US Treasury Tells Lawmakers It Needs $2 Trillion In Debt Capacity

Tyler Durden's picture

Reuters reports that the US Treasury has informed lawmakers it needs a $2 trillion debt limit increase to operate... until the end of 2012. Better stated, this is 112% of US GDP (which will soon be declining). This is precisely as Zero Hedge speculated. We hope PIMCO will be swayed soon enough to buy all this extra debt about to start coming down Geithner's conveyor chute. But yes, the Fed will most certainly not be needed to monetize this extra debt: Japan, Europe and Libya have it covered. That said, we don't know if Libyan rebels will have the capacity to monetize the $3 trillion in debt in 2013, $4 trillion in 2014, and so forth. The pattern is clear.

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augie's picture

Stop. Just stop it already.

kaiserhoff's picture

No, I like this.  Cut federal salaries in half.  Cut federal benefits by 90%, and then we'll talk.

Whizbang's picture

You're adorable. I think you're forgetting that the few jobs that remain in the economy are completely based on corporate welfare, socialization of risk, and deficit spending. You cut back the federal government, the tit you're drinking off of dries up as well. Federal domestic spending makes up less than 10% of total funding go ahead and push the button, blow it all to hell. 

kaiserhoff's picture

Blow it all to Hell?  Exactly.  Private sector wages have been in hell for a long time.  I want to establish some reason for a young person to take a real, productive job, instead of sitting around a government office with his thumb up his ass. 

Even the MSM is catching up.  The Wall Street did a nice piece yesterday comparing the income opportunities of Harvard grads VS California prison guards.  Do you have to guess who has it better?

Kopfjager's picture

I junked you because you're forgetting who's propping up who.  It's the printing press and small business profits that are keeping the government afloat.  If you reduce the amount of money required to keep the government alive, you increase the amount of money that remains in the private sector.  Less government spending will eventually lead to an increase of cash balances and/or reinvestments in either R&D or more hires.  

In other words, if what you say is true then there should have been massive recessions and unemployment after the return of millions of government workers (soldiers) after the end of WWII.

A hell, "jump and the net will appear."  Make sense?   

Sam Christie's picture

One makes his own job. I haven't laid anyone off in all of this mess. I took a personal pay cut and kept my employees' pay the same.

I did, however, fire my gardener, but that wasn't because I couldn't afford him. It was because my wife had to call him 2 or 3 times to get him to come do his job. He unmade his job.


sun tzu's picture

Federal salaries and benefits combined is about $200 billion per year for the civilian workforce. So we save $100 billion. All we need to cut is another $1.6 trillion. Cut the entire military $700 billion budget and now we're still short $900 billion. It's hopeless. Yet the chicken littles keep telling us that the government is underfunded and hospitals, libraries and schools will close unless we increase spending by 10% each year.

unky's picture

we  dont need no government at all, problem solved

CH1's picture

Yeah, but then who will pat us on the head and tell us that nothing is our problem, save for voting?


Kopfjager's picture

I will.  ;) You're doing great, just keep spending.  

aerojet's picture

We got Bin Laden.  Wars these days don't need big armies, they just need highly trained hit squads like DEVGRU and Delta and Mossad offer.  The military is mainly just a jobs program for the lower-performing half of last year's high school graduates, and a place for sadists to get themselves killed in mostly benign (to the rest of American society) ways.  The defense contractors can still sell their drones and their ordnance and then the only problem is what to do with all those kids who don't have any futures.

Forward History's picture

I have quite a few of those underperforming "kids who don't have any futures" as friends stationed in Iraq and Afghanistan now. You need to check the elitism in your post. It's disgusting. 

Kopfjager's picture

Or, our military is stacked with professional war fighters who, despite graduating from college, never found civilian life to be all that satisfying.  Believe it or not but some of us would rather hunt Taliban than sit in a cubicle.  Not saying I'm more man than you or anything... I mean it's totally fine that you prefer to live in a social environment that produces things like Justin Bieber.  I'd just rather live in a warrior society.  

RockyRacoon's picture

Hey there, Mr. aerojet.  Having been on both sides of the military scene, I see your comment as being spot on.   Sorry to say.   My experience has shown that even some of the more "elite" services like Navy and Air Force attract the less socially equipped, in many senses.  You got some serious junking for speaking a bit o' truth.  Not to say that there aren't some very qualified folks who join the military for all the right reasons.  Cut to the bone, a military career (or short enlistment) is a voluntary action, thus making sympathy or patriotism unnecessary.  Save the flag-waving for the conscripted.

