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Visualizing The Upcoming Treasury Funding Crisis

Tyler Durden's picture


In his interview yesterday Julian Robertson expressed substantial concerns about the ongoing US debt funding threat, using words such as "Armageddon" to describe what will happen when and if China and Japan stop buying US debt. More disturbingly, as was pointed out on Zero Hedge first, and was subsequently picked up by the WSJ, the Fed has accounted for half of all Treasury purchases in Q2 ($164 billion of total of $339 billion).

Below we present data for what could be construed as a Treasury funding crisis borne out of lack of demand for longer maturities, once the QE portion of UST purchases expires. This crisis could hit as soon as October.

The first chart highlights total UST foreign holders as per TIC data:

Of which holdings of bonds was almost flat:

Yet bills were up a whopping $400 billion:

Summary: foreign purchasers are congregating exclusively around the front end of the Treasury curve, meaning that the primary net purchaser of dated bonds has been the Federal Reserve. As everyone knows by now, the Fed only has $10 billion left out of the $300 billion total allotted for Treasury QE. That should expire next week. The question then becomes will we see another major steepening leg in the UST curve as yields on long-dated paper finally catch up to the real supply-demand curve absent the Fed's manipulation of the equilibrium point. Or will we see an outright funding crisis as foreigners pull out entirely of all treasury purchases, not just Long-term USTs.

The time of unravelling may be upon us sooner than most think.

Compliments to Gunther for the primary data.


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Fri, 09/25/2009 - 09:45 | 79404 pivot
pivot's picture

government realizing it cannot fund itself is likely best remedy to the problem.  but then again, what do you think this rally has been for? except to set up another scare back to UST?

Fri, 09/25/2009 - 09:49 | 79410 koaj
koaj's picture

as long as you and i and Mao have faith in the Federal Reserve Note, this charade will be allowed to play out


so if you want to force end game...take your money out of a TARP bank, starve the beast. wait until year end to pay your quarterly estimates

Fri, 09/25/2009 - 09:58 | 79425 gmrpeabody
gmrpeabody's picture


Fri, 09/25/2009 - 11:24 | 79551 john_connor
john_connor's picture


Fri, 09/25/2009 - 12:15 | 79628 ghostfaceinvestah
ghostfaceinvestah's picture

Exactly, I have been saying this for months, if you really care about this country, you will NOT bank with the Stress Test 19.

Fri, 09/25/2009 - 20:20 | 80156 Gordon_Gekko
Gordon_Gekko's picture


Fri, 09/25/2009 - 12:29 | 79648 Anonymous
Anonymous's picture

The Fed institutionalized moral hazard with the Bernanke, Paulson, Geithner Greenspan Puts, distorting markets and
destroying the economy.

Whether by design or default interesting discussion.
Result the same.

If indeed there is a scare, will it go to dollars, gold
or bills?

Won't Gilts fall further?

Interesting to hear the mikes at the Ron Paul Hearing
break: witness complained he just couldn't get
through to Frank et al.

No kidding...

Fri, 09/25/2009 - 15:05 | 79849 Anonymous
Anonymous's picture

Speaking of scooping the WSJ:

Lone wolf Fed Guv says iRates may be about to leap:

Fri, 09/25/2009 - 09:48 | 79407 etrader
etrader's picture

If the Mid east kicks off , then wont that force some long end buying?

The war drums are already starting to sound out.

Fri, 09/25/2009 - 09:48 | 79409 . . .
. . .'s picture

Congress can help address its funding gap if it shuts down the Obama administration's give-away of 85% of cap-and-trade carbon emissions allowances, and instead auctions all of them off.


As you know, the EPA is looking to pass regulations creating a cap and trade program.  You should consider starting a petition to have the relevant state (or DC) attorneys general investigate the EPA attorneys that have advised the EPA it has authority to issue the regulations.  If the EPA doesn't have legal authority to issue the regs, and the EPA lawyers bad opinions saying they do have authority, the EPA lawyers may not be acting ethically and may be subject to penalties, like having their license to practice law suspended or revoked.

Fri, 09/25/2009 - 09:49 | 79411 Ragnarok
Ragnarok's picture

Bernanke just has to show these three charts to the democrats, get the debt ceiling raised and fire back up the printing presses. 


Unless Obama is willing to sacrifice Governors and House Democrats in the mid-year elections for more crisis = more control?  Hmmm....

Fri, 09/25/2009 - 11:39 | 79581 DaddyWarbucks
DaddyWarbucks's picture

I think we're willing to sacrifice them. Let's all meet at the top of that volcano in Hawaii, say next Tuesday around noonish?

Fri, 09/25/2009 - 12:17 | 79634 Ragnarok
Ragnarok's picture

Hey, we could have a luau. 

