The $700 Billion U.S. Funding Hole; Desperately Seeking A Very Indiscriminate Treasury Buyer

Tyler Durden's picture

A month ago we observed that in 2010, the supply/demand picture for US fixed income would be very problematic, as there was no immediate apparent substitute to fill the void resulting from the departure of the constant bid provided by the Federal Reserve's Quantitative Easing in both the UST and the MBS markets. The conclusion was that there would need to be a dramatic increase in demand for debt securities across the board, with an emphasis of Treasuries and MBS.

Today, we focus on the most critical segment of debt issuance for 2010 - those ever critical US Treasuries, without whose weekly uptake by various investors, the multitrillion budget deficit will become unfundable. Using estimates from Morgan Stanley for 2010 Treasury supply and demand, the conclusion is that there will be a demand shortfall of at least half a trillion, and realistically $700 billion, to satisfy the roughly $1.7 trillion in net ($2.4 trillion gross) coupon issuance in the upcoming year.

The implication is that back end prices will decline sharply due to an ever increasing supply overhang, even as nearly $800 billion in Bills are paid down, thereby further accentuating the steepness of the bond curve. And with ever more emphasis put on the coupon supply, the marginal yield on long-dated Treasuries will likely find it needs to be increasingly more attractive to find bidders, which in turn will jar mortgage rates out of hibernation. We are now certain that Q.E. will continue: the weakness in the mortgage backed-market is already becoming a topic of contention, and when it becomes apparent that there is an additional $700 billion demand void in Treasuries, then it is merely a matter of time before Ben (or his successor) realizes the dollar destruction comeback tour has to resume asap. Those cynically inclined may wonder why Bernanke's reconfirmation should take place prior to any potential Q.E. 2 announcement. Perhaps this country's Senators would further evaluate their support of the Chairman once they experience the popular anger which will accompany the next leg down in the US currency the minute Mr. Bernanke announces that the Fed will need to continue being the market in treasuries and mortgage backed securities, further eroding the collateral behind the greenback.

First, based on Morgan Stanley's expectations, and further corroborated by yesterday's disclosure that the next increase in the debt ceiling by $1.9 trillion net, to $14.3 trillion, would last the country only through early 2011, we present the estimated supply of gross coupon issuance in the upcoming fiscal year (keep in mind one quarter of issuance has already been absorbed and the run-rate validates the projections).

After issuing a $1.9 trillion gross amount of coupons in F2009, in 2010 this amount is expected to increase by 30% to $2.4 trillion, with an emphasis on long-dated maturities: per the chart above, the average age of new gross coupon issuance (excluding Bill impact) will increase from 5.9 years to 6.4 years in 2010.

In 2010, net issuance will be substantially lower than gross according to MS, due to an increase in maturities, and "only" $1.7 trillion in net new coupon bonds, $425 billion more than 2009, are expected to be issued by the US Treasury: this number may well be an underestimation as the Senate, which likely has far more granular issuance projections, is calling for $1.9 trillion in net issues (in addition to the $300 billion temporary increase which passed late last year) which would fund the US budget for about a year. One offsetting feature of net issuance in 2010 will be a surge in paydowns in Bills, which are expected to be a net negative contributor to issuance to the tune of $775 billion (of which $275 billion has already taken place in Q1 of fiscal 2010, primarily as a function of the $195 billion in SFP bills rolling off).

So far so good- the supply picture is clear, and in reality the final amount will probably end up being substantially higher than $1.7 trillion net, as the runaway deficit-creating machine in D.C. will stop at nothing to prove that any one failed auction will destroy this country.

Where things get tricky is on the demand side.

As we pointed out previously, the number one defining feature of 2009 was the Fed's blatant support of the bond and MBS markets. Bernanke monetized $300 billion in Treasuries, and indirectly will have purchased another $1.4 trillion in bond/MBS hybrids (we say indirectly, because Fed MBS purchases effectively allowed MBS holders to switch their holdings to Treasuries at preferential terms, better known as the "reallocation trade" in essence achieving the same effect as if the Fed has purchased these - see Bill Gross). With the Fed out of the demand picture (at least temporarily), the questionmarks emerge.

Combining the supply and demand for Treasuries yields the following chart. Fact: in 2010, a best case of demand projections, indicates there will be a $400 billion shortfall for total Treasury supply... and a worst case of a stunning $700 billion funding shortfall. This is "just" a little worse than Greece, yet the latter's CDS trades trades nearly ten times wider than the U.S. Logical? You decide.

The key variable in this exercise is quantized and overall demand, which is why a detailed analysis of each end segment must be performed to understand the demand mechanics.

Foreign Accounts

On December 31, 2009, a majority of U.S. debt (marketable Bill, Coupons, TIPS) was held by foreigners, making America a net foreign creditor nation. Compare this with Japan, where 93% of sovereign bonds are held by domestic accounts. Yet over the past several years, the US has become increasingly reliant on foreign generosity: foreign demand has grown from $143 billion in 2007 to $794 billion in 2009. And even as foreigners have purchased an increasingly greater amount in absolute terms, the relative composition has in fact declined in the past year: foreign demand dropped from 76% in 2008 to 46% in 2009.

