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Prepare For A Surge Of Treasury Issuance As Soon As The Debt Ceiling Is Lifted

Tyler Durden's picture





 

One of the side effects of the US hitting its debt ceiling in mid-May is that while the components of its total debt have been shifting, with total marketable debt slowly grinding higher, while intragovernmental holdings (i.e., government retirement pension accruals) declining, the total thing has been flat as a pancake at just $25 million below the mandated ceiling. Since May 16 (or 57 working days now), total US debt has been $14.345 billion and not a penny more. Yet the issue is that with the US expected to have a roughly $1.5 trillion budget deficit in the calendar 2011 year, the ongoing contraction in debt issuance is only temporary. Basically when and if the debt ceiling is lifted, the Treasury will not only have to issue as much debt as before, but it will have to issue massively more in the short term to catch up to the ongoing run rate, and also in order to prefund the same retirement accounts it has been plundering for the past 6 months. So here's the math. As the chart below shows, since May 16, the cumulative divergence between where total debt is and where it should be is now a whopping $265 billion. That's right: when the debt ceiling cap is finally lifted, and it will be lifted, with republicans "kicking and screaming", Geithner will suddenly find himself needing to plug a gap of over 2 months worth of accrued treasury issuance. Mathematically, this means the Treasury will have to sell not the $100 billion or so in net debt but well over double that in August and September. And this will happen at a time when there is no QE2 to soak up the excess slack.

Two other things to note: the primary reason for the collapse in total debt in addition to retirement fund "disinvestment" is that the Treasury has not been rolling its Bill maturities: after all every single Bond and Note weekly auction has so far gone down just as expected with no delays. Another thing: we are assuming a $1 trillion run rate increase in total debt which fits with the rateof debt issuance in the early part of the year. However, as noted above, the total debt in 2011 will likely have to be 2011, which means a dramatic pick up in total issuance in the second half as Geithner scrambles to fund operations.

And one last thing to note: as has been reported elsewhere, recent tax withholdings have dropped substantially in recent weeks, which simply means that even more debt will have to be funded through debt issuance.

In other words, as Treasury prepares to flood the market with Bills of all shapes and sizes, we could see one of the biggest curve flattening moves in recent history. After all, recall what the Fed did to the RMBS space after it decided to dump Maiden Lane II in the open market.

Prepare for a repeat of just that in the short-end as soon as the debt ceiling is finally hiked.

 


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Mon, 06/27/2011 - 10:28 | Link to Comment 66Sexy
66Sexy's picture

I love the smell of a conventional arms race in the morning...

Mon, 06/27/2011 - 11:27 | Link to Comment Scottj88
Scottj88's picture

We are living through the dual reality where truth (love) and lies (corruption) meet. This is all just apart of the macro-illusion...

http://thehardrightedge.com/twilightzone/

R.I.P. Federal Reserve Note - 1971-2012...

Mon, 06/27/2011 - 12:04 | Link to Comment Libertarians fo...
Libertarians for Prosperity's picture

We are living through the dual reality where truth and lies meet....

Yep.  You bet.  Here's a great example: One of the biggest lies being pumped by goofy silver fanatics is that physical silver and paper silver have disconnected from each other. The biggest silver goons on this website are still telling everyone not to worry about the collapse of silver prices. Supposedly, the collapse is merely a "paper" collapse, and that the "real" price of silver - the physical price at Wilber's Coin Store - is about to jump to the moon due to a physical shortage.    

Such bullshit.  

First, we had Eric Sprott admitting in May that he could buy physical silver at/near spot price, and yet all the silver goons still pumped their bullshit paper/physical story. 

And today, we have the retail public capable of buying silver for .99 over spot at Apmex:

http://www.apmex.com/Product/27086/1_oz_APMEX_Silver_Bar_999_Fine_.aspx?...

So here's your physical silver, under $35/oz - no physical/paper disconnect whatsoever, except for normal retail/wholesale arbitrage.  

Will the paper/physical pumpers finally STFU?

 

Mon, 06/27/2011 - 12:14 | Link to Comment cossack55
cossack55's picture

No.

I, for one, do not give a shit about paper/phys ratios.  Paper always, as in ALWAYS, involves counterparty risk.  Physical does not.  I don't care if silver is $35/oz or $3.50/oz. Irrelevent.  The lower it goes, the more phys I buy. End of fuckin' story.  Get over your paper obsession, brother.  Some of us will NEVER play that game.  If you wish to, more power to ya.  See ya on the other side.