Fri, 09/25/2009 - 09:50 | 79412 monmick
monmick's picture

Yeah, the long rates will start going up soon, but NOT because of supply-demand issues but RATHER because of the Fed's independence being compromised by, among other things, HR-1207.

At least, that is the line we will be hearing with increasing frequency in the coming weeks... 

Fri, 09/25/2009 - 09:54 | 79418 Missing_Link
Missing_Link's picture

Why do you have a terrorist as your avatar?

Fri, 09/25/2009 - 10:03 | 79430 gmrpeabody
gmrpeabody's picture

And since you asked...,

We all would like to know why you chose a fairy.

Fri, 09/25/2009 - 10:06 | 79434 MinnesotaNice
MinnesotaNice's picture

Yep, cough it up Missing Link... I've been wondering also... I bet there is story that goes with it  :-)

Fri, 09/25/2009 - 10:50 | 79513 Hephasteus
Hephasteus's picture

Haha. Nobodies figured out what my pic looks like.

Fri, 09/25/2009 - 11:07 | 79533 MinnesotaNice
MinnesotaNice's picture

OK... I'll play... I have noticed you avatar wondering what it is... so give it up...

Fri, 09/25/2009 - 11:17 | 79544 Hephasteus
Hephasteus's picture

I don't know why I like it so much. It's like the finder icon on Mac OS/X though I don't use mac's but it's picassofied. I found it right before I started digging into financial stuff.

Because I have a very specific set of skills that make me a nightmare for people who want to hide things. I will find you. I will hang you (Like the hanged man in tarot). I will make you confess. ;)

All the people who are here. Are not here for the reasons they think they are here. This makes things very hard to predict. Nothing unnerves control freaks like unpredictability.

Fri, 09/25/2009 - 11:47 | 79594 MinnesotaNice
MinnesotaNice's picture

Very interesting...

Fri, 09/25/2009 - 16:32 | 79957 legerde
legerde's picture

My avatar is the only future use of the USD.

Fri, 09/25/2009 - 22:03 | 80209 defender
defender's picture

*cough* ummm...about that...when they said that the fed would have to start printing larger bills, and I could be wrong about this, but I think they meant the denomination would be larger...

Sun, 09/27/2009 - 01:49 | 80777 Anonymous
Anonymous's picture


Fri, 09/25/2009 - 10:19 | 79456 Anonymous
Anonymous's picture

fairy? sacriledge!

that is clearly Link, from the Legend of Zelda series of video games, a force against darkness and evil!

Fri, 09/25/2009 - 10:34 | 79486 Anonymous
Anonymous's picture

Its not a fairy, its a character from a Nintendo video game. His name is Link.

Fri, 09/25/2009 - 11:37 | 79573 Primal Reversion
Primal Reversion's picture


Fri, 09/25/2009 - 12:03 | 79611 Anonymous
Anonymous's picture


Fri, 09/25/2009 - 10:07 | 79436 Anonymous
Anonymous's picture

Shouldn't you have put that under the Bernanke avatar?

Fri, 09/25/2009 - 10:22 | 79465 MinnesotaNice
MinnesotaNice's picture


Fri, 09/25/2009 - 10:11 | 79442 LoneStarHog
LoneStarHog's picture

Please define "terrorist", as people's avatars include Obama, Bernanke, Paulson, Geithner,, and you have not questioned them.


Fri, 09/25/2009 - 10:19 | 79457 gmrpeabody
gmrpeabody's picture


Fri, 09/25/2009 - 11:20 | 79546 Anonymous
Anonymous's picture

Che killed people directly, not through monetary policy. He was a murderer and terrorist.

Fri, 09/25/2009 - 13:49 | 79763 Anonymous
Anonymous's picture

If an individual kills people directly, he's a murderer and terrorist?

I think I must agree with you.

How about if an individual has an army or other organization to do the killing for some policy or ideology, which the individual triumphs?

No difference, whether he is the head of a state or a corporation. How about those corporations and entities, who provide the tools of murder - the members of the UN security council in their dark global games of dominance?

Some times their interest coincide and sometimes don't. - in the end what we see and hear is the ultimate theatre they together weave for us to obfuscate what has really happened.

It's murder incorporated.

We are living in a world where some killers are championed, and some are executed (And what are those people who order the executions by you definition?)

So Che fits nicely in.

Too bad he wasn't invited to the party, but he crashed it.

Fri, 09/25/2009 - 12:16 | 79633 percolator
percolator's picture

The people you spoke of are the REAL terrorists.

Fri, 09/25/2009 - 10:32 | 79482 Bam_Man
Bam_Man's picture

Che was a marxist revolutionary, not a terrorist.

Big difference.

Fri, 09/25/2009 - 11:03 | 79528 Anonymous
Anonymous's picture

Same thing. I bet a lot of people felt terror at Che's hand.