An even more granular analysis of foreign purchases, indicates that as foreigners rushed into the safety of Bills, demand for coupons actually declined. Also notable is that foreign demand for coupons has never moved too far, and has stayed in the range of $192-$370 billion each year.

The biggest problem this data indicates is that foreign demand will not go willingly with the Treasury's demand to extend the average Treasury maturity from 4 to 7 years: foreigners purchased 145% of the Fiscal 2008 net issuance of $255 and a meager 26% of the Fiscal 2009 of $1,271 billion.

And herein lies the rub, as MS points out, the foreign bid is usually a direct function of the amount of global trade and the associated trade gap experienced by the U.S. Historically, the excess trade gap was not an issue, as China, Japan and net exporter partners had to recycle their otherwise useless dollars back in the U.S., and they did so by purchasing U.S. bonds, thereby allowing U.S. consumers to borrow ever cheaper and to purchase yet more Chinese and Japanese trinkets, rinse, repeat.

As Zero Hedge pointed out some time ago, the deputy governor of the PBoC, Zhu Min, said the most logical, yet scariest, thing for the US Treasury.

"The United States cannot force foreign governments to increase their
holdings of Treasuries
," Zhu said, according to an audio recording of
his remarks. "Double the holdings? It is definitely impossible."

US current account deficit is falling as residents' savings increase,
so its trade turnover is falling, which means the US is supplying fewer
dollars to the rest of the world," he added. "The world does not have
so much money to buy more US Treasuries

Zero Hedge has previously demonstrated the problem associated with China's trade surplus, which while still positive, saw a significant drop from the prior year. And compounding this is the concern that while China is still accumulating FX reserves, it may now be diversifying its US-denominated holdings. Yet setting diversification concerns aside, the bigger picture indicates that China UST purchases usually are a function of FX reserves: should the US continue on the recent protectionist path, this will implicitly make Chinese demand for Treasuries even scarcer.

Based purely on global trade surplus/deficits, it is likely that the foreign bid would purchase $300-$400 in coupon Treasuries in 2010. However, in evaluating foreign demand in 2010 one has to consider the Bill/MBS reallocation trade. A big question mark for 2010 will be whether foreigners will reinvest Bill holdings purchased at an above average rate in 2008 and 2009 (see Foreign Bill Vs Coupon Purchases). The demand for Bills occurred due to reallocation away from Agencies/MBS and corporates, which can be seen from the below chart. Here it becomes visible why the Fed's MBS program was the practical equivalent of a Treasury QE extension. The Fed was acquiring foreigners' MBS and Agencies at prices that would allow them to buy Bills (and sometimes Coupons) in kind.

With non-Fed demand for MBS still non-existent (and, in fact, everyone selling into the Fed's bid), and a reduced issuance of Bills in 2010, it remains to be seen what assets foreigners will reallocate to. This "reallocation" trade will likely add another $200 billion to the $300-400 billion estimated above, thus bringing total demand for Coupons to $500-600 billion, offset by a Bill outflow of $300-400 billion.

Household Sector

Recently the "Household" sector as defined in the Federal Reserve's Flow of Funds, attained some notoriety after, as Zero Hedge disclosed first, Eric Sprott brought up allegations of covert monetization and general ponziness by the Fed via the "Household" sector. We will stay away from semantics, and present what is known: at the end of 2009, "households" held 12% of Treasury debt, or $800 billion: less than a quarter of Foreign holdings of $3.6 trillion. The inappropriately-named household sector consists of individual households, nonprofits, hedge funds, private equty, private foundations, labor unions and others, and Treasury holdings allocated to it, are calculated as a differential between total USTs outstanding and known amounts held by other investors. Basically, it serves as a plug to "everything else."

Regardless of semantics, a critical point must be added to the Sprott analysis, and also to Goldman's optimistic outlook on bonds, which is predicated on increased household purchases. As a reminder, Goldman speculates:

Increased saving by households and businesses creates a
potential demand for Treasury securities as well as less competition
for lenders' funds; flow of funds data and bank balance sheet reports
confirm that the domestic private sector is increasing its allocation
to Treasury securities.

Is Goldman overly optimistic on their expectation that U.S. households will finally do what their Japanese equivalents have been doing for decades? The answer is yes. But before we get into this, we need to point out that the recent surge in "Household" buying has not been effected in one bit by actual households and individual investors. Why is this? After all, the household savings rate has increased from 0.8% in April 2008 to 4.8% in December 2009. Yet as a reminder, the two key components of Household Treasury holdings include Savings Bonds, which are what households actually buy when they wish to purchase government debt, and Other Treasuries, which are marketable Treasuries, and which average households have no access to. It is a notable observation, that while the savings rate has indeed increased, holdings of savings bonds have not only stayed flat, but have declined over the past year: this is perfectly explainable by the combination of an increasing savings mentality coupled with a desire to deleverage: i.e., Rosenberg's new frugal normal. Goldman, which has bet the house on household Treasury purchasing to keep rates low, will be disappointed.