Mon, 06/27/2011 - 12:19 | Link to Comment tmosley
tmosley's picture

We'll shut up as soon as you stop being a coward (which will never happen).  Symptoms of your cowardice include changing your user name every three weeks, and calling anyone who calls you out on it "paranoid".

Funny that you are still harping on your out of context quote by Sprott, considering he is on record numerous times saying he has trouble locating physical silver in quantity.  Hmmm...he can't find silver at spot in quantity...I wonder what THAT means?

Also funny that you think a 24 hour "flash sale" is indicative of the entire physical market.  You know less than nothing.

Mon, 06/27/2011 - 12:50 | Link to Comment Libertarians fo...
Libertarians for Prosperity's picture

And here we have the biggest carnival barker of them all: tmosley, the self-proclaimed "next oligarch."  How many times are you going to be discredited until you stop spreading lies?

Here you are telling everyone on the Ron Paul Forum in 2009 (before you joined ZH) that you started buying silver at $20/oz:

http://www.ronpaulforums.com/showthread.php?194334-Spot-Silver-Trying-16...

And here you are last month telling everyone at ZeroHedge that you are up 400% from when you first started buying silver:

http://www.zerohedge.com/article/so-about-speculative-and-undisputed-sil...

LOL

So which is it tmosley?  How do you back peddle out of this lie? 

The Sprott comment is NOT out of context. Here's the Max Keiser interview. Pay attention at 3:19, and please tell me how it's out of context.

http://www.youtube.com/watch?v=PM-LrMimRys

You may be able to trick the lemmings, but you can't trick those who know better.

 

 

Mon, 06/27/2011 - 13:01 | Link to Comment LawsofPhysics
LawsofPhysics's picture

This is the same Eric Sprott that believes that all this "reeks of someone manipulating the silver market" and who remains a "net buyer of silver".

Just curious.  In addition to the application of silver as true money, we also use silver to make things so I keep hoping the cost comes back down.  Does not sound like Eric Sprott thinks it will be coming down anytime soon.  

Mon, 06/27/2011 - 14:16 | Link to Comment tmosley
tmosley's picture

Uh yeah, so?  I always said that I made my first purchases at that level, but that I didn't start buying in volume until it was far lower.  Those first purchases were less than $1000 combined.

You ever going to tell us the reason that you keep switching names, you butthurt little baby?

But hey, you keep pursuing your vendetta with your protools that you use that enable you to see edits when they were made less than five seconds after the original comment was submitted.  Why do you have access to such technology?  What is your agenda?  As if it wasn't clear.

Edit:  Also, nice cyberstalking, BTW.  What is your malfunction?

Mon, 06/27/2011 - 13:06 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You have the logic of a child and the wit to match.  The US Mint has been selling more silver this year and last than any other since its first.  Demand for silver is out of this world.  Comex inventory has never been lower.  And you know nothing about JPM's control over prices due to naked short selling.  It is you who should STFU.

Mon, 06/27/2011 - 13:53 | Link to Comment MrBoompi
MrBoompi's picture

Maybe I'll STFU, but I'll still be buying more physical metal.

Someone works real hard to suppress the prices of metals, prop up the dollar, and prop up the equity markets. This is unnatural market manipulation.

These kind of monetary schemes have never lasted forever. It's true I may not live long enough to see where this ends up, but I'll leave my gold and silver to my heirs in case they'll require it.

Mon, 06/27/2011 - 10:28 | Link to Comment Ancona
Ancona's picture

Bring it on Timmy boy!

I need some more feedstock for my fireplace.

Gold and silver bitchez.

Mon, 06/27/2011 - 11:43 | Link to Comment CPL
CPL's picture

Did anyone pick up (just by scanning the chart from April 15th onwards) that collected tax revenues obviously didn't meet expectations.

 

The debt though doesn't reflect the direct withdrawls the US government has been doing from their own Social Security fund.  This isn't going to end well in September.

Mon, 06/27/2011 - 10:26 | Link to Comment RobotTrader
RobotTrader's picture

I seriously doubt that anyone is really worried about deficits and debt ceilings with 5-yr. and 10-yr. yields at 45-year lows.

And no matter how dire the Treasury's situation is, gold, oil, and stocks will be dumped in a panic during any and all financial crises and proceeds promptly stuffed into Uncle Gorilla paper.

