In the last few years, the U.S. Treasury has issued more debt than it can ever hope to repay. The Federal Reserve is facilitating these unprecedented Treasury security (debt) sales, while at the same time, hoping to keep interest rates low. This effort, by the Federal Reserve, is being called Quantitative Easing (QE1 or QE2). The Federal Reserve has been coming into the market with hundreds of billions of newly printed dollars and buying Treasury bonds. This is effectively increasing the demand for Treasuries. A greater demand means higher prices for Treasury bonds and when bond prices go higher market interest rates tend to go lower. The dollars that the Treasury has been borrowing through these security sales flood into the economy through government spending.

Over the last few years we’ve seen an influx of trillions in government spending, chasing a limited supply of goods. This increases demand and drives the prices of those goods higher, which by definition is inflation. This inflation is destroying our savings by significantly diluting (reducing) the purchasing power of those saved dollars.  Read More