Three Horrifying Facts About the US Debt “Situation”

Phoenix Capital Research's picture

Since too
often financial articles consist of some stooge blathering on and on with
opinions instead of facts, I thought today we’d simply focus on some FACTS
about our current financial system which few if any want to acknowledge.


#1: The US Fed is now the second largest
owner of US Treasuries.


right, this week we overtook Japan, leaving China as the only country with
greater ownership of US Debt. And we’re printing
money to buy it. Setting aside the fact that this is abject lunacy, this policy
is trashing our currency which has fallen 13% since June… as in four months
ago. Want an explanation for why stocks, commodities, and Gold are exploding
higher? Here it is.



#2:  “There are only about $550 billion of Treasuries outstanding
with a remaining maturity of greater than 10 years.”


horrifying fact comes courtesy of Morgan Stanley analyst David Greenlaw. And it
confirms what I’ve been saying since the end of 2009, that the US has entered a
debt spiral: a time in which fewer and fewer investors are willing to lend to
us for any long period of time… at the exact same time that we must roll over
trillions in old debt and issue an additional $100-150 billion in NEW debt per
month in order to finance our massive deficit.


And only
$550 billion of the debt we’ve got to roll over has a maturity greater than 10


So we’re talking about TRILLIONS of old
debt coming due in the next decade. The below chart depicting the debt coming
due between 2009 and 2039 comes courtesy of the US Treasury itself. In plain
terms, we’ve got some much debt that needs to be rolled over that you can’t
even fit it on one page and still read it.



#3: The US will Default on its Debt


… either
that or experience hyperinflation. There is simply no other option. We can
NEVER pay off our debts. To do so would require every US family to pay $31,000
a year for 75 years.


Bear in
mind, I’m completely ignoring the debt we took on with the nationalization of
Fannie and Freddie, AIG, and the slew of other garbage we nationalized or
shifted onto the Fed’s balance sheet. And yet we’re STILL talking about every
US family making $31,000 in debt payments per year for 75 years to pay off our
national debt.


that ain’t going to happen.


So default
is in the cards. Either that or hyperinflation (which occurs when investors
flee a currency). Either of these will be massively US Dollar negative and
horrible for the quality of life in the US. But they’re our only options, so
get ready.






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you’re worried about the future of the stock market and have yet to take steps
to prepare for the Second Round of the Financial Crisis… I highly suggest you
download my FREE Special Report specifying exactly how to prepare for what’s to


I call it The Financial Crisis “Round Two” Survival
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protection, which investments to own and how to take out Catastrophe Insurance
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designerhandbagsoutlet's picture

This is a great post. you got cheap handbags online .I like cheap designer handbags as well give you designer handbags outlet

fallst's picture

chopper read me with this...

Cant find this story we commented on anymore on zero hedge.

The only way I could find this again...

Three Horrifying Facts About the US Debt “Situation”

....was to go to My Account, then Track, then click on my comments.


chopper read's picture

this is the same way that i find it.  not sure what is happening. 

fallst's picture

Who do we owe this money to?

Have the Fed buy all of it, then close it down, and default.

Then start issuing Greenbacks direct from Treasury, without having to "borrow" it from the Fed, a Delaware Corp.! If you don't understand this, that is common, keep up your research. I admit it is confusing. All in The Plan.


Lincoln and Kennedy tried it.

chopper read's picture

good stuff, fallst.  ron paul is suggesting the same.

The Fed has done nothing but terrorize us since its inception. 

marksf's picture

"want an explanation for why stocks, commodities, and Gold are exploding higher? Here it is."


I disagree.  The commodities bull was well underway long before QE was even on the Fed's radar.

pitz's picture

SUKI (tm) RELIGION, motherfuckers!  Major international Japanese religion.