Fri, 09/25/2009 - 11:21 | 79548 Anonymous
Anonymous's picture

His murdered victims and their families disagree with you.

Fri, 09/25/2009 - 15:30 | 79885 Anonymous
Anonymous's picture

Yeah, yeah. At least he didn't do it with drones from 10,000 ft.

Fri, 09/25/2009 - 11:04 | 79529 Cognitive Dissonance
Cognitive Dissonance's picture

One man's terrorist is another man's freedom fighter. Weren't America's founding fathers terrorists (sanitized with the word "revolutionaries") in the eyes of the British?

I know that's tough to swallow because of the American myth of superiority (BTW I'm a natural born US citizen) but the world doesn't revolve around America, which we are about to discover first hand when the rest of the world stops buying our debt.

But I digress.

Fri, 09/25/2009 - 11:30 | 79562 gmrpeabody
gmrpeabody's picture

It seems to me that there is a difference, slight as it may be. A revolutionary is sanctioned by a/the state (this is who we are, and this is where we live, and this is why we fight). Terrorists lack state sanctioning, preferring a murky, low lying, hit and run kind of tactic which suits their murky reasoning, mask wearing rational.

Fri, 09/25/2009 - 11:49 | 79596 Anonymous
Anonymous's picture

Incorrect. A terrorist targets civilians intentionally with the intent to cause terror. It does not matter whether the state sanctions it or uses regular military forces.

That is the only proper definition. Thus, a non-state sanctioned actor, such as a revolutionary, can target non-civilians and not be a terrorist, although they will most certainly be branded one by the state.

Calling all non-state actors terrorists is both inaccurate and dishonorable to victims of actual terrorist acts, both state-sponsored and not, worldwide.

Whether Che Guevara was a terrorist or not, then, depends on who he killed and why (collatoral damage to civilians is not terrorism). If the 'victims' served the security forces in an armed conflict, they are not 'victims'. They are casualties. Again, honor and truth demand that they not be robbed of the proper respect due to those who take the risks of service to their nation. A member of the military who falls in battle is not a 'victim'. That is demeaning.

Fri, 09/25/2009 - 13:13 | 79724 monmick
monmick's picture

I hesitate to join this debate, even thought it was started, apparently, by my choice of avatar. However, I think the point needs to be made that killings and murders, or more generally the loss of life, is not an essential element in defining terror... 

Fri, 09/25/2009 - 15:28 | 79882 Assetman
Assetman's picture

It is when you're on the wrong end of the gun barrel.

Fri, 09/25/2009 - 18:42 | 80084 Hephasteus
Hephasteus's picture

It's the first part of it. First you do "dirty deeds" kill people, then you get "juice". Other people respond differently knowing that you will go that far.

Fri, 09/25/2009 - 12:15 | 79613 Cognitive Dissonance
Cognitive Dissonance's picture

What "state" sanctioned the American revolutionaries? They were a minority. The clear majority favored staying British and the rest were equally divided between rebeling and "leave me alone, I have no opinion". Our so called founding fathers were a clear minority and not very popular.

The myth is that the vast majority of colonists wanted independence. This was absolutely not the case, though our grade school "history" (some would say propaganda) books would lead you to believe otherwise. Remember, the victors write the history books to support what they wish people to hear and read. Even in America.

In fact, if you read the memories of the founding fathers, they were extremely worried about public opinion when they were composing their declaration of independence as well as fighting the war. Why do you suppose it was so hard to supply Washington's army with men and supplies if everyone supported them? 

BTW, something never discussed in the history books is the fact that the King of England was attempting to force the (central bank) Bank of England down the throats of the colonist. The wealthy in America (the instigators of the revolution, not the traditional poor) did not want this and I would argue (based upon my readings) is the real reason behind the revolution.

Fri, 09/25/2009 - 12:56 | 79689 gmrpeabody
gmrpeabody's picture

I stand clarified...

My only point was that revolutionaries are more in the open and less likely to kill just for the sake of killing. Generally, they are not anachists.

Fri, 09/25/2009 - 19:50 | 80130 Anonymous
Anonymous's picture

Bullshit. Che was a callous sociopath who hid his violent streak under the guise of revolution. My wife's grandfather knew Che Guevera, and described him as evil and arrogant. Anyone who lauds Che deserves his fate.

And to the other shitbag who criticizes drones--if Pakistan won't deal with its extremist problem, then we should and we will. If you don't like it, move there and throw acid in the face of schoolgirls like the rest of the Taleban.

Fri, 09/25/2009 - 10:36 | 79492 monmick
monmick's picture

Alvarez just confirmed this almost word-for-word in answering a question.

Q: What would happen if HR-1207 became law right now?

A: Blah, blah, blah... higher interest rates,... blah, blah, blah...

