>When I said rich folks don't need the bonds, I meant in the sense of
>having lots
>of other alternatives. But they use them now (govt. bonds are a small
>part of
>rich folks' portfolios, but they receive the lion's share of the money,
>so the
>redistribution is there).
U.S. government debt accounts for about 17% of total credit market debt, and government-sponsored enterprises and "federal-related mortgage pools," like Fannie Mae, account for another 14%. The U.S. Treasury bond market is the biggest and most important in the world, and dwarfs stock trading. And that's not counting all the derivatives, from futures to repurchase agreements, that are based on U.S. government paper. It would change the financial scene a lot if that's not there.
How can the U.S. have a reserve currency if there's no government paper to park the reserves in? That's one of the fatal flaws of the yen - no real T-bill market.
Doug