DonutBoy's picture

I have closed my TBT (UltraShort 20+ Year Treasuries) positions.  They are in a fantastic bubble - but rather than getting popped - the securities are simply going to disappear into the Fed who will print cash for them.  TBT will become undefined, there being no such security not in the hands of the Fed.  I really don't want to buy any more gold - but these schmucks aren't leaving me much choice.  They print green paper to consume anything else with a price: stocks, bonds, homes.  Capitalism turned to canabilism.

Why worry about #2 above - the amount of shorter-term debt rolling over?  The replacement debt will be bought by the Fed.  The treasury could issue consols and the Fed would buy them. 

As for #3 - there will be no treasury default - it's not possible when you print currency to buy the debt.  There is only one route left. 

chopper read's picture

way to be disciplined, DonutBoy.  fuck'em.  yeah, they got you on the short bond trade, but you can kick them in the nuts by converting that fiat to gold.  every ounce of physical you buy takes approximately $10,000 out of the system via 'fractional reserve' contraction.  they've got to print more (which drives up the price of gold) just to counter your decision.


feeling powerful, DonutBoy?  you should be.  you have roughly 10-to-leverage against them!!


how you like the apples, Benny?

mark mchugh's picture

I like the post, but I have a question:

Can Phoenix (or anyone else) tell me how that $31,000 per family per year x 75 years was calculated?

YHC-FTSE's picture

I have to admit it. I am a bit scared, but instead of agreeing with the inevitability of the article, I thought, is there a way out of this? (Without resorting to shooting my neighbours, drinking my pool water, or advocating nuclear war?)

Since #1 and #2 are merely factual, there's no way to put a positive spin on the horror. However, there is some scope for further consideration for #3: Threat of hyperinflation or default.

Sovereign debt cannot be considered in the same way as other debts. Creditors and sovereigns are assumed to interact in a way that allows them to achieve the optimal level of trade, ex ante, as well as understanding the risks of the cashflow of the debtor.

For a start, who will enforce the contract when a sovereign defaults? You are not going to get some muscle-bound goons from all the creditor countries (including the US-Fed) banging on your door with baseball bats asking you, "Where's the fucking money?" in the middle of the night. In fact, the only options creditors have: the threat of trade sanctions or diplomatic and military pressure, are hardly likely to cower the bald-faced liars and criminals who started this mess in a country as powerful as the USA. Yes, governments repay to obtain future loans or protect their reputations, but then we are assuming that the US government is an honourable institution, when reality has thus far implied otherwise. That is the worry.

The process of default can go in a number of ways, but the results all point to the surrender of some US assets, rapid devaluation of the dollar & strong inflation (Followed hopefully by rapid regrowth to sustainable levels). The worst-case scenario where the creditor country government or a supra national institution are told to fuck off, point to the same outcomes, plus complete international embargo leading to blackouts in cities, starvation, social chaos and anarchy within months.

The creditor countries can expect a zero profit transfer of assets and even large losses in the expected value, but I reckon, despite all the spite and xenophobia that spews from ordinary Americans every day, countries around the world led by China will rally round to support American regrowth. Demand is driven by need, and there is always a great need for peace, sanity, understanding and consumers with disposable incomes. 

hvl626's picture

Your scenario of only slight problems upon a national default is believed to be unrealistic.

The debt being considered for default is backed by the full faith of taxpayers. Many of the individuals who would be financially distressed by default are government employees, including the military, the IRS, the judges, the law-makers, the POTUS, the U.S. marshals and prison guards, etc. Their life style is at risk. They would seize assets of the taxpayers and make more laws that would allow more assets to be seized by expeditious process. Tax protestation has been a capital offense.

The historic status of nations is a small body of wealthy aristocrats and a very large body of oppressed peons. The aristocrats gain wealth by theft under color of law. Recent statistics have confirmed this trend in the U.S.