The chart below demonstrates the historical holdings progression between Savings Bonds and Other Treasuries. As can be seen, actual households have not been active purchasers at all in the recent bond buying spree.

Yet while it will take much more to convince Goldman in its faulty assumptions, what is without doubt, is that the same "reallocation" trade that has taken place in Foreign purchasing, has been paralleled in the Household sector. As the chart below shows, while Treasury holdings have surged over the past year, this has been purely a function of a collapse in Agency/MBS holdings. In fact, in the past year, MBS holdings in the Household category have fallen by a stunning $772 billion, from $840 billion a year ago to just $68 billion most recently. This has been accompanied by a less than half increase in Treasuries in the last 12 months: from $493 billion to $860 billion, a $367 billion increase, and less than half the decline in MBS.

Just like the reallocation trade has been critical to spur demand in foreign purchasers for USTs as they have rotated out MBS with the Fed lifting any and all foreign offers, so has the Fed been busy domestically. Comparing the action over the past 3 years, from the peak of the housing bubble (2006-2009 period), indicates that the reallocation trade accounts for nearly a dollar-for-dollar move out of MBS, which declined by $352 billion from $420 billion to $68 billion, into Treasuries, which in turn increased by $344 billion, from $516 billion to $860 billion.

With just $68 billion left in Households' MBS holdings, the reallocation is over, which means that the household sector will no longer be a major purchaser of Treasuries, and all of this on the backdrop of actual consumers, whose Saving Bonds holdings have dropped from $197 billion to $192 billion over the past two years. On the other hand, should "Households" end up purchasing substantially more than expected, then the Sprott thesis will have to be seriously revisited.

Commercial Banks

A major wildcard for 2010 Treasury demand will come from commercial banks, whose $1+ trillion in excess reserves, courtesy of flawed monetary policy, may be used if not to spur consumer lending, then at least to acquire treasuries. As was shown previously, banks held only $200 billion in Treasuries at the end of 2009, making them the second to last holder, yet the massive dry powder on their books, as well as possible political prerogatives, will likely make this sector a major purchaser of Treasuries.

Empirically, banks add to their Treasury holdings at the end of recessions, when banks have capital to allocate, yet consumer and small-business loan opportunities remain weak. This can be seen on the chart below:

This is also evident when one considers that change in bank UST holdings, compared against the steepness of the yield curve: it makes all the sense in the world that banks would increase Treasury holdings in a steep yield curve environment.

Yet even if banks unleash the full power of their excess reserve holdings it will likely not do much for back end supply. The reason is that banks traditionally purchase USTs in the 2-4 year sector, as they get most of their duration via their mortgage holdings, and with rising rates, existing duration has grown. As banks receive much better returns by lending direct, moves along the curve are i) rare and ii) merely placeholder measures until the economy improves, which explains their unwillingness to stray far on the back end of the curve.

The reason why this may be problematic is that there is an incremental $350 billion in new gross issuance in the 5Y - 30Y part of the curve alone, which is precisely the part that is least attractive to the banking sector.

Another major concern to banks is the prevalent uncertainty about possible future inflation: the Fed's liquidity spigot is as worrying to banks as it is to all but the staunchest deflationists. Today, inflation uncertainty is near decade highs. Furthermore, even as 10 Year yields remain near all-time lows, 10 Y inflation expectations are rising fast.

In order to determine the pace of Treasury purchases, a comparison with prior recessions (including those of the 1970s, 1980s, and 1990s) indicates that following major recessions, banks increase their UST holdings by 1.6% to 2.7% of total assets (with an average increase of 2.2%), and this increase takes two years on average.

Of the $16.9 trillion in total banking assets as of June 2009, USTs accounted for $141 billion or 0.8%. Growing this number in value to 2.2% of projected total bank assets of $18.6 trillion in June 2011 in the low case, and 2.7% in the bear case, implies that between $421 and $513 billion in Treasuries would have to be purchased over the next two years. As $82 billion was purchased in H2 2009,  this implies banks need to ramp up purchases to $225 billion per year in the low case, or about $4 billion per week. This represents about one-third the pace with which the Fed was monetizing/buying back bonds in 2009. The high case corresponds to an annual pace of $287 billion per year, or $6 billion per week: about half of the Fed's rate of purchases. Both cases, as noted above, would focus on Treasuries in the front-end of the curve.

As a result, it is expected that banks will purchase between $190 and $240 billion in Treasuries in 2010, which number also includes the $24 billion already purchased by domestic banks in Q1.


Broker dealers, unlike the other mentioned purchasers, do not have an outright preference for Treasuries as a yielding instrument, but merely as a hedge for spread-product books (including corporates, CDS, MBS and agencies). As banks deleveraged in 2008 and 2009, they covered massive amounts of UST shorts as they sold off the underlying hedged securities. Indeed, in Fiscal 2009, B/Ds purchased a record $119 billion of Treasuries, following $86 billion in 2008. Not surprisingly, these coupon purchases occurred in the front end of the curve (1Y-5Y), again indicating B/D's aversion toward dated paper.

