Where is the money for the "economic stimulus" payments coming from

[texastoast]

My accountant said that in effect I'm borrowing the money from my child.

I assume that means that the government is borrowing the money from ??? for my child to pay it back as a taxpayer.

But who is the lender today? Specifically. And how does that work?

[baldguy]

1. Bush's ChinaPRC Credit Card™

[texastoast]

2. What is China PRC?

I don't know what that is.

[DemocratInSoCal]

3. People's Republic Of China nt

[baldguy]

4. The Republican debt is being funded by the People's Republic of China.

The "refund" you get will be paid off - eventually - by your children...and their children...and their children's' children.

Spend it wisely.

[texastoast]

5. Okay, how can I find the government docs?

That show that. Or does it just go into the droning budget as some kind of line item?

[baldguy]

6. There's a lot of info out there

Unfortunately, none of it goes down easy.

http://www.iht.com/articles/2006/10/23/opinion/edchina.php

http://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance


BLUE = countries in current account surplus
RED = countries in current account deficit

http://www.epi.org/content.cfm/issuebrief203



http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A3188-2003Sep12¬Found=true

http://www.huffingtonpost.com/susan-kaiser-greenland/american-and-chinese-cod_b_92193.html

[texastoast]

8. Thanks so much

That's a good start.:hi:

[DemReadingDU]

7. Maybe it is coming out of the Treasury?

borrowing form our taxes to be paid back by our taxes?

:shrug:

[Art_from_Ark]

9. It is coming from the Bureau of Engraving and Printing

in both DC and the Fort Worth megafacility, which are printing up gazillions of "dollars" faster than you can say "Notgeld" and "Weimar Republik"

[aquarius dawning]

10. My understanding is that Congress authorizes the spending bill of say $100,000,000

which then authorizes the Federal reserve to increase the money supply by $100,000,000.00. One way the fed does this is to sell Government backed securities i.e. bonds to investors (which increasingly means China). Said investor than sits on said bond for X number of years and then presents the bond to the US Government for redemption which equals face value plus interest. In this way, we are said to be borrowing money from our children as they will be the ones who have to redeem the bonds. This is the basic foundation of deficit spending/Reagonomics/supply side economics/voodoo economics as I understand it. It's all very complicated however and I'm no economics major. I do find it all fascinating however and would appreciate any coreections on my understanding if someone knows better.

[A HERETIC I AM]

11. The Federal Reserve does not issue or sell "Government backed securities"

The issuance and sale of Treasury Securities, which includes Bills (less than one year maturity), Notes (Maturities from 2 years to ten) and Bonds (from ten years to 30 year maturities) is done by the United States Treasury, NOT the Federal Reserve.

Said investor than sits on said bond for X number of years and then presents the bond to the US Government for redemption which equals face value plus interest.

What you are describing is known as a "Zero Coupon" bond and that only applies to Treasury Notes. T-Notes are sold at a discount to "Par" ($1,000), pay no interest payments and mature at Par. In other words, a 1 year T-Note that would yield 5.04% would be purchased at $952.00 and at maturity the bond holder would receive $1,000.00. (Actual yield 5.042017%) The amount at which they are sold is determined at regular auctions held by the Treasury.

T-Bills and Bonds do pay regular interest payments, paid twice a year, and also mature at Par. The price of a Bill or a Bond can change dramatically over time as its price is bid up or down on the secondary market. If the price is bid up, yield falls. If the price is bid down, yield rises. The purchaser of any marketable Treasury Security, be they an individual, a Mutual Fund, a Pension Plan or a Foreign Government, is under no obligation whatsoever to hold them until maturity. The largest single group of owners of Treasuries of all types is the United States Government, followed by the American People (Private Sector Americans). China ranks fourth.

The source of the funds for this "Economic Stimulus" is essentially a tax cut for this year, paid early. Instead of you realizing it when you file in 2009, you are getting it in a check in 2008. It is an accounting maneuver, if nothing else, and it may indeed increase the Federal Deficit for 2008 and possibly 2009. If the Congress can find a way to further cut funding to some other program (invariably a needed one, like Veterans Health care or Head-Start or something similar. Of course, there will be plenty of money for weapons. There always is) then no further debt would be added to the system. If they don't cut something to offset the tax cut, then yes, this money will be added to the Debt of the US Government in the form of Treasury Securities.

Edited for typo