Forward History's picture

So if someone volunteers to serve, they're less patriotic and deserving of less respect than someone drafted?


Kopfjager's picture

Economics/finance isn't my profession so I often came here for sensible advice.  I was under the impression that people here were fairly intelligent...  until the subject shifted onto something I am expert on--warfare.  

This place is infested with naysaying fools.  Before the internet, these sorts of people had to face living alone.  Now they have a place to meet and cheer each other on and create the illusion that they have numbers on their side...

RockyRacoon's picture

Nope.  I repeat myself:

Not to say that there aren't some very qualified folks who join the military for all the right reasons.

I've met them, served with them, and been proud of it.

TruthInSunshine's picture

The annual budget deficit is now 1.8 trillion.

The annual budget for 2011 is forecast to be 15 trillion. Total debt is budgeted to increase from $11.9 trillion in FY2009, to $13.8 trillion in FY2010, and $15.1 trillion in FY2011.[3][4]

Approximately 80% of the annual budget is now mandatory spending, mostly on Social Security, Defense and Medicare (the Big 3).

Defense, alone, is responsible for just under a trillion USD expenditure, annually (it's much more, using more accurate measures of tracking).

The U.S. spends more on defense/military component of its budget than the next 18 largest sovereigns of the world do, combined.

If the U.S. could muster the ability and will to cut the budget by 10% per annum, and using 2011 fiscal year calculations, we would have achieved a 1.5 trillion dollar savings within a decade, even adjusting for real changes in monetary value.

Use 20% reductions instead of 10%, and over a 30 year timeline, we could achieve a pare down of 9 trillion.

Is this possible? Yes. Likely? No. Not without a semi non-comatose public who don't give a shit about the literal future of their children, and who are already seeing their young and newly minted college grads not be able to find gainful employment at anything resembling a living wage.

alexwest's picture

good post but..

# annual budget for 2011 is forecast to be 15 trillion
no its around 3.8 trln$

#we would have achieved a 1.5 trillion dollar savings within a decade

pal, you dont get it.. THERE'S NO FUCKING DECADE OR ANYTHING by thE end of 2012 USA debt will 17 trln, 1 more year its 19 trnl..

lets assume feds fund rate will be 2-3 %, so 10 yy will be 5-7%, so only debt servicing will around 1 trln $$.. lets assume budget recepits will be 2.5 trln ( i doubt),
so its 30% of budget...

do you get it ? now out of 3.7 trln of budget, debt servicing is less 300 bln, less 10%..

GOLD 3000$, AND ON.. oil will be 20-30$, 10 yy % will be +8 %

good luck

TruthInSunshine's picture

Alex, I agree that rising interest rates on treasuries are the dagger to the heart. The Federal Reserve is already insolvent, if in fact it's truly an independent actor, and there's no collusion between Treasury and it (which there is), and in fact, it's insolvent even if there is.

Let yields on the 3yr, 10yr and 30yr tnotes rise even by 100, 200 and 300+ basis points, respectively, and then recalculate the interest due component of the debt.

There's no out.

alexwest's picture


US debt is 800 pound fucking King-Kong.. but it can be managedlook at Japan...thye print 100% of taxable revenues for years

USA/Fed cant afford raise rates, cause it will require more and more printing , but PRINTING RESERVE CURRENCY IS #UKCING nightmare.. better to default and issue new currency backed by gold ( aint gonna happen)

agree, no way out .. game is over..

oklaboy's picture

Truth, nice write, but as to the next 18 countries? If China has 20 million unders  arms, and pays them pittance, I guess they are cannon fodder? There for the show? Lots of people with lots of guns for what? And as for the 18, do you wanna live in any of them? And how many of them are democracies not under the threat of attack, domestic or forgien? You can cut everything else, because if you don't have Defense, neither will you have the rest.  

Non Passaran's picture

There's Defense as in "defense", and there's Defense as in DoD.

The post-cold war DoD has been an overkill, so to speak.

thefedisscam's picture

Defense spending ALONE is 22% of the Fed. budget, adding Home Land Security spending, easily 30% or more

Sam Christie's picture

$100B is a good start. Now let's cut the rest of it in half and we'll be there.

sheeple's picture

right, 2T debt ceiling is a metals-negative facts which caused the most recent violent sell-offs


i concur with the market


johngaltfla's picture

They will get it watch and see. But if they do, there isn't enough room to jump into the UDN trade....

unky's picture

so it seems the market didnt set the price of gold and silver right yet because if this were true, $2 tn additional debt would mean the PMs should surge

Tyler Durden's picture

"The market is efficient" Alan Greenspan

EscapeKey's picture

"Financial Stability in Iceland" - Frederic Mishkin.