As of June 2009, the B/D deleveraging process appears to have ended, and in fact has reversed as leveraging has once again commenced: B/Ds sold $21 billion of Treasuries in Q4 2009. Therefore, Broker Dealers are expected to sell $25-50 billion in coupons in 2010.

Insurance/Pension Funds

Insurance funds are essentially banks-lite: they prefer to purchase treasuries in a steep yield curve environment. In 2009, insurance/pension funds were the fifth largest buyer of Treasuries ($56 billion from insurance firms and $37 billion from pension funds). With expectations of a steep yield curve (for now) likely staying in the 270-280 bps range, Insurance funds are expected to purchase about $100-$150 billion.

An upper ceiling to purchases is likely to come from the discount rate on defined benefit pension plans (around 6.5%), implying the yield on purchased Treasuries has to be at least 5.25%. Currently the highest yielding P-STRIPS in the 30 year sector offer just 5%. Insurance companies could very well become a purchasing force... however at materially lower levels.

Mutual Funds

In 2009 the fixed income mutual fund/ETF space saw unprecedented activity: doubling the $104 billion in 2008 inflows (2009 closed at $204 billion). Yet the vast majority of this amount went to chase higher-yielding, riskier assets: only $33 billion (16%) was allocated for UST purchases.

As allocation to these buyers seeks to outperform benchmarks, the allocation to USTs has traditionally stayed limited, and as a result 2010 demand from mutual funds/ETFs is expected to stay in line at around $50-75 billion. Furthermore, as has been repeatedly pointed out, equity inflows have been negative in 2009. If there is a reallocation trade whereby investors seek even riskier assets, 2009 could see a rotation out of broad fixed income into equities and even riskier assets (CDOs are already stirring).

Money Market Mutual Funds

As money-markets only invest in ultra-short dated Treasury products, this demand category would not have an impact on the back-end. Furthermore, money-markets will probably continue to unwind the $332 billion in front-end paper purchased in Fiscal 2008: already last year $34 billion in Bills and short-end coupons was sold. If ZIRP persists, and if the Volcker doctrine manages to make money markets sufficiently unattractive, this category will at best have a neutral impact on USTs and more realistically will continue to be a net seller. As such, in 2010 this segment is expected to sell $100-200 billion in Bills and front-end paper.


Municipalities are expected to provide a token amount of demand, to the tune of $25-50 billion: this source of demand is low in a rising rate environment. In 2009 only $3 billion in demand came from money market funds.

Federal Reserve

Up to this point, we have demonstrated that under realistic assumptions, the traditional buyers of Treasuries will be insufficient to plug the demand hole. As the Fed will not sell any of the roughly $770 billion in Treasuries on its balance sheet with a ZIRP policy still in place, the only question is whether Ben Bernanke will step in and roll out QE 2. Of course, the implications to the stock and currency markets will be drastic should the Fed relapse to its old financial heroin-dispersing ways.


While near end supply will likely not be as difficult to satisfy, the back-end will face increasing yield pressure in order to stimulate demand. This means that long yields will begin a slow trickle higher to attract the missing demand that currently is unaccounted for. Should this happen, and should the likes of Morgan Stanley be correct in expecting even further steepening, the implications on mortgages will likely be severe. Which is why we are confident that the Fed, which is all too aware that the economic situation is far worse than what is presented in the mainstream media, will expand quantitative easing not only to more MBS purchases (mostly to facilitate yet more reallocation trades), but to direct Treasury purchases once again. In doing so, the Fed will surely short-circuit the market beyond all repair.

A practical idea on how to approach this binary outcome, would be the implementation of the kind of barbell trade that has made John Paulson a billionaire: should the Fed announce QE 2, the dollar will plunge, and gold will surge. Due to negative convexity between these two asset classes, we anticipate a non-linear acceleration in the price of gold compared to the DXY. Alternatively, should the Fed stay pat and do nothing to prevent the verticalization in the yield curve, the other side of the barbell would be to reward those who would benefit the most from the resultant even greater curve steepness, expressing this with long financial exposure (the more levered, the better). Another levered way to play the increasing curve steepness would be putting on the Julian Robertson-proposed Constant Maturity Swap trade (discussed previously in depth here).

Lastly, should the Fed attempt to stimulate an endogenous flight to safety and boost demand for Coupons artificially, we believe, as we have said before, that the FRBNY will certainly implement a stock market crash. The alternatives, an interest rate hike and QE. We believe that while the probability of QE 2 is increasing with every day, the likelihood of a rate raise is negligible, leaving the market crash theory as the wildcard. We will not handicap this outcome and instead let every reader decide for themselves. Nonetheless, as this week demonstrated all too well, once the market gains downward momentum, even the much expected daily offer-lifters may be mysteriously elusive. Hedge appropriately.

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Number 156's picture

You need someone indiscriminate? No problem. The Fed will buy what they can't sell.

Ben Shalom Bernanke, Suuuuuuuuuuper genius.


huntergvl's picture

Great Article Tyler.