The interest on government debt may be 20 to 40 percent of the entities’ budget. I have not heard of any default where interest payments have been suggested not to be paid. Greece (riots in the cities by government employees who have had wages and benefits cut), California (thousands of state employees and recipients of state funds, including teachers, at risk), and the US certainly follow this pattern.

markar's picture

"If we can keep structural deficits to less than growth, we don't even have to have inflation. "

That's not only a big if, it's a big lie. Our deficits are already exceeding our growth if you consider the fact most of our growth is fueled by debt and consumption-not production

Bear's picture

I don't know why people so often overlook this gruesome fact. In the 80's we sold stuff, in the mid 90's to 2001, we sold technology; 2001 to 2007, we sold financial products (MBS) to other nations ... but now we have nothing except food that they want from us. We have limited options for growth and all we can see from today until forever in more government spending (i.e more deficit) with no return. 

StychoKiller's picture

Again, the problem (Donkephant in the room) is Govt spending and the refusal to cut it back down to size!

bobzibub's picture

Yes, but what if the Treasury defaults on debt *only* held by the Fed and promises not to with other entities?  The Fed will be the largest holder soon.

Here is my in-depth analysis:  ; )

The Treasury says: Woo hoo!

Fed says (under duress): OK.  We'll write that off... We bought 'em with cash anyway.

Other Investors say (OK;  Hey, didn't you just devalue the dollar from under our feet--Oh yeah, we priced that in already.)




edit: totally last with this idea!

hvl626's picture

You ask: "what if the Treasury defaults on debt only held by the Fed ?"

Get in touch with reality.  Goldman Sachs is running the Treasury, right ?

Inflate Or Die's picture

We are all doomed! Fiat currencies suck!  They always fail and return to their true value which is zero.  They give an illusion of wealth and prosperity, but like any other credit card, the bills will eventually come due.  Perpetual debt equals perpetual slavery.

hvl626's picture

You have apparently not been following the action in Greece.

Paul Bogdanich's picture

You know to the extend that the Fed can buy government debt without debasing the currency that debt does not exist.  It can be erased with a book entry.  Crazy like foxes these guys are.  The only danger to the status quo is a failed bond auction and that is still a ways off.

hvl626's picture

Wrong. We have already had a failed auction but it was quietly ignored.

About 6 months ago the Fed/Treasury announced an auction of 30 year bonds. The Primary Dealers did not want to get their finances tied up with trying to unload such long term debt---if they anticipated inflation. Anyone who would tie up money for that length of time for the interest that was anticipated would have had a “hair cut.” The PD submitted such low bids that the Fed ate more than 50 percent of the offering by submitting secret bids claiming they were from foreign purchasers. The previous highest percentage taken by the Fed had been 15 %.

The Fed is the real owners of the securities being auctioned---the Treasury serves as auctioneer to make it look like the government is selling the stuff.  The Fed receives the securities in exchange for establishing a line of credit for the U.S. government.  Congress gets to spend the line of credit.  Presto !!!!   NEW FIAT  MONEY !!!

A few months later the Fed was caught purchasing one of the numbered securities that had just been auctioned at a later date. The conclusion was that a prearranged deal had been made to make a good show for the public.

The Fed has pressured banks that receive TARP funds and state pension funds to purchase T-securities. Buyers are getting harder to find.

We should also note that the graph of maturing securities in the article is for roll-over debt. It does not include any new debt that is certain to come.

Bear's picture

Big Bang Theory ... We have to roll over $4.8B in 2 year notes between Feb and Nov of 2011. Those are certainly going to be big sellers at .8% ... I'm getting in line now, I hope some will be left when I get to the front.

thermroc's picture

Still a ways off? Hello? Did you actually read the article?

The US Fed is now the second largest owner of US Treasuries

It's failed. FAILED. F-A-I-L-E-D.

Did you really think the rest of the world was just going to stupidly continue to bankroll the US?

We will have to pay more and more and more for imports, as the dollar is worth less and less and less around the world, until it's no longer accepted at all. Then, we're on our own. Morning in America.

Bear's picture

Sorry Dude ... It's mourning in America.

chopper read's picture


only it ain't a springtime morning; its a long, cold winter morning.  and we brought it all on ourselves.  