Mon, 06/27/2011 - 10:31 | Link to Comment SheepDog-One
SheepDog-One's picture

Youre pathetic Robo, youll never be a Pigman, just a Pigman cheerleader.

Mon, 06/27/2011 - 11:23 | Link to Comment Greeny
Greeny's picture

I'm not sure why you pissed, but in financial collapse, Commodities will drop ahead of everything else. So far GOLD doesn't show anything to proof otherwise. Market Down, Gold/Silver down, OIL down. It might all changes at the end of usual summer PM correction.. Remember Silver at $8 2008-9? So you better pray for stability or Silver will be priced as dirt. I have a lot of physical Silver too.. And tell me what pops price of the silver to $50? finance crisis or QE's? You know the answer to that, obviously.

Mon, 06/27/2011 - 11:35 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea Greeny? Hows your 1.46 Euro long doing?

Mon, 06/27/2011 - 11:46 | Link to Comment Greeny
Greeny's picture

Jees, man do ever trade Forex? I think, I rarely hold anything over 1-2 days, sometimes even 20-30 min enough. What makes you think,
that I keep that position open? BTW ones Greek pass that Austerity cuts vote you can find EUR ones again above 1.44. Just watch.

Mon, 06/27/2011 - 11:52 | Link to Comment SheepDog-One
SheepDog-One's picture

Really? Well Friday you told me that was a 1 year buy and hold trade.

Mon, 06/27/2011 - 12:32 | Link to Comment Jonas Parker
Jonas Parker's picture

Go get a copy of "When Money Dies" and read it (in fact, you better read it twice). Then come back and tell us all how silver will be priced "as dirt" when the FRN crashes. On second thought, don't bother with the book. Ignorance is, after all, bliss!

Mon, 06/27/2011 - 10:34 | Link to Comment oddjob
oddjob's picture

How's your 30%+ haircut on MFN feeling?

Mon, 06/27/2011 - 10:39 | Link to Comment Boston
Boston's picture

"And no matter how dire the Treasury's situation is, gold, oil, and stocks will be dumped in a panic during any and all financial crises and proceeds promptly stuffed into Uncle Gorilla paper."

Agree with everything except the gold part. While I hope gold tanks (temporarily so that I can buy MUCH more physical), I believe gold will outperform silver and may not drop by nearly as much.  

Mon, 06/27/2011 - 10:41 | Link to Comment 6 String
6 String's picture

I agree Robo. Many like Schiff will be flogged again in a financial crash until Benny comes in with CNTRL ALT P. In fact, if there is no debt ceiling hike, the Dollar might also get bid and silver drops 50% or more. It's too early to be completely loaded up on silver. It's best to accumulate a little over each ensuing month....and then buy big if all lines up.

Mon, 06/27/2011 - 11:05 | Link to Comment bankrupt JPM bu...
bankrupt JPM buy silver's picture

6 string:  Your entire statement above represents how dumb sheep are.  Thank you for clerifiying your position.  Lastly, most of us are 'loaded' up from $15 silver.  Not $45 like you. 

Mon, 06/27/2011 - 11:12 | Link to Comment 6 String
6 String's picture

You are right: sheep are dumb and you cannot underestimate that. However, your groupthink stupidity doesn't make you any smarter. It makes you a fool. I bough silver heavily between $17 and $19, moron. Unlike you, in this environment, I pledge no alligenance to anything. It's the last man standing dipshit.

Mon, 06/27/2011 - 11:59 | Link to Comment CPL
CPL's picture

15?

 

I liked it at $8 an ounce and delivery over the counter.

Mon, 06/27/2011 - 10:42 | Link to Comment trav7777
trav7777's picture

...except that last time the Euro was "collapsing," the euro POG exploded

Mon, 06/27/2011 - 11:04 | Link to Comment Zing
Zing's picture

I shall simply junk you and send you on your way.

Mon, 06/27/2011 - 11:29 | Link to Comment QuantumCat
QuantumCat's picture

RobotTrader speaks truth. Additionally, a little engineered short term market panic will increase demand for treasuries. They own both sides of the trade... the stock market through primary dealers, and T-bills through the treasury. A pendulum for wealth confiscation.

Mon, 06/27/2011 - 13:59 | Link to Comment MrBoompi
MrBoompi's picture

It's only the paper that will be dumped, and it's the paper that's the cause of most of our problems.

Here we have about 14 to 1 collateral on average vs. upwards of 32 to 1 in Europe! Who knows what collateral backs up derivatives??? Any at all?