I do believe Bernanke will continue to buy Treasuries, but through backdoor, very quiet to the public, venues. Announcing QE2 will not be prudent (understatement of the year).

So, they are floating the 'idea' of annuitizing 401ks and IRAs which might get some money. I have already wrote my congressman screaming and hollering that if they force me to annuitize my funds, I will pull them all before the plan is implemented even if it means quitting my job to get access to my funds. I think (hope) the backlash against forcing our retirement accounts into inflating treasuries will not meet with success.

Second......they need to crash the stock market. If the DOW and the S&P break through to new lows, say 500 on the S&P, the reverberations and domino effect on global markets will force a run to safety - Treasuries. Whether that will force a flight to safety into the long treasuries will be the question, but it will provide a backstop for treasuries that doesn't require the FED to raise interest rates. At least for 2010.

Of course, sooner or later the game will be up, and treasuries will need a rate boost, gold will explode, and stocks will wallow along in the 500-650 range will occasional dips, with less frequent surges.

Your article points out a multitude of factors to consider, and I am particularly interested in China's bonds and Germany's bonds (post the Euro collapse?). Lot's of variables to consider but:

Oil, Gold, and commodities will be the way I am going soon.

There will be some long term stock picks available in the s&p 500 range.

And there is always the small risk of an eventual dollar collapse which simply can't be ignored.

MrPalladium's picture

"So, they are floating the 'idea' of annuitizing 401ks and IRAs which might get some money. I have already wrote my congressman screaming and hollering that if they force me to annuitize my funds, I will pull them all before the plan is implemented even if it means quitting my job to get access to my funds. I think (hope) the backlash against forcing our retirement accounts into inflating treasuries will not meet with success."

Don't forget that withdrawls from 401(k) and IRAs are taxable, with a 10% early withdrawl penalty tax (last time I checked). These withdrawls push the taxpayer up into higher marginal rate brackets. Force a trillion out of IRAs and the gummint collects an unanticipated $450 billions in tax revenues, enough to kick the can of long dated treasury yields down the road for another year.

An inspired plan!!

Dirtt's picture

He's not alone in thinking that.  Particularly in the medical biz I know more than one highly qualified person that is ready to retire so they can begin to pull down the 401 reserve.

The clowns who are pushing this healthcare "reform" are insanely out of touch. Highly qualified people in medicine have been clamoring on for years about the woefully underprepared underlings entering healthcare.  And when you force the cream of the crop into retirement WHO exactly is going to staff the institutions that expand coverage to the tens of millions converging into the system.

It's kinda like starting a football league to rival the NFL.  How well did the USFL work?  There aren't enough people in the world who can play at the NFL level ( w/o steriods).

Any wonder why we need to pound the Progressive Movement into the fetal position?  Breathlessly void of logic.

Anonymous's picture

Doctors aren't that special. Cuba gave 400 to Haiti before the disaster.

strike for return to reality's picture

The withdrawal of productive labor and capital from the system is to be expected.

The speculative activities of Goldman Sachs and the like have been made risk-free via their ownership of Treserve.  Consequently all capital is driven to them.  (Those in the know because they know.  Those not in the know because heads squid wins, tails you lose, means that squid gets everything.)

Our society will stop functioning in this environment.  The question is when that will happen.

Anonymous's picture

"It is widely acknowledged that the USFL had a dramatic impact on the National Football League both on the field and off. Almost all of the USFL's on-field innovations were eventually adopted by the older league, and a multitude of star players in the USFL would go on to very successful careers in the NFL".

With the expiration of the collective bargaining agreement in 2011 what's going to happen to the "progressive movement" of the NFL? Basically only the most wealthy market teams are going to be able to afford star players, effectively killing the competitiveness of small market teams.

The majority of modern medical treatment is standardized and routine, much like the requirements of a offensive lineman.I don't need the talents of a Brett Favre to put a cast on a my kids broken leg or to administer a flu shot.

GoldSilverDoc's picture

BOY it's fun to read these comments - especially THIS ONE!!  I, as a specialty surgeon, am absolutely THRILLED that most of the patients are going to see "physician assistants" and "nurse practitioners".  I have noticed that the practices which employ these folks send me three to five times as many consults as the ones who use actual physicians, because about 80% of the time they have no idea what they are doing. 


Good luck with the cast, btw - a little too tight and your leg turns blue, then black, then falls off.    But don't worry, some nice NP or PA will hold your kid's hand while it does, and everyone will at least "feel good about it".  And as for the flu shot, well, heck, anybody can handle an anaphylactic reaction, right?  You just.... well, what is it that you do, anyway? 


Ha ha ha ha ha ha..........btw - I now work on retainer.  $5000 up front, plus 2% of your net assets (yearly), and 20% of your income if I manage to save your life.  If I don't well,  you take the loss......


Anonymous's picture

um....epinephrine...adminstered by another injection? Aren't many common folk (who are allergic to bee stings)provided doses themselves to self adminster?

ha. Thanks for the info. ummm....what happens if I am unemployed? Can we still make a deal? Will you at least take my underwater home as collateral? If not, I have a bunch of plastic stuff from China I can give you.