The analysis in our study suggests that although Iceland's economy does have some imbalances that will eventually be reversed, financial fragility is currently not a problem, and the likelihood of a financial meltdown is low. However, the possibility that multiple equilibria might occur suggests that policy measures to bolster confidence in the Icelandic economy and financial system would be beneficial. We suggest four such measures: 1) financial supervision might be more effective if it were consolidated inside the Central Bank; 2) Iceland's commercial banks should be encouraged and should also see that it is in their own interest to disclose more information about their activities; 3) the inflation measure used for the inflation target should minimize the influence of housing price fluctuations, and; 4) the government should implement a formal fiscal rule to dampen the Icelandic

business cycle. These measures are by no means exhaustive but could help improve the future stability of the Icelandic economy.

Gubbmint Cheese's picture

You are wrong EK.. his piece was called "Financial INstability In Iceland"... just look at his C.V.




EscapeKey's picture

Tyler Durden at ZeroHedge points out this video of Columbia University economist Fredric Mishkin who has changed the title of his 2006 pen-for-hire paper on Iceland’s economic state from Financial Stability in Iceland to Financial Instability in Iceland.

What an absolute fucking sleazebag.

hedgeless_horseman's picture

I couldn't hear Timmy very well over all the cheering regarding Osama.  What did he say?

Non Passaran's picture

Haha, yeah right.

Watch the author (try to) BS his way out of that on that recent movie about the crisis.


The Grip's picture

...stealth retitled to Financial INstability in Iceland. After his s--- got called out.

Votewithabullet's picture

Gross goes new-clear  "holding treasurys is an abdication of responsibility".

DavidC's picture

And "Prove me wrong" Alan Greenspan...

The hubris of the man.


Tonesvette's picture

I will surmise you're being sarcastic about Europe, Libya and Japan picking up the tab next year. But just in case, I need to ask, QE is a done deal, no ?  It really just has to be announced.

Ecoman11's picture

PMs are surging, but just in physical. Unfortunately by the time everyone realizes that, there will be no silver left. Keep buying those paper dips guys cause your helping guys like me buy more bullion. Thanks

gordengeko's picture

The banks are short silver contracts see, the tipping point is near.  Propaganda pushed the fiat price down.  Just wait.

unky's picture

wait, lets assume the comex really defaults or something like this but at that time silver is at lets say $30. so if this occurs i would still have the time left to immediatley go to my dealer and buy the phyzical then.

NotApplicable's picture

Well, assuming that somone else didn't buy them out at $33. Or $35, or $40.

Other than right after the May US Mint shipment, I don't expect US dealers to have any ASE inventory for very long. Tulving doesn't even have any listed right now, so I'm guessing all of his May stock has been sold. He does have Maple Leafs though.

unky's picture

i monitor the inventory of several dealers very closely every day. so i think i just wait and see how deep the price will fall.

gordengeko's picture

If they increase the debt ceiling flooding the market with more dollars, how does that justify a selloff in gold, silver and oil and milk for that matter?  It doesn't, which is why we have gas above the 2008 high while oil has been basically flat the last month?  Fear is being implanted in the markets.

johngaltfla's picture

so it seems the market didnt set the price of gold and silver right yet because if this were true, $2 tn additional debt would mean the PMs should surge


Dude there will be so many margin calls if they approved this it would not be funny. Freaking hilarious, yes, but funny, no.

The overseas physical buyers would crowd out most American demand.

disabledvet's picture

"patience young grasshopper."  and "prepare to hop!"

TruthInSunshine's picture

That's nice, Timmay.

Did you ask The Bernank?

No more POMO?

What! WHAT!!!


Why stop at 2 trillion, you blatantly incompetent American Government REJECTS. Why not just ask the equally incompetent CONgress for 20 trillion?



NotApplicable's picture


You don't really think voting can improve anything, do you? It was voting, after all, that created this mess.

At some point you have to stop this insanity and realize all you are doing is to help support the beast that empowers criminals over the lives of honest people.

Vote every single one of them out, and you'll soon have an even worse situation, as all of the new unknowns can be manipulated in ways you wouldn't expect from the old guard, a known quantity. It is not the occupants in office, but the office itself, along with the idea that one man needs to hold a gun to the head of another in order to best secure a peaceful society that is the problem to address.