You can't engage in this extreme activity without fake paper wealth. No one doubts it makes a few people extremely wealthy. That doesn't make it right or safe for the rest of the world.

Mon, 06/27/2011 - 10:26 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

Who cares...American Idol auditions start this week!!!

Mon, 06/27/2011 - 10:30 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Velocity negative, issuance as positive as can be.

Talk about kicking an off-balance drunk in the nuts/guts. I think by the end of this week, we'll have new thigns to worry about. Huge earthquake/volcanoe/freak weather warnign from Piers Corbyn. And me. ;-) Good luck all around.

ORI

http://aadivaahan.wordpress.com/2011/06/17/nuclear-american-cross-other-thoughts/

Mon, 06/27/2011 - 10:27 | Link to Comment oogs66
oogs66's picture

Some politician on cnbc hinted that the aug 2nd deadline isn't hard and there might be a couple weeks or even a month more. So massive treasury issuance in sept and oct Perfect timing for a crash I we haven't had one by then

Mon, 06/27/2011 - 10:31 | Link to Comment Alea Iacta Est
Alea Iacta Est's picture

Fed to spend another $300B purchasing treasuries? http://www.bloomberg.com/news/2011-06-27/fed-seen-buying-25-billion-a-mo... Has QE3 arrived? Market seems to think so.

Mon, 06/27/2011 - 10:34 | Link to Comment SheepDog-One
SheepDog-One's picture

No free Hefty bags full of crack rocks for stocks = no QE.

No one gives a shit about some bond issuances to themselves.

Mon, 06/27/2011 - 10:33 | Link to Comment Tyler Durden
Mon, 06/27/2011 - 10:38 | Link to Comment Alea Iacta Est
Alea Iacta Est's picture

Thanks Tyler. That helps, though the market doesn't seem to get it just yet.

Mon, 06/27/2011 - 10:50 | Link to Comment FEDbuster
FEDbuster's picture

The real question seems to be, "What is the "asset" limit for the FED balance sheet?"  How many worthless Tbonds can the Bernak convert into FRNs, before FRNs are deemed worthless? 

"Just a couple hundred billion more Mr. Bernake. Bon appetit."  http://www.youtube.com/watch?v=rXH_12QWWg8

Mon, 06/27/2011 - 11:00 | Link to Comment jomama
jomama's picture

any chance we could see a 2x size image for that revised chart?  

cheers

Mon, 06/27/2011 - 11:02 | Link to Comment Tyler Durden
Tyler Durden's picture

done

Mon, 06/27/2011 - 14:15 | Link to Comment jomama
jomama's picture

thank you, sir!  great work as always.

Mon, 06/27/2011 - 12:44 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

QE Lite, in my book, means QE continues.  Socrates' look alike Jim Rickards has been proven wrong already when he said QE will not continue.

Mon, 06/27/2011 - 10:48 | Link to Comment buzzsaw99
buzzsaw99's picture

that article is bogus and the headline misleading. they are counting rollovers as net purchases. Pathetic reporting.

Mon, 06/27/2011 - 11:34 | Link to Comment SheepDog-One
SheepDog-One's picture

Similar to how theyre counting the FED's gold, already spent to different entities many times over, so they simply multiply the imaginary gold number by that factor. 

Mon, 06/27/2011 - 11:57 | Link to Comment buzzsaw99
buzzsaw99's picture

similar to how they will sell t-bonds in order to buy back the t-bonds they sold when they hit the debt ceiling. fun to watch but don't think about it too hard or you will go crossed-eyed.

http://www.youtube.com/watch?v=x8w95xIdH4o

Mon, 06/27/2011 - 10:31 | Link to Comment doomandbloom
doomandbloom's picture

dip the freakin buy, did u?

Mon, 06/27/2011 - 10:32 | Link to Comment SheepDog-One
SheepDog-One's picture

'Republicans kicking and screaming against it'? Not what I see at all, the 2 top republiclowns Boehner and Graham have already said they have no problem raising it a few hundred billion here and there as requested.

Mon, 06/27/2011 - 12:50 | Link to Comment cougar_w
cougar_w's picture

Kicking and screaming in the media.

We're all about appearances in the great Bread+Circus Travelling Big Tent of Nightmares.

Whoa. That would be a good title for a story...

Mon, 06/27/2011 - 10:32 | Link to Comment Boston
Boston's picture

In other words, as Treasury prepares to flood the market with Bills of all shapes and sizes, we could see one of the biggest curve flattening moves in recent history.