Whats that smell's picture

Medical people are at least 10x smarter than anyone else, just ask one. Also they never make any mistakes after working those 15 hour days? (not for money but to help people)

Basia's picture


Very arrogant and inappropriate comment. Most health care does not need a high salaried physician's services . I rarely have to refer to an M.D., save my HMO lots of money, and get excellent patient reviews.

You are obviously more interested in the money than in helping people. I feel sorry for your patients.

BH Nurse Practitioner

Chumly's picture

Dear Nurse Practitioner:

>Very arrogant and inappropriate comment. Most health care does not need a high salaried physician's services.<

Tell that to the parents, whom I know of, with of a toddler who was probably within 24 of dying had not a highly skilled physician properly diagnosed a serious condition requiring emergency surgery and whose prognosis had been missed by a practitioner who would have never got it right (because only the highly skilled physician had the experience and knowledge to identify it).  Now, I'm sure that practitioner does not pay the malpractice insurance that the highly skilled physician pays, yet in this case mentioned it would have been the practitioner who cost the child his life, probably not because that practitioner didn't "care" but because the the practitioner didn't have the skills of a highly paid arrogant physician.  Do you think the parents would have cared if the doctor was arrogant (which in this case she wasn't)?

If it was my child's life, I would prefer the highly paid arrogant skilled physician (probably paying at least $1 million in annual malpractice insurance premiums, hence he/she is highly paid; which came first: the chicken or the egg?) over the less paid practitioner.

Grace's picture


You don't get it - precisely *because* you are an arrogant **** who overvalues your contribution to society.

The practitioner you mention in the referenced case did his/her job by refering the child to a highly skilled physician who understood the condition. It's not like he/she had a fist fight in the ER over who owned the patient. No. Things worked out just as they should have.

You get paid to be on call for these rare cases where life hangs in the balance. But I've set a leg and stitched myself up - with no medical training - just a book with pretty pictures and informative descriptions. The fact is that the basics are not rocket science and I would prefer to have a conversation with a nurse or PA about what's going on with me, than spend two minutes with a "highly skilled" MD who is more concerned about his investments than he is about my health.

And yes - you have massive malpractice insurance. That's not the fault of the PA or Nurse. That's the fault of a lot of doctors who get it VERY wrong, too damn often, and the fault of an overly influential insurance and legal lobby who pay congress to make them rich.

Get over yourself. You went to med school for the wrong reasons. Why don't you find a network to work for, like your moral twin Sanjay Gupta? I'm sure it pays even better than your current scam/scheme.

GoldSilverDoc's picture

Ah, Basia.

"I rarely have to refer to an M.D." - that is because 95% of what you see is self-limiting, and needs no treatment.

"I save my HMO lots of money" - so you withhold care from patients in order to save money.  Who is most interested in money?  You.

""get excellent patient reviews" - patients don't know that you are doing nothing for them.  How could they?  


I feel sorry for anyone who gets stuck with a poorly-trained doctor wanna-be, like you.  They will pay for it, in the end.

DonnieD's picture

Are you saying a PA can't do as good of a job putting on a cast as a physician? I think you're just worried about losing your "god status" as an M.D.

GoldSilverDoc's picture

O Envious One:

Perhaps you, too, should have studied, instead of screwing around in college? Then you wouldn't have to be so envious?


Anonymous's picture

No worries AuAgDoc, you've got to do that sh*t for 20 years to get the irony.
Don't phuck with civilians.

MarketTruth's picture

Some may be missing the point. The 10% 'penalty' is easily offset by the 15%+ devaluation of the USD that will probably rear its ugly head. In other words you will be +5% when all is said and done. Have you seen the loss of value in the USD in the past few years alone(!) and yet the US Gov says inflation is low. The point is that dollar devaluation (and gold price increasing) tells the tale of the typical and ongoing USA government lies and deception. The sheeple will not know what hit them when their 401k is converted because "We are from the government and are here to help you."

Anonymous's picture


One smart cookie.


Anonymous's picture

Long yields could drift higher. How something trickles
uphill is beyond me. Take me to a stream you've seen traveling uphill defying the laws of gravity.
It has to be an exotic locale and I could use the
vacation. Interstellar travel does't count. Breakeven
on mortgages is 5% on tens I seem to have read some-
where else last week so we have a ways to go yet
before treasury yields threaten the doorstep of
mortgage rates your assertation in that regard is
somewhat overstated as it pertains to the near term.
I doubt Bernanke has time to meddle in the minutiae of fed
operations he is up to his eyeballs in alligators at
the moment. I never understood for the life of me
why normal fed behavior signaled in some people's
mind a ponzi scheme of some sort. Buying in the
open market as a tool for portfolio mgmt has
been done for decades you probably just weren't
aware of it for whatever the reason. I swear ZH sometimes can't see the forest for the trees. Probably in your quest for accuracy and truth you let yourself be bogged down by minutiae that makes your crystal ball a little not so crystal clear.

