A Federally Rewarding Game....If only one can play it

***********The Treasury borrows money by issuing bonds. The Fed sets interest rates low and makes it really inexpensive for the Treasury to borrow. Furthermore, the Fed buys up government debt if others are not willing to or if the buyers demand higher rates. The Fed instructs the printing presses to print more money, which the banks can borrow at almost zero cost and then buy treasuries and make money at no risk. The Fed reports interest income..."The Fed said much of its income, $46.1 billion, came from its open-market buying of U.S. Treasury debt, debt of mortgage finance sources Fannie Mae and Freddie Mac, and mortgage bonds and other securities. The program was aimed at holding down interest rates to spark an economic recovery..."

*******What a game!**********

News Analysis - A Decade of Enormous Deficits May Alter American Politics and Power - NYTimes.com: "

In a federal budget filled with mind-boggling statistics, two numbers stand out as particularly stunning, for the way they may change American politics and American power.The first is the projected deficit in the coming year, nearly 11 percent of the country’s entire economic output...But the second number, buried deeper in the budget’s projections, is the one that really commands attention: By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water... One source of that absence of will is that the political warnings are contradicted by the market signals. The Treasury has borrowed money to finance the government’s deficits at remarkably low rates, the strongest indicator that the markets believe they will be paid back on time and in full..."