Unless of course, there we just happen to get a panic sell-off in risk later this summer, coincidentally just when Timmy needs to catch up by selling this boatload of shorter term paper.

Mon, 06/27/2011 - 12:51 | Link to Comment cougar_w
cougar_w's picture

"just happen" to get a panic? What are you attempting to imply, sir? Speak plainly!

 

 

File under "Things that make you go hmmm"

Mon, 06/27/2011 - 10:35 | Link to Comment qussl3
qussl3's picture

So i guess today was the pre QE3, debt ceiling raise rally?

Todays action is absolutely bizarre.

Mon, 06/27/2011 - 10:34 | Link to Comment SheepDog-One
SheepDog-One's picture

Nah just needed to park DOW back over Mystical 12,000 number.

Of course 'market action' is bizarre, the market is now a totaly broken 100% manipulated joke.

Mon, 06/27/2011 - 10:35 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

Yeah, even Yahoo Finance is having hard time characterizing the inexplicable rally!

Mon, 06/27/2011 - 12:56 | Link to Comment cougar_w
cougar_w's picture

The market is rallying to celebrate the end of QE2 because that ending will signal the beginning of the QE3 pre-rally right after the post-QE2-pre-QE4-post-QE2.5 rally head-fake.

To make sense of it you have to do the maths backwards from the future using Olmsford/Burns Type 3 matrix algebra. And don't forget to wear your 3D glasses and tinfoil mittens.

Mon, 06/27/2011 - 10:37 | Link to Comment gdogus erectus
gdogus erectus's picture

How deep is this pension fund?  And what fund can they go after next?  The sheeple don't seem to mind or even notice at this point.  Why not just keep draining all of them?

Mon, 06/27/2011 - 10:36 | Link to Comment IBelieveInMagic
IBelieveInMagic's picture

He he. They will.

Mon, 06/27/2011 - 10:37 | Link to Comment SheepDog-One
SheepDog-One's picture

I've been saying thats the plan all along, keep people unfazed looking at DOW 12,000 and comfortable enough to prevent panic while pensions and 401K's are looted behind the curtain.

By the time people feel any actual discomfort and panic, it will be too late in the endgame.

Mon, 06/27/2011 - 10:47 | Link to Comment wombats
wombats's picture

All the more reason to buy PMs.

Mon, 06/27/2011 - 11:32 | Link to Comment gwar5
gwar5's picture

Agree. The Fed will be Willie Sutton and just go where the money is ----> IRAs, 401Ks.

Mon, 06/27/2011 - 10:37 | Link to Comment MFL8240
MFL8240's picture

More confetti on the way!

Mon, 06/27/2011 - 10:39 | Link to Comment plocequ1
plocequ1's picture

Well, There it is.

Mon, 06/27/2011 - 10:40 | Link to Comment the not so migh...
the not so mighty maximiza's picture

USA...USA..USA

Mon, 06/27/2011 - 10:45 | Link to Comment vegas
vegas's picture

With the US treasury train heading off the cliff, why would anyone with a brain want to buy a ticket and get on board?

 

Who wants to buy this shit and why?

Mon, 06/27/2011 - 10:57 | Link to Comment The Fonz
The Fonz's picture

Two groups of people, 1. The banks paid off to do so. They get cash to cover them, in turn they buy our bonds cheaply forever, or that is what they hope. 2. Everyone else in the market is being corralled with fear and legislation into treasuries. IE if you had 5 million position in silver during the 5x margin hike I think you would have gotten a margin call for 10 million. That was the same trick used during the hunt brothers run up and it broke the market. Other legislation going into effect is creating uncertainty about commodities. Also our govt is using a price control sledge hammer with USD manipulation, so everyone is scared and they are all being herded toward treasuries like cows lead to slaughter.  The bottom line is we can't get interest or preserve our money through any means and that is the goverments intent. After all this govt is determined to loot the people for the banks.

Mon, 06/27/2011 - 10:50 | Link to Comment wombats
wombats's picture

How about NOT raising the debt ceiling and only spending what they actually take in from taxes?  Sounds like a novel idea that just might work.  Maybe give peace a chance and quit spending so much on useless wars that have outlived their purpose.  Bring the troops home and maybe there would be enough money to actually come close to balancing a budget for a change.  Didn't Obama once promise to do something like that???? 

