Brief
History of
the Treasury
Markets
First
established
in 1789 by
an Act of Congress,
the United
States Department
of the Treasury
is responsible
for federal
finances. This
department
was created
in order to
manage the
expenditures
and revenues
of the U.S.
government,
and hence the
means by which
the state could
raise money
in order to
function. The
method of raising
money or taking
on national
debt is through
issuing and
selling Treasury
security instruments.
The
National Debt
In order for
a government
to function
it needs to
have revenue.
Most revenue
comes from
taxes, these
taxes pay for
the goods and
services the
government
provides the
country and
its people.
When these
expenditures
for goods and
services exceed
the revenue
taken in, it
is known as
a budget deficit.
In order to
finance the
shortfall of
the budget,
governments
raise money
by taking on
debt, that
is, by borrowing
money from
the public.
As more and
more annual
budget deficits
occur, the
sale of securities
increases,
which lead
to an increase
in the national
debt. As of
the end of
2003, the U.S.
national debt
was a staggering
$7 trillion
dollars.
Who
Owns The Debt?
The debt is
sold in the
form of securities
to both domestic
and foreign
investors,
as well as
corporations,
and other governments.
U.S. securities
issued include
Treasury-bills
(T-bills),
notes and bonds
as well as
U.S. savings
bonds. There
are both short-term
and long-term
investment
options, but
short-term
T-bills are
offered regularly,
as well as
quarterly notes
and bonds.
The following
chart illustrates
who owns all
this debt,
data as of
1998.
When
the debt instrument
have matured,
the Treasury
can either
pay the cash
owed (including
interest) or
issue new securities.
Conclusion
Debt instruments
issued by
the U.S.
government
are considered
to be the
safest investments
in the world
because interest
payments
do not have
to undergo
yearly authorization
by Congress.
In fact,
the money
the Treasury
uses to pay
the interest
is automatically
made available
by law. Public
debt is a
liability
to a government.
However,
the only
way to reduce
debt is for
the government
expenditures
not to exceed
its revenues,
at times,
running a
deficit may
be the country's
only choice.
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