Voluntary Exchange's picture

For those of you who begin to understand that we are living under despotisim, may I sugget you read the excellet article at


to get some good ideas about what can be done about it to undue the problem and get America and the world back on the track to a decent life for the most people.

D.M. Ryan's picture

Just factor in the option-ARM resets expected next year and the case for QE2 gets even stronger.

aurum's picture

thats exactly right...we are finally moving out of the eye of the hurricane

waterdog's picture

Cynically inclined- I did not use to be this way until I began reading the posts on this site.

Quantitative squeezing- the act of putting the USA's lemons in a vice.


GeoffreyT's picture

The Chinee made some ornery noises when Billary tried to tell them not to behave like the NSA. Hop Sing got downright un-neighbourly towards the entire Cartwright clan.

Maybe Billary thinks that getting Hop Sing and his cronies to stop buying USTs would help her Preznitential pretensions in 2012 (or earlier if the CIA decides to off the Great Beige Hope). Not sure why Billary would want to be Preznit of a failed state, but you never know with them lezbeens.

US has mortgaged the Ponderosa to Hop Sing, and they still need Hop Sing to buy USTs ... cash.


You raff, you ruse.


Obvious troll is troll...






Anonymous's picture

your cynical attitude is being noticed comrade....:)

Shiznit Diggity's picture

Huh? May I suggest making any future comments intelligible to persons other than yourself.

Anonymous's picture

it's quite intelligible but perhaps crossed that very clear but narrow line in ZH land where Marla will gladly provide IP info should Jim and Artemus come a callin'

Grace's picture


I haven't thought of the Wild Wild West since I was ten years old. But I got the ref as easily as I got the Hop-Sing/Ben ref. It's a generational thing ya'll... 60's TV.

Master Bates's picture

I agree with you shiznit diggity. 

You know you must be spewing some words nobody can understand when shiznit diggity is like "wtf did that guy just say?"

Anonymous's picture

Come on MasterB - if you aren't clever enough to decipher GeoffreyT, then you do not belong on ZH, and you best go play with yourself ...

Anonymous's picture

I guess this all depends on whether Bernanke gets renominated right?

Regardless the wall of worry remains high for Treasuries and the dollar. Given how big a hole our economy is in, and how much trouble our banks and our retirees are in, I think that there will be plenty of demand going forward. As far as China? Don't you worry, even though they say they won't buy, they surely will. .. Didn't a news story break recently that they are now the 2nd largest exporter in the world? That's exactly the point, they are exporters and have been for decades. Their domestic economy take over in less than 2 yrs? Wishful thinking you all.

The dollar will continue to rise, regardless of whether QE2 is initiated or not. Why? Ask the millions of small business and unemployed in the real world: "There is no money out there". While all printing might be creating insane amounts of cash, all the debt that exists out there that is BS is going to get eliminated sooner or later....THAT is where ALL the dollars that are being printed are going. To replace those dollars that will completely vanish sooner or later. And even then that won't be enough. Deflation will be the order of the day. There is NO money in the economy, only debt...debt that will fail.

I'd give it around 2013 when we start seeing some of the symptoms of what this article portrays.

Anonymous's picture

China was expected by WTO to overtake Germany as
world's largest exporter and did so by early estimates in
December of 2009.

Mongo's picture

Wow, do you ever get to sleep?

Anonymous's picture

Can someone please tell me when the fed cant print anymore and admit defeat? This story is becoming boring. ZH, The marketticker all say that the fed cant do this and the Fed cant do that, or the end of the world will happen, Yet they are doing it. Please explain what hasto happen for the Fed to stop their policy or i am just going to think that The Fed is doing the right thing and ZH and all the Fed bashers are wrong..

Doug's picture

When you see tanks rolling down your street, you'll know the game is pretty much over.

Number 156's picture

...and the price of 1 pound of bread cost 3 billion marks... er uh, I mean, dollars.



Anonymous's picture

Never ever fill a tank barrel with water before firing it.

Never ever ever do that.

Just don't do it.


Seer's picture

You're asking for the impossible.  If everyone knew what the Fed was going to do it would be impossible to maintain any sense of stability.  It would be like a listing ship in which everyone runs to the high side only to cause it to become the low side (and, perhaps, capsize).

That's what's so tricky about all of this, the Fed has to play the biggest bluffs in all of history.  It's even more tricky with fewer, more powerful players.  And then on the other side of the coin is the poor, general (unemployed and un-insured) populace which could explode and nullify everything.

Regardless, it's all pretty much headed for the toilet anyway, as growth as we've known it is dead.  We are, in effect, just shuffling the deck chairs.

Mark Beck's picture

I think most financial analysts, with portfolio segments invested in Treasuries and cash (USDs), are watching the Treasury auctions to be at a rate which would finance Government spending. The FED will not bluff, it will just announce another Long Term Treasury buy program, to simulate XXXXX, you fill in the blank, growth, interest rates, employment, what ever the best buzz word at the time fits. The question is, once this starts what is the strategy for investment portfolios. Well, goodby USD, and a move out of US Treasuries. So this will not be 2008 where money moved from equities to Treasuries. Here we will see divestiture out of the US assets and debt.

