that we have created another burden in our country that we may be able to pay for but just weakens our financial situation. A small majority of Americans don't seem to have an understanding as they voted Obama back in. They want the goodies that he supposedly provides, but they have not asked how it will be paid for. Raising taxes on a sliver of the population won't do it. Printing moremoney won't do it. Asking foreign countries to buy more of our debt won't do it. Asking the Fed, to buy more of our debt won't do it.
The only reason why America is still on its feet is because the Fed controls the printing press. So what if we spend far more than we collect in revenues, the Fed can always print more money to meet it's obligations.
The quick fixes (Obamacare, fiscal cliff deal, ...) only increases America's debt. To pay for this debt, the Fed has to sell government bonds(Treasuries). In the past,foreign countries bought a lot of the debt. However, they realize the poor financial situation that the US is in, and as a percentage of US Treasuries are purchasingng less every year.