The Real US Federal Debt Has Ballooned to More than $100 Trillion

Currently, the US federal debt stands at more than $100 trillion. According to the recent US stock market rally, the fact that the US government is not only bankrupt but has put every four-person family in America on the hook for more than $1.45 million does not merit concern. Of course, in reality, the US economy and the US stock market are two entirely different creatures. Perhaps, if the Plunge Protection Team took a prolonged vacation, US stock market behavior would begin to reflect the fundamentals of the US economy again. However, it is important for an investor to understand that due to the not-so-invisible hands of Goldman Sachs, JP Morgan and the Plunge Protection Team, quite often, the US market can move higher for sustained periods of time even when the fundamentals of the US economy at large are atrocious. This is the fiat money-induced phenomena otherwise known as irrational exuberance. In the long run, the fundamentals of the economy at large will catch up and drive US stock market behavior once again. Despite the recent stock market rally, the fundamentals of the US economy are downright scary. According to the figures released by the US government, as of May 25, 2009, the US federal debt stood at $11.3 trillion, about $37,000 for every man, woman and child in the US (we'll get to the real federal debt figure soon). To accommodate this growing debt, the US government merely raises its debt ceiling every so often to avoid default in the US Treasury market. Currently this debt ceiling stands at $12.104 trillion. Recently foreign appetite for Treasury auctions has dried up and the US Federal Reserve has resorted to buying US Treasuries in the absence of foreign demand to keep the US Treasury market from collapsing. However, what if the largest foreign holders of US Treasuries realized that the current US federal debt already exceeded the national debt ceiling by $98 trillion? How would they feel about keeping the US Treasuries they currently hold?