One item not mentioned is that any increase in entitlements will place even more pressure on issuing debt. The one that I am watching is for SS to not be self funded in 2010. That is, more money going out than withheld from payroll taxes. If this indeed happens it will mean that the CBO estimate is off by 8 years. Although, it has to be revised by now, but perhaps not published.

Also, adding to the increase in debt, is the possibility of a new healthcare bill, although it is all but dead. We may incur in 2010 costs for another stimulus bill.

Perhaps by the end of 2010, it will become clear the actual date of default, or currency collapse. It really depends on the sequence of world events.

Mark Beck

Jean Valjean's picture


When money velocity picks up due to failing confidence in the currency...hyperinflation.

Or two:

When the manipulation of the gold market no longer works, signifying a weak currency to the sheeple and triggering number one.

If neither of those things happen, they can continue forever.

hooligan2009's picture

congrats on a good analysis of the upcoming demand and supply for US treasuries. I suggest that you need to include three other areas.

1) The demand from a global perspective, that is, G7 + PIGS deficit funding and

2) the global consumers "draw-down rate", that is, the need by holders for their money back to fund retirement, health and house payments

3) the flow of global trade, that is, the net trade surplus and deficit supply of all currencies that is available for G7 + PIGS to steal, I mean borrow.

From 1) the Fed and other central banks have funded the "mark to market" effects of excess leveraged capacity by buying around 30% of capacity that is not required and continue to sponsor the misallocation of "scarce" tax payer resources away from benefits to tax payers (government for the people, by the people, etc, so atrocious and smug delegation of proper government to ivory towered civil servants).

From 2) consumers (or investors, as ou describe) actually need their money back at an increasing rate. Parallels exist for health and housing, but as baby boomers increasingly retire (and continue a ten year old trend of increasing in Japan) and live for twenty years, they want their 5% per annum in "drawdown" for the twenty years they have before they die. This 5% will increase in 5% increments. This is a "drawdown rate" and is the new cost of debt, that doesn't feature in any economic analysis that I have seen.

3) as global capacity was overleveraged, global trade nominal levels will settle at lower levels to reflect "correct" capacity and demand. The net trade numbers you allude to, should better reflect "petro-dollars" and other resources dollars as well "trade dollars" and a world map of money flow drawn up. As G7 + PIGS progress towards the failure of the macro economic model they use, other countries who have not failed (yet) like BRIC will spend their cash at home, not in G7 + PIGS economies. Trade and petro dollar flows are the source of funds, I think that you have addressed China, so well done, but not put it in the context of (somewhat ignorant and traditionally dollar friendly) petro dollars or the other BRIC countries local situtations.

Japan has shown that a ponzi scheme of failed Government can persist for decades. Whether this can happen in isolation or whether G7 + PIGS can do it is the question. There is a tipping point, but so far, the lunatics running our fiat (ponzi) asylums have convinced consumers that consumers are the lunatics.


MrPalladium's picture

"but as baby boomers increasingly retire (and continue a ten year old trend of increasing in Japan) and live for twenty years, they want their 5% per annum in "drawdown" for the twenty years they have before they die. This 5% will increase in 5% increments. This is a "drawdown rate" and is the new cost of debt, that doesn't feature in any economic analysis that I have seen."

Outflows to U.S., Japanese and European retirees for the next 20 years. This guarantees under-performance of stocks and rising interest rates for the next 20 years, and it seems that even bearish analysts are in complete denial about this stark reality.

And all these retirees will be cutting back on consumption and downsizing their homes to cut back on taxes and utilities.

We will have to live with the massive forces of deflation for a long time, as the CBs of the developed world create a roller coaster for stock and bond prices with episodes of unrestrained money printing alternating with periods of restraint.

Fortunes will be made by those who can see reality and catch the tops and bottoms of the red flag waves on the investment beach.

Seer's picture

And all these retirees will be cutting back on consumption and downsizing their homes to cut back on taxes and utilities.

Not necessarily.  After all, who is going to be able to purchase these homes formerly known as homes-as-nest-eggs?  Wages continue to be pummeled.

I would suggest that you're going to see a lot of boarding going on.  These "retirees" will be renting out rooms.  I suspect that more of this is occurring, given that rent is being driven down: with people losing homes you'd think that rent would be coming up a bit, but that's not the case; this means that the supply of rentals is greater than the demand;  prices are too high- resolution? people doubling up in residences (cheaper).

TheGoodDoctor's picture

Yeah and they didn't just overbuild houses. But you are right, kids are moving back home, families are moving in with their parents, and don't forget the rent free tent cities.

Mark Beck's picture

I would like to give you a heads up on what may happen if Government cannot pay its bills, and the FED debased the dollar as much as they dare, the program most likely to be cut first is Social Security. It is by far the easiest to whittle down politically, much easier than Medicare or Medicaid.

The point is, the Government will have to cut benefits. It is just a matter of which one will be cut first.

Mark Beck