Fri, 09/25/2009 - 16:12 | 79926 monmick
monmick's picture

My apologies for the length of the cut-and-paste, but this articles provides an indication of what one of the Fed strategies will be in the next little while...

Fed’s Alvarez Says Audits Could Lead to Higher Rates (Update1)

Share | Email | Print | A A A

By Craig Torres and Scott Lanman

Sept. 25 (Bloomberg) -- Federal Reserve General Counsel Scott Alvarez said audits of monetary policy by the U.S. Congress could lead to higher interest rates and reduced confidence in central bank policy.

Congressional audits of monetary policy could “cause the markets and the public to lose confidence in the independence of the judgments of the Federal Reserve,” Alvarez told the House Financial Services Committee today in response to a question from Representative Dennis Moore, a Kansas Democrat. Alvarez said in his prepared remarks the audits would probably “chill” the central bank’s discussions on interest rates.

Fed Chairman Ben S. Bernanke and his colleagues are trying to persuade lawmakers not to pass legislation sponsored by Representative Ron Paul of Texas that would repeal the central bank’s immunity to audits of monetary policy. Fed officials used emergency powers to protect creditors of Bear Stearns Cos. and American International Group Inc. during the financial crisis, prompting congressional scrutiny.

“We don’t want to give the rest of the world or, more important, domestic investors the impression that we are somehow in a formal way injecting Congress into the setting of monetary policy,” said Representative Barney Frank, a Massachusetts Democrat and chairman of the committee. “That could have a very destabilizing effect.”

Frank added that “a lot needs to be done” on Fed transparency and said that Congress can accomplish that without interfering with the independence of monetary policy decisions.

Remove Exemptions

Paul’s legislation would remove Fed exemptions from audits in four areas: transactions with foreign central banks; deliberations on monetary policy matters, including discount- window operations; transactions made under the direction of the Federal Open Market Committee; and communications and discussions between the Board, the reserve banks and staff.

Frank said he supports a delay in making some Fed information public, such as the securities it buys and sells, so it doesn’t have a “direct market effect.” Alvarez told Frank that the Fed is “giving serious consideration” to that idea and would be “happy to work with you on it.”

In an interview after the hearing, Paul said the audit powers in the bill may be altered to delay by three to six months releasing information on FOMC actions. The legislation is likely to be included in a broader Democratic package of financial-regulation changes in the House, he said.

‘Gentleman’s Agreement’

“It’s a gentleman’s agreement” with Frank, Paul said, adding that Frank fulfilled an earlier agreement to hold a hearing. “That doesn’t mean it will happen in the Senate,” even as prospects in the upper chamber are improving, Paul said.

In the hearing, Paul told Alvarez that the Fed had “failed” to stabilize interest rates, prices and employment, according to its mandate. “What we need is more oversight and more transparency rather than more authority to the Federal Reserve,” Paul said.

Alvarez said GAO audits of discount-window lending could reduce the effectiveness of “these facilities in promoting financial stability, maximum employment, and price stability.” The legislation could also “disrupt” the Fed’s relationships with foreign central banks, he said.

“Monetary policy independence prevents governments from succumbing to the temptation to use the central bank to fund budget deficits,” Alvarez said in his prepared testimony. “Financial markets likely would see the grant of audit authority to the GAO with respect to monetary policy as undermining the Federal Reserve’s independence.”

The legislation has 295 sponsors in the House, including every Republican member, Rachel Mills, a spokeswoman for Paul, said in an e-mail yesterday.

The Fed is facing other challenges by Congress, including a proposal to strip the central bank of its rule-writing power on some consumer financial products.

To contact the reporter on this story: Craig Torres in Washington at

Last Updated: September 25, 2009 14:25 EDT

Fri, 09/25/2009 - 17:44 | 80039 Anonymous
Anonymous's picture

kind of like saying there will be a terra attack if you don't vote for Darth Vader

Fri, 09/25/2009 - 18:43 | 80088 Anonymous
Anonymous's picture

or a terrorist attack if you don't vote for GWB

Fri, 09/25/2009 - 09:52 | 79415 Cognitive Dissonance
Cognitive Dissonance's picture

I firmly believe the next major drop in the stock market will be engineered in order to scare people into buying the one thing the Fed and Treasury are desperate to see bought.

US Debt in any and all flavors.

Sound too much like a conspiracy theory? Things I and many others talked about for years which were dismissed with a laugh as crazy are now not only openly discussed but accepted as truth by the majority.

The one weapon used consistently by others against ourselves is our own closed minds.

Fri, 09/25/2009 - 10:08 | 79438 Steak
Steak's picture

I can take that argument a step further.  What if things get really dire and the govt decides to tap savings directly to fund the defecit.  Presumably the govt could convert money market funds, reseves held at the Fed, or retirement plans into Treasuries and buy a massive chunk of time as a result.