CustomersMan's picture



I was thinking the same thing. Suppose the FED/Treasury buy the Treasury debt, the proceeds get expended, but then the Treasury Notes ,Bonds,Bills never receive the interest payments that go with them,....because they no longer exist, the book entry is taken off-the-books. This would change everything thats talked about in the above arguement, which was very good.


He's right, but they are not abiding by the rules, since they make the rules and anything goes.


Glad your here and posted, would like to hear from others on this as it seems to me a real possibility.


I spent 32 years in the trenches as a stock, bond, commodity,options,currency, rep and General Security Principal, as well as setting up, owning my own Investment Advisory firm with Fidelity Institutional Advisors Group.


Left the business in May 08, because I could not see anything left but manipulation, and I would put me and my clients at risk.

chopper read's picture

simply put, the consequences of additional debt are exactly how they appear with no way out.  The Fed is not clever.  There is no way to make the debt on The Fed's books vanish without a bondholder revolt and a run on the USD (which we are on the verge of).

The Fed has toxic asset-backed securities on their balance sheet.  they need these homes (some of which are in deserts in Arizona) to re-inflate in value.  The elderly and poor will suffer as the inevitable hyper-biflation (things needed go up in price, things not needed drop in price - food & energy up, houses and cars down) ensues. 

augmister's picture


The baby-boomers will be eating out of garbage cans.

Bear's picture

Who's going to throw out anything to eat?

Pat Hand's picture

The US won't default.  Inflation yes.  Hyperinflation? not necessarily.  Near term, deflating to flat.  Not sure where the tipping point will be, but I bet that we see Euro disappear & China bubble pop first.  It's a global world ;-) and US owns the fiat reserve.  For all the logical contortions of Chartalists, they have that one right.

We do not ever have to pay off the debts.  If we can keep structural deficits to less than growth, we don't even have to have inflation.  Of course, it takes political will and I have no illusions that either a Dem or Repub congress has any such thing.

hvl626's picture

I respectfully disagree.  The Fed/US cannot avoid default. 

It is not a matter of not paying off the debt, which we both agree can never be done. (Should this agreed scenario not reveal a contract that cannot be culminated ? A contract that cannot be culminated is an act of fraud and is void from its inception, right ?)

It is a matter that the interest, which accumulates exponentially, inherently becomes so great that it exceeds the entire source of revenue. The US economy is a giant Ponzi scheme and like all Ponzi schemes will self-destruct. Ref. RIP-OFF BY THE FEDERAL RESERVE,

Leo Kolivakis's picture

Two words: gas tax!

Bear's picture

Oh that's going to generate plenty ... but no one will go anywhere ... no go, no gas, no tax. VAT maybe? But, best tax of all is TV tax; you pay tax or TV goes dark ... I think people would sell their children before letting the TV go away.

SimpleSimon's picture

Now you see it, now you don't.

hvl626's picture

The statement that the Fed has purchased a trillion dollars worth of securities is submitted to be Fed disinformation. A more correct way to say it is that the Fed has been unable to unload that value of securities (that were given to the Fed by Congress so the U.S. government could spend a trillion dollars worth of stimulus) and the Fed has been forced to eat those securities offered at the auctions rather than accept bids that were too low and would cause the interest rate to escalate. Ref. RIP-OFF BY THE FEDERAL RESERVE.

The financial debacle is nothing new---except to the financial circles.

INHERENT NATIONAL BANKRUPTCY was posted on the internet 6 or 7 years ago (ref.  or among others).

RIP-OFF BY THE FEDERAL RESERVE is a mathematical analysis of the fraudulent Ponzi nature of the “national debt” that is based upon the impossible concept the debt can somehow be paid off---or is a stable, perpetual economic system.  The article has been circulated for some time. (ref. or or  









hbjork1's picture


Thanks much for your posting and links. 

This time we are in has heros and villans.  The heros are the people who are doiing what they can to inform their neighbors.