Just asking...

Mon, 06/27/2011 - 10:56 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

 ever increasing amounts of debt is needed so that the usurers can indefinitely extract interest payment from the population out of money they create out of nothing.

This is why Benocide will not allow Deflation at any cost. Deflation= plunge in tax revenues.

FED believes they can engineer inflation and keep it under control. Of course, never before in history has this been a successful endeavor. The currency and monetary system always collapse.

Mon, 06/27/2011 - 11:15 | Link to Comment White.Star.Line
White.Star.Line's picture

Actually, the ever-increasing amount of debt is needed so that the "usurers" can plunder as much as possible in natural resources and financial power.

Against the backdrop of financial misdeeds, is theft of sovereignity.

Mon, 06/27/2011 - 11:28 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

Yep. Economic Hit Men recognize no nation state. The world is nothing but a oyster to them.

Mon, 06/27/2011 - 11:30 | Link to Comment AgShaman
AgShaman's picture

It's been the MO of Shylocks since the inception of banking

http://www.youtube.com/watch?v=wPtYGJOh3f4&NR=1

Mon, 06/27/2011 - 11:24 | Link to Comment wombats
wombats's picture

I think the best that we and the rest of the proletariat can do is keep buying and hiding gold, silver as long as TPTB allow it.

Mon, 06/27/2011 - 10:50 | Link to Comment Arius
Arius's picture

what's new ... really ? 

Mon, 06/27/2011 - 10:51 | Link to Comment The Fonz
The Fonz's picture

U.S.A.!  Use Steal Aquire!

Mon, 06/27/2011 - 10:58 | Link to Comment DaveyJones
DaveyJones's picture

"kicking and screaming" like a masochist in an orgasm

Mon, 06/27/2011 - 13:00 | Link to Comment cougar_w
cougar_w's picture

Word

Mon, 06/27/2011 - 10:55 | Link to Comment YesWeKahn
YesWeKahn's picture

interest rate will raise rapidly. Bernanke has to do something, otherwise the world will end.

Mon, 06/27/2011 - 11:01 | Link to Comment John McCloy
John McCloy's picture

   Looks like the banks are going to have to suck it up and buy the debt without being able to flip it back to the Fed just yet..there is always QE lite 2.0.

Mon, 06/27/2011 - 11:08 | Link to Comment monopoly
monopoly's picture

Does this mean the bank bonus parade will end. I think not.

Mon, 06/27/2011 - 11:15 | Link to Comment buzlightening
buzlightening's picture

Spending our way to prosperity through great debt issuance; compounded daily, weekly, monthly, yearly; for decades .  Grand kleptocrap bull. One day we just wake up and a granite sized planet of debt crushes the world and financially the globe robbed as a thief in the night.  Can't say how important it is to keep preparing your economic life boat off this planetary fiat ponzi go round.   I started Jan '08 and haven't stopped adding to the economic life boat.  What Keynesian black magic is going to turn away the fact paper fiat money backed by this air promises of lying politicians, in bed with bankster fradsters has any intrinsic value whatsoever. What a cluster flock of chaos.  

Mon, 06/27/2011 - 11:29 | Link to Comment Quintus
Quintus's picture

"......and this will happen at a time when there is no QE2 to soak up the excess slack."

 

How can anybody of sane mind look at this situation and imagine for a second that there will be no more QE?  It's just ridiculous.  Maybe it would work if the US was the only country in the world trying to issue debt, but wouldn't you know - just about everyone else also has aspirations to sell billions more debt at the same time.  Absent the power of freshly printed money, there simply isn't the global capacity to soak up this flood of debt, and certainly not at the pitiful yields on offer.

Mon, 06/27/2011 - 14:17 | Link to Comment MrBoompi
MrBoompi's picture

Ask any GOP member of the House or Senate. What can they do to stop the Fed from creating money (debt)? They abdicated their authority 100 years ago. Every president that has since tried to regain the government's right to print its own money has been shot.

Don't be fooled. The debate in Congress has nothing to with "fiscal responsibility". It's all about freeing up more taxes so that more is available for debt-holders by cutting or eliminating entitlement programs.

All we get to see is the official Budget of the US. We never get to see a real financial statement that includes all revenues and assets of the USA. Chances are our budget, and the resulting deficits, are as fudged as anything else coming from this government.