Fri, 09/25/2009 - 11:09 | 79536 Cognitive Dissonance
Cognitive Dissonance's picture

Steak, I fully expect the US Government to "appropriate" (or more accurately confiscate) private investment accounts when the rest of the world turns off the money tap. All we need to do is read a few world history books to see this rather common development when governments go mad. 

Fri, 09/25/2009 - 11:26 | 79556 London Banker
London Banker's picture

The Fed has already announced a plan to do reverse repos with money market funds.  They have floated it as a way to withdraw QE funding, but clearly they have to get some of those long dated Treasuries off their books and into the market.


Fri, 09/25/2009 - 10:17 | 79453 Anonymous
Anonymous's picture

"This crisis could hit as soon as October."

Maybe October 12th?

Fri, 09/25/2009 - 10:25 | 79470 Anonymous
Anonymous's picture

Its really very interesting topic.Could you please give us some more details on this issue?

Thank you

Fri, 09/25/2009 - 09:52 | 79416 Anonymous
Anonymous's picture

you will notice, also, that most T-bill funds such as those offered by vanguard and fidelity are CLOSED TO NEW INVESTORS. Hmm, that's strange, gov't needs to borrow ungodly amounts of money and yet T-bill funds are closed to new investors. Well, now we see why. Only lending anybody wants to do for these jokers is at the shortest end of the curve, where bailing out is an option.
This country is toast.

Fri, 09/25/2009 - 10:13 | 79446 Green Sharts
Green Sharts's picture

Government money market funds are closed to new investors because the yields on t-bills are so miniscule that the fund managers can't charge a normal fee without creating a negative return to shareholders.  I don't know if they can even cover their operating costs at yields of 5 or 10 basis points.

On top of that, with the government insurance off the non-government money market funds I wonder how many corporations and people will leave their short-term money at risk for maybe 50-75 basis points of yield.  If short rates stay near zero much longer I think money market funds are headed to extinction.

Fri, 09/25/2009 - 11:15 | 79541 Anonymous
Anonymous's picture

The average professional with a 401(k) has no option but money market if the stock and bond funds are poison chalices. With the corporate match, the average Joe/Jane Cube "has no choice" but to stay in the retirement plan.

Don't forget that mutual fund investors can't actually buy corporate bonds, or any bonds. They (we) can only buy bond funds. The proper investment in bonds today, laddered mid-yields held for 1 to 5 years TO MATURITY, is scandalously not available. That would take actual management of clients as real, individual people.

Bond funds, of course, provide neither yield nor safety under current conditions.

So the money market fund, hoping to stay even, is by far the best of a bad lot. Once they are seized for debt monetization of course they will die. But not until then.

Fri, 09/25/2009 - 09:54 | 79417 Mos
Mos's picture

Someone posted in an earlier post but this is a topic worthy of its own post.  Congressional insider trading.  Make enough people aware of it and it may go the way of flash orders.

Fri, 09/25/2009 - 11:09 | 79535 Anonymous
Anonymous's picture

i would like to know what it's gonna take for the sheeple to wake up.

Fri, 09/25/2009 - 09:56 | 79421 Anonymous
Fri, 09/25/2009 - 10:34 | 79487 Fish Gone Bad
Fish Gone Bad's picture

So when the camera shows which of our "leaders" is there, there are about 8 people in the view.  I think that includes pages, flunkies, do-gooders, and hostesses. 

Fri, 09/25/2009 - 11:30 | 79561 monmick
monmick's picture

I am not a fan of him, but Alan Grayson is in great form today!

Fri, 09/25/2009 - 09:58 | 79424 lizzy36
lizzy36's picture

Released 5 mins early.

Reuters/Univ Michigan End-Sep Sentiment 73.5; Aug 65.7

Prelim was 70.2

Fri, 09/25/2009 - 10:08 | 79437 Dixie Normous
Dixie Normous's picture

They can release it whenever they want.  Without a doubt one of the most ridiculous pieces of "data" out there.

Fri, 09/25/2009 - 10:14 | 79447 MinnesotaNice
MinnesotaNice's picture

Hallelujah... it is just a hop, skip and a jump back to the economic engine humming again and everything back to normal... NOT!

I wonder what planet they find their consumers for this survey... are there any statistics which are dependable anymore... is there any government agency which tells the truth... this is a very sad situation... and we can only watch the train wreck in slow motion with our mouth hanging wide open. 

Fri, 09/25/2009 - 10:43 | 79501 Herr Morgenholz
Herr Morgenholz's picture

I didn't know you could smoke "green shoots".

Fri, 09/25/2009 - 09:58 | 79426 Anonymous
Anonymous's picture

to TD:They released the Chicago Sentiment index early?was it in response to market drop?realy what kind of market is this?

Fri, 09/25/2009 - 09:59 | 79428 Anonymous
Anonymous's picture

I'm loading the kids into my station wagon and heading to Canada.