RighteousRampage's picture

I'm amazed that no one sees the endgame yet.


If and when we do reach the wall, the UST will simply absorb the Fed and wipe out the liabilities in the inter-agency debt shuffle.  Of course this would be considered outright monetization instead of slight of hand monetization, but if the event occurs sufficiently after the "quantitative easing," then would it truly be inflationary?  If there were no Fed today, it would be patently obvious that the UST was simply printing dollars (and the USD would be worthless), but the fact that the Fed maintains liabilities (fictitious as they may be) to offset their digitally enhanced UST purchases means, at least theoretically, that the intent is to one day unwind, leaving real debt (taxpayer debt) in it's wake.


If the consolidation/reset were to happen, say 5-10 years from now, I do not believe that the quantitative easing strategies employed today would be considered inflationary to that future time (hey, sure we printed, but it was in the past! and that money has already gone down the sinkhole, heh).  Forward monetization would be another matter, naturally.


While it may never come to pass, I do believe that the scenario above is the ultimate trump card, and would be played before things went the way of default


The prior U.S. central banks came undone, why should this one be any different.  Be careful what you wish for, however, as Fed the 4th would likely follow soon after.


gwar5's picture

Hyperinflation is de facto default anyway, no? 

DaveyJones's picture

it's worse. More things destroyed, more people screwed

sbenard's picture

The hubris of Wall Street and Washington never ceases to amaze me!

gwar5's picture

Well, the good news is that the bad news has not changed, but should we worry that the time it takes to circle the planet and come around again each time seems to be counting down? 

Chemba's picture

What an abject Bozo this clown is.

"And we’re printing money to buy it"

The Fed does not "print money" to buy treasuries.  The Fed swaps bank reserves for treasuries.  If those bank reserves do not create incremental credit - and they will not because there is insufficient demand for credible projects from qualified borrowers - then those bank reserves do nothing except reside as digits on a computer at Nassau and Maiden Lane.

masterinchancery's picture

Absolutely wrong. Maybe you could be on CNBC.

Hansel's picture

Get real.  The Fed does print money.  An expansion of the Fed balance sheet is printing money.  The balance sheet is expanded by the Fed through creation of new FRNs which they trade for treasuries and other assets.  The FRNS didn't exist, and then the Fed created them.

SimpleSimon's picture

I think you are both right (or worng :-)).  The Fed does not print money, it creates it.  It is the Bureau of Engraving and Printing (under the Treasury department) that actually prints paper currency.  Balance sheet purchases by the Fed are paid with for with just a credit in the seller's account, no actual FRNs are printed.

This also explains why the actual currency in circulation (those printed notes) has largely remained stable at just under $1 trillion.

If all the depositors (and the asset sellers) were to ask for actual printed FRNs (withdraw printed cash from their accounts), there is not enough printed FRNs to give.

Chemba's picture

ignorance is bliss.  the fed does not "print money" to buy treasuries.  the fed credits bank reserves in return for treasuries, i.e. it is an asset swap.  this adds money to the monetary base in the form of bank reserves.  there are no "federal reserve notes", as you so ignorantly put it, involved.  this "money" in the form of bank reserves sits there, like a lump of coal.  it is of use to nobody in the real economy if it is not lent out.  and it will not be lent out.  credit is contracting, not expanding.  if you don't understand this, I can not help you.

hvl626's picture

It is good to see somebody understands the Fed operation.  Perhaps the new post at

by hvl626
on Thu, 10/07/2010 - 11:07

may be of interest.

Bankster T Cubed's picture

sorry to burst your bubble, chemba, but you sound like an idiot.

when the fed buys treasuries or anything else, money is created "printed"

whether it buys them directly at auction, in which case the treasury spends those conjured up dollars, or in the secondary market, in which case the seller winds up with dollars that otherwise would have come from somewhere else but didn't because THE FED PRINTED THEM UP, shazam - dollars from nowhere