Mon, 06/27/2011 - 11:29 | Link to Comment Scottj88
Scottj88's picture

We are living through the dual reality where truth (love) and lies (corruption) meet.  This is all just apart of the macro-illusion...

http://thehardrightedge.com/twilightzone/

R.I.P. Federal Reserve Note - 1971-2012...

Mon, 06/27/2011 - 11:26 | Link to Comment Defenestrate
Defenestrate's picture

Forgive this question, but I'm coffee deprived and a non-MBA reader. My family is (insane, I know) about to buy a house. What immediate effect could this have on mortgage rates?

I've learned from you guys and others that the 10-year and rates are at least somewhat linked, but the implications here are a little beyond my non-business-educated mind.

Mon, 06/27/2011 - 11:35 | Link to Comment YesWeKahn
YesWeKahn's picture

insanity is never a crime. Buy buy buy.

BTW, the interest rates have to go up rapidly, the new issurance of T will drive down the price, thus higher interest rates including 10 years.

Mon, 06/27/2011 - 12:17 | Link to Comment JuicedGamma
JuicedGamma's picture

I keep thinking rates must back up, only problem is fighting the Fed -- Bernanke is a tenacious SOB.

 

Mon, 06/27/2011 - 11:40 | Link to Comment metastar
metastar's picture

QE3 now in 3D showing in theatres starting August 2011!

Mon, 06/27/2011 - 11:41 | Link to Comment janchup
janchup's picture

It's taken a while but I've lost my irrational optimism about the future of the USA. Which is probably a good sign, either of a turning point or at least of personal sanity attuned to reality..

Mon, 06/27/2011 - 13:11 | Link to Comment Widowmaker
Widowmaker's picture

Go stand in a few TSA lines to cheer you up.

"Protecting you from yourself since 2001"

Just think, like TSA, FEMA prevented the last catergory 5 hurricane proving that centrally planned police states never lose.

Mon, 06/27/2011 - 11:49 | Link to Comment gigeze787
Mon, 06/27/2011 - 11:52 | Link to Comment Hubbs
Hubbs's picture

Like a sniper rifle tirgger adjustment from 2lbs down to 2 oz. Won't take much now to send it. Don't breath on the trigger.

Mon, 06/27/2011 - 11:59 | Link to Comment Hubbs
Hubbs's picture

Witholding decreasing? Meaning people making less money so having to witholdless in taxes. That would be me. The problem is, now that I have had to close my medical practice, will be living off retirement for a while...but not all is lost, if I have no active earned income, then I pay no taxes. If I withdraw from my IRA prematurely, sure, I'll pay the 10% penalty, but the amt will still be a lower tax rate than  I'll ever pay in the future if I get back to work. plus the IRA is not growing anyway, so tax deferment is a moot point.

Mon, 06/27/2011 - 12:07 | Link to Comment hannah
hannah's picture

like there wont be a qe3 or the debt ceiling raised...get real....!...like they have a choice at this point.

Mon, 06/27/2011 - 12:07 | Link to Comment Pinktip
Pinktip's picture

My first comment on ZH, been Lurking for ~1yr.

 

As a novice spectator of Dow and USD charts, can someone explain why these two move 95% of the time in harmony, on a hourly basis yet the financial headlines regarding Dow movement never mention it.

 

My bottomline point is, is the main lever in Dow movement the value of the dollar?

 

Thanks in advance!

Mon, 06/27/2011 - 13:30 | Link to Comment Larry Darrell
Larry Darrell's picture

Good question.

Must remember:  correlation does not equal causation.

HOWEVER, in my humble opinion.....yes, the DOW only trades based on the USDX, and more specifically right now, the EUR/USD ratio.  In other words, I believe that in this particular instance, there is causation.

My reasoning...........

There is zero real/organic economic growth (it's actually contracting --> see the FED report from this morning for the latest in 3 straight years worth of info on the Great Depression v2.0 economy).  As such, the only way for institutions to appear solvent and / or profitable is on PAPER.  This is currently being acheieved by devaluing the dollar with respect to other currencies--lower dollar value here boosts paper profit margins on sales overseas.  This is being done, among other things, because the Amerikan consumer is dead.  As EUR strengthens, people chasing paper returns (aka the MOMO lemmings) pile into business which will benefit (on paper) from lower dollar.

 

Again, just my opinion.

Mon, 06/27/2011 - 14:21 | Link to Comment Pinktip
Pinktip's picture

Thanks LD!

Mon, 06/27/2011 - 12:21 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Tyler,

No QE2 and no QE3 (yet) but will this Summer's seven POMO auctions "soak up the excess slack"?

