In 2008, the U.S. Treasury sold about $700 billion in new debt to cover the budget deficit and the non-budgeted excess war spending. In ’09, it has to raise about $2.0 trillion, nearly three times as much as in ’08. And FY 2010 shows similar financing needs.
There has been a lot of concern that foreign purchasers of the debt, on whom the Treasury has come to rely, will dry up. There is some evidence that this has already begun. So, where is the money going to come from, especially since rising interest rates may derail any semblance of a recovery? That’s where you come in!
The majority of Americans have an IRA, a 401(k), or some sort of pension plan. The top 1000 pension plans in the U.S. have almost $6.5 trillion in assets (CalPERS alone has about $180 billion). So, $100 trillion in retirement assets in U.S. plans is probably a conservative estimate.
Since the retirement plans all come under U.S. tax rules, Congress merely needs to require that, to qualify, each plan has to purchase some percentage of U.S. Treasury securities. Assume they require 15%. Voila! They just sourced at least $15 trillion from the U.S. taxpayer. Problem solved!!!
Of course, that means up to $15 trillion in other assets held in these plans may have to be liquidated. Depending on the time frames allotted to accomplish the transformations within the plans, there could be significant implications for the general level of stock prices!
Robert Barone, Ph.D.
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