Fri, 09/25/2009 - 10:05 | 79431 Ragnarok
Ragnarok's picture

Don't I lived there for 17 years and they are proud of their socialism.  I even lived in Calgary Alberta, the most conservative place in the country and it still reeked of welfare Nanny state.  Although it was beautiful.

Fri, 09/25/2009 - 12:15 | 79632 Herd Redirectio...
Herd Redirection Committee's picture

Proud of the healthcare system, maybe.


Canadians are extraordinarily apolitical. The only time people talk about this stuff is when directly confronted with it.

So don't go around thinking: "Damn canadians and their socialism!" Most Canadians don't even know what socialism is, so it would be extremely difficult for them to be against it, esp. if you give the health care system as an example.

I have no doubt that Ottawa is as corrupt as Washington. But I think its tentacles have not spread as far, or penetrated as deeply as those of the White House and Wall Street.



Fri, 09/25/2009 - 10:02 | 79429 Anonymous
Anonymous's picture

How is there a funding crisis when we print our own money?

Fri, 09/25/2009 - 10:41 | 79499 Anonymous
Anonymous's picture

No more ink!!!!

Fri, 09/25/2009 - 11:30 | 79563 London Banker
London Banker's picture

Reminds me of the bankers' sterotype of a university student: "How can I be overdrawn?  There are still lots more cheques in my chequebook!"

Fri, 09/25/2009 - 10:06 | 79433 phaesed
phaesed's picture

You mistake the influence of the dollar on long term bills. Who cares if you yield only 3% and then the yield falls to 4% if the dollar appreciates 5% from a crisis? You still have a real effective gain over a shorter period than maturity. It's the dollar action that will determine treasury rates, not vice versa.

Fri, 09/25/2009 - 10:07 | 79435 mberry8870
mberry8870's picture

Seems to me that taking money (loans) out of one pocket and putting into another is not exactly productive creation. Robertson's most telling comment was something to the effect that we know what happens to those entities that rely on short term funding. I am not liking where this ship is heading.

Fri, 09/25/2009 - 11:59 | 79608 Assetman
Assetman's picture

Correct.  Our own government is quickly approaching the fabled "Bridge Loan to Nowhere".

It's sad that our representatives and executive branch are bailing out large swaths of our financial system, and are simply replacing it with even more debt.  The simple equation is that you cannot spend more that what you generate in income, becuase at some point paying the interest on that debt becomes impossible.

As Julian Robertson pointed out, our government is now at that point.  The Chinese realize it, and are buying assets in every corner of the world-- while curtailing U.S. purchases down to the shortest end of the curve.

Obama needs to grow a pair, fast.  Take the medicine, promote sacrifice and savings, and quit bailing out entities that got us into this mess in the first place.

Americans really need to draw the line in the sand as well on maintaining the debt ceiling where it remains today.  Trust me, Timmy will come running and plead for a ceiling raise... but Congressional reps need to be told their incumbancy is at issue if they cave in.

Otherwise, we will be borrowing time and money that we cannot possibly pay back.

Fri, 09/25/2009 - 10:10 | 79440 Anonymous
Anonymous's picture

I think you're wrong Tyler specifically because the Fed has hundreds of billions left in MBS programs. The Fed will simply continue to buy MBS at inflated prices from the banks in exchange for their promise to buy U.S. treasuries. This seems like a no-brainer. It's the old QE, just in a round about way.

Fri, 09/25/2009 - 10:26 | 79474 gmrpeabody
gmrpeabody's picture


Fri, 09/25/2009 - 10:10 | 79441 shorttrader
shorttrader's picture

I wonder if Congress is going to be scared once again, this time by Geithner, to pass another round of stimulus money.

After all, Goldman and Co. have their Christmas bonuses to think of too, not to mention their partners in crime in the corridors of Capitol Hill.

Fri, 09/25/2009 - 10:12 | 79443 SWRichmond
SWRichmond's picture

The simple fact remains: ballooning federal borrowing requires a source.  Those sources to date have themselves been "ballooned" by a credit bubble in a self-reinforcing mechanism.  That bubble is now busted.  As global wealth has evaporated, demand for capital has increased while sources are drying up.  Demand for sovereign borrowing is not restricted to the U.S.  Many nations want to borrow their way through this downturn.  China seems to want to internalize its markets and will need to spend reserves to do so.

Consumers have stopped borrowing, so the government is borrowing in our names to keep the game going.  But in an environment of shrinking sovereign incomes and increased borrowing demand, where is this money going to come from?  Governments are the least productive borrowers, borrowing only to consume and not for productive activity.  Will there be any money left for productive enterprises? 

In other words, borrowing only to eat and not to plant is not a success path.  Who's got the increasing amounts of money to lend us, when revenues are falling everywhere?