Seven POMO Operations (QE Lite) This Summer:

http://www.zerohedge.com/article/new-york-fed-announces-it-will-conduct-...

Mon, 06/27/2011 - 13:36 | Link to Comment Tyler Durden
Tyler Durden's picture

You mean create enough excess slack? Of course not.

Mon, 06/27/2011 - 12:20 | Link to Comment Don Levit
Don Levit's picture

In regards to the retirement accounts of federal employees that have been plundered, which accounts are you referring to  -  the defined benefit accounts, the defined contribution accounts, or both?

As best as my limited understanding allows, the defined contribution accounts are invested in stocks, bonds, and Treasuries, while the defined benefit accounts ater invested in Treasuries.

The Treasuries were issued, partly due to the borrowing the Treasury did from the employer and employee contributions to help pay for current government expenses.  Similar to the SS Trust Fund, the trust fund for federal employees is also part of the total debt, represented by intragovernmental holdings.

Some of you may be acquainted withthe FASAB, which is the accounting advisor for the federal government.

In a recent exposire draft entitled "Revisions to Identifying and Reporting Earmarked Funds:  Amending Statement of Federal Financial Accounting Standards 27, believes that the retirement plans for federal employees should not be considered earmarked funds, or funds designed to be set apart for a specific purpose.

On page 5  ""The Boiard also believes that funds established to account for pensions, other retirement benefits, other postemployment benefits, and other employee benefits provided to federal employees were not intended to be and should bot be reported as earmarked funds.

The result at the government-wide level is that the large negative net position of these funds obscures the large cumulative amount that needs to be repaid by the general fund in order for the earmarked revenues to be used for their intended purposes.  By changing the criteria for what is an earmarked fund, the Board is proposing to exclude such funds from the category of earmarked funds, and thus the large negative balances associated with those funds will not be masking the large positive balances in the funds whose balances result from dedicated collections."

http://www.fasab.gov/pdffiles/exposure_ef_2011.pdf.

Don Levit

Mon, 06/27/2011 - 12:48 | Link to Comment Robslob
Robslob's picture

You will always lose me when I see the acronym FASB or any itteration of it...replace with CROOK and you have my attention.

Mon, 06/27/2011 - 13:08 | Link to Comment I am Jobe
I am Jobe's picture

Agreed. how about Looters and Thiefs. Include Congress in the way you see fit.

Mon, 06/27/2011 - 13:05 | Link to Comment I am Jobe
I am Jobe's picture

Agreed. how about Looters and Thiefs. Include Congress in the way you see fit.

Mon, 06/27/2011 - 14:31 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

You will always lose me when I see the acronym FASB or any itteration of it...replace with CROOK and you have my attention.

FASB: Fuck America, Serve Bankers

 

Mon, 06/27/2011 - 12:21 | Link to Comment cougar_w
cougar_w's picture

Ruh roh

Mon, 06/27/2011 - 12:36 | Link to Comment the grateful un...
the grateful unemployed's picture

so do i want to buy TIPs?

Mon, 06/27/2011 - 12:40 | Link to Comment Robslob
Robslob's picture

The Market is a "toy" and the old saying "if you aren't on the inside...then you are on the outside" has never been more true than it is today.

 

Mon, 06/27/2011 - 12:53 | Link to Comment I am Jobe
I am Jobe's picture

WTF. Are these guys for real. Hang the bastards. Garbage in garbage out is the way America works anymore.

Mon, 06/27/2011 - 13:19 | Link to Comment Widowmaker
Widowmaker's picture

Now that fags can marry in NY, your comment is a hate crime.

Mon, 06/27/2011 - 13:15 | Link to Comment toros
toros's picture

Switching to 11" X 17"

Mon, 06/27/2011 - 13:21 | Link to Comment Mark_BC
Mark_BC's picture

September 11, 2011 baby

Mon, 06/27/2011 - 14:02 | Link to Comment XenoFrog
XenoFrog's picture

I remember my first sexual experience, because I kept the recipt.

Mon, 06/27/2011 - 15:53 | Link to Comment Jovil
Jovil's picture

What are you going to do when the dollar devalues.

http://lonerangersilver.wordpress.com/2011/06/20/living-through-a-curren...

Mon, 06/27/2011 - 16:07 | Link to Comment PulauHantu29
PulauHantu29's picture

I don't like flat..prefer curves::))

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