US Debt May Be up to $2 mln in 2009 - Obama Fights Recession

With President-elect Barack Obama and congressional Democrats are considering the massive spending package aimed at pulling the nation out of recession, the public debt is projected to jump by as much as $ 2 trillion in the year of unprecedented
Currently, investors feverishly stuffing money into the relative safety of the U.S., which was to serve as the world's mattress in troubled times. Interest rates on Treasury bills has fallen to its lowest ever level, with some short-term investors just the provision of public money for free.

However, about 40 percent of the debt held by private investors will mature in one year or less, according to Treasury officials. When the timing of these loans, the Treasury will borrow more money to repay them, even as he runs, perhaps the most aggressive expansion of U.S. debt in recent history.

What the Government is planning to roll over short-term loans to more stable, long-term securities, experts say investors may require greater returns on their money, saddling taxpayers with a huge interest payments for years to come. Some analysts also fear that foreign investors, the largest U.S. lenders, may not be able to absorb sharp increases in debt, thus undermining the credibility of the United States as the foundation of the world financial system.

While the current market Treasurys rapidly, whether the demand for debt may be sustainable, said Lou Crandall, chief economist at Wrightson ICAP, which analyzes trends in the financing of the Treasury.

"There, in a time-bomb there is", Crandall said, "but we do not know exactly where he planted it in the calendar."

Government hunger for cash began to grow exponentially, as a nation facing economic recession as a result of foreclosure housing crisis a year ago. Washington has already approved $ 168 billion in spending to stimulate economic activity, $ 700 billion to prevent collapse of the U.S. financial system, and the multibillion dollars of bailouts to a number of financial institutions, including insurance giant American International Group and mortgage financiers Fannie Mae and Freddie Mac.

Despite these measures, the economic outlook continues to darken. Now, Obama and Democrats in Congress are discussing as $ 850 billion in new federal spending and tax cuts for the creation or retention of jobs and slow grim, up March unemployment rate, which in November stood at 6.7 percent.

Congress has no plans to raise taxes and cut spending to cover the costs of these programs, as well as the economists say it will contribute to slower economic activity. This means that the government should take the money.

Some of these borrowings had been made during the fiscal year, which ended in September, when the Treasury has added almost $ 720 billion public debt. But the big drawing drink comes in during the current fiscal year, when the cost of bailouts, plus another package of incentives, coupled with a slowdown in tax revenue will force governments to increase the debt by as much as $ 2 trillion to finance its obligations, in accordance with Treasury bonds poll dealers and other market analysts.

According to the latest data, foreign investors held about $ 3 trillion in U.S. debt at the end of October. China, who in October replaced Japan as the United States, the largest lender, increased its holdings by 42 percent over the past year, the UK and the Caribbean banking more than doubled their holdings.