Fri, 09/25/2009 - 15:20 | 79873 SWRichmond
SWRichmond's picture

NEW YORK (Reuters) – The U.S. government will have issued $7 trillion in bonds by the time the current fiscal year ends next week, but it expects the debt deluge to stabilize by mid 2010, a Treasury official said on Wednesday.

Though markets and the economy are improving, efforts to provide a firm foundation for recovery will require increases to the U.S. Treasury's conventional bonds going forward, as well as debt securities that are indexed to inflation.

However, this expansion may take place in an environment where investors consider leaving the safe-haven Treasury market for riskier assets, and debt issuance is likely to level off mid next year, said Treasury Acting Assistant Secretary for Financial Markets Karthik Ramanathan.

"In fiscal year 2009, which ends next week, Treasury will have issued $7 trillion in gross issuance -- that's in a 12-month period," Ramanathan told a financial markets conference in New York.

Fri, 09/25/2009 - 10:12 | 79444 Anonymous
Anonymous's picture

Didn't you post a story a few months ago about someone buying about 120,000 SPY puts for $85, dated late this year? How do you think that deal is starting to look?

Fri, 09/25/2009 - 10:21 | 79461 Printfaster
Printfaster's picture

This is all about the average maturity of the treasuries, and what the average maturity of the treasuries the Fed holds, averaged with the zero maturity of the FRN.

We are seeing a shortening of the average maturity of the the outstanding treasuries+FRN.  What is inside the fed is the long garbage that no one wants.


Fri, 09/25/2009 - 10:22 | 79466 Anonymous
Anonymous's picture

What is the use of all those indicators if they keep on getting revised downward?

Fri, 09/25/2009 - 10:24 | 79469 Anonymous
Anonymous's picture

So let me see Canada is a socialist nanny state. My home has held it's value, I have a health plan provided by my government that won't banckrupt me when I get sick, we haven't had one bank failure. The city I live in Toronto has a murder rate o 55-60 annual murders and declining crime rates, in comparison to any major US city of the same size being 10 to 20 times greater. Your right it's an awfull place to live, get your head out of your ass and see the light. The bullshit the corporations have been feeding you about life libirty and the American dream has turned into a nightmare and your still trying to justify it. Thanks for leaving.

Fri, 09/25/2009 - 11:03 | 79527 RatherBFlying
RatherBFlying's picture

Yeah, you're right... we should all become pussies like you Canadian folk.

Canada is a tick on the US dog. As the US is torn down, you're going to discover just how true that is.

Fri, 09/25/2009 - 11:38 | 79578 London Banker
London Banker's picture

I think not.  Canada has natural resources (water, oil, gold) and a productive economy.  The US could militarily occupy Canada, if it chooses, but absent that Canada should outperform in deflation.  And it is a much, much nicer place to live.

Americans seem to pride themselves on incivility, violence and gunpower when they loose any rational claim to superiority.  Being able to kill more people faster is not a mark of a higher civilisation that merits emulation.

Fri, 09/25/2009 - 12:59 | 79693 lizzy36
lizzy36's picture

Lovely words LB.

Enjoy your posts.

Fri, 09/25/2009 - 16:22 | 79944 SWRichmond
SWRichmond's picture

I truly wish that the U.S.'s young men and women were not seen and used as fodder to keep the world safe for bankster corporatism.  I wish our military protected the United States, and only the United States, and not by extension Europe (from the Russians), Israel (from whoever they've tried hardest to piss off), Korea, Japan and Taiwan (from China, Russia, or whoever), and our hemispheric near-neighbors from everything just by being here.  These nations should all bear the burden of their own defense, or the consequences of the lack thereof. 

Do I long for genuine world peace?  Of course.  But I am not willing to shed a drop of American blood or to spend a dime of American money to protect Europe, England, Australia, or Canada, or anyone else, or any of your trade routes or sea lanes.  You guys handle it, and then we'll see how much money you have left for socialized paradise.  We can return to American Naval protection of American-flagged merchantmen, and the rest of you can fend for yourselves.  Think of the money we'll save, and the money you'll spend.  I'm all  for it.

I'd just as soon we weren't extending ourselves, trust me.  Russian naval incursions into the Arctic?  Deal with it, please.  Really, no kidding.  Take your turn.

Fri, 09/25/2009 - 18:50 | 80094 Anonymous
Anonymous's picture


Mon, 09/28/2009 - 00:08 | 81180 The Deacon
The Deacon's picture

Agreed.  I am happy here.  As a kid I always wanted to move to the US.  Near 18 i changed my mind.  Too violent, and stratified, and only getting worse.  Also people are zealots when it comes to their '2' ploitical parties, but most don't realize they are essentially one.

I agree if TSHTF, I could see some 'deals' with the US for our oilsands.  Essentially we'd become the 51st state, en route to a NA union.  The US needs her oil.

