The Federal Reserve recently passed China as the largest holder of US Treasuries.  The Fed currently holds $1.1 trillion while China holds $896 billion and Japan holds $877 billion.  With QE2 in effect the Fed will be buying more treasuries throughout the first half of this year.  It is possible that the Fed will surpass China and Japan combined within the year.

We are going in the wrong direction here!  The Fed is monetizing the debt by purchasing treasuries, which is the equivalent of printing money out of thin air.  In fact the money isn’t even printed, it is digitized.  It looks as though the Fed has committed itself to devaluing the dollar through inflation.  This makes debt easier to handle and erodes savings.  It only takes 4% inflation for 17 years to cut the dollar’s value in half.  With the way the Fed is printing money now we could be in for inflation rates much higher than 4% per year.

Marc Faber estimates that we are currently experiencing a real inflation rate of 5-8% in the US, which is much higher than the government’s unrealistic figure of 1.5%.  Gold has increased in value 18.37% per year over the last ten years which has outpaced inflation.  A convincing case for buying gold coins.  Watch the short video below with Marc Faber.

[youtube]http://www.youtube.com/watch?v=ofeFBZmTAEo[/youtube]