With the government in full debt mode by its borrowing close to $150 billion a month just to cover current obligations, the Federal Reserve has been forced to go full bore in buying that debt, and monetizing government spending.
Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.
This not only creates the false impression of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
Congress last year did not have the stomach to halt raising the debt ceiling, and it appears that they will not keep the debt from crossing $16 trillion by the time of the election. As foreign entities such as China and Japan deal with their own economic downturns, and Europe is requiring bailouts not buyouts just to survive, the Fed will have no choice but to keep monetizing US debt to stave off collapse and default by the world's largest creditor nation.