But with BO and all those environmental whiners crowing about the oilsands, I wish we'd just sell it to the Chinese.  Oh wait we've started already!

Also, it is funny what the word socialism does to some Americans.  They should be more concerned with the term fascism.  A union of business and gov't interests.  And yes I know we are essentially in the same boat.

Fri, 09/25/2009 - 11:29 | 79560 Anonymous
Anonymous's picture

Not only that, but Europe just overtook the US in the last measure the US was still leading - income per capita!

Fri, 09/25/2009 - 12:12 | 79623 Anonymous
Anonymous's picture

bullshit - there is no such thing as europe....
you might want to narrow that list down
to norway, leichtenstein, and a few other
limited countries to make that claim...

Fri, 09/25/2009 - 16:50 | 79979 payitdown (not verified)
payitdown's picture

We having been watching this... that the unwind of the recent trend (especially the last 6-8 weeks) of selling the dollar, buying all other asset classes against it, will be the trade that will hurt the most managers.

Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

good articles; good articles 4 slow news day ..http://www..
hat tip:

financial news & opinion updated daily

Fri, 09/25/2009 - 10:26 | 79472 Anonymous
Anonymous's picture

People seem to forget that inflation reduces the real debt burden. It will solve the "debt crisis." The only problem is that it does so at the expense of those who have worked hard to save and put their money in supposedly "safe assets" like bonds and cash.

Fri, 09/25/2009 - 10:29 | 79479 tinfoilhat
tinfoilhat's picture

Didn't the Fed just say they've got almost a trillion and a half earmarked to buy MBS?  Don't you think foreign CBs and other big money will continue to buy treasuries in exchange for being able to unload their shitty MBS paper onto the US taxpayer balance sheet? 

In other words, QE continues.... but as a taxpayer rope-a-dope.


Fri, 09/25/2009 - 10:42 | 79500 MinnesotaNice
MinnesotaNice's picture

Good point... and great name BTW...

Fri, 09/25/2009 - 10:34 | 79485 Anonymous
Anonymous's picture


Fri, 09/25/2009 - 10:46 | 79504 adinfinite
adinfinite's picture

Its just a matter of time really. I really dont see how this thing can hold.

Fri, 09/25/2009 - 10:46 | 79505 Anonymous
Anonymous's picture

And to carry your point further... "What is inside the fed is the long garbage that no one wants."

What the Fed is doing is carrying monetary policy to it's logical conclusion. They have traditionally only needed to manipulate the borrowing rate for consumers/businesses to stimulate the economy. However given that the proportion of longer term debt (ie real estate) to short term debt isn't even comparable. The longer term rate is really the button the fed should have been pushing all along. If you think back to ~2001 when ARMS allowed the short term rate to be much more heavily tied to mortgage rates. As they short term rates rose and mortgages reset, people refinanced (or went into foreclosure) and the 30 year mortgage (which is tied roughly to 10 year treasuries because of duration) is what matters most. As people refi, they get more money in their pockets, which stimulates the economy just like normal monetary policy would.

Fri, 09/25/2009 - 16:50 | 79973 payitdown (not verified)
payitdown's picture

I don't know why I like it so much. It's like the finder icon on Mac OS/X though I don't use mac's but it's picassofied. I found it right before I started digging into financial stuff.


Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

good articles; good articles 4 slow news day ..http://www..
hat tip:

financial news & opinion updated daily

Fri, 09/25/2009 - 10:49 | 79510 Anonymous
Anonymous's picture

How do I get to the last chart on BBG?

Fri, 09/25/2009 - 10:58 | 79517 Sancho Ponzi
Sancho Ponzi's picture

Not to worry. The Fed can tap pension funds once China, Germany and Japan stop purchasing our Treasuries. 

Added: Argentina, here we come!

Fri, 09/25/2009 - 16:19 | 79940 Argos
Argos's picture

Holy crap Batman!  That's scary.  And now the Feds want our money market accounts.  Looks like the best bet maybe to pay the penalty, cash out the retirement account before either taxes go through the roof or the $ crashes. 

Fri, 09/25/2009 - 10:54 | 79518 Anonymous
Anonymous's picture

How do I get to the last chart through bbg?

Fri, 09/25/2009 - 11:13 | 79540 waterdog
waterdog's picture

With all due respect to ZH and its accurate insights, it will hit in October.

Fri, 09/25/2009 - 11:30 | 79564 TraderMark
TraderMark's picture

Just posted this on blog - completely under the radar earlier this week


China has potential to become net importer by turn of the year or early 2010

while foreign reserves would still be massive (2 Trillion) they wont be adding to them if this happens.  For example in 2008 they ADDED $430B in reserves. Much of it right into treasuries.

then what happens when our largest creditor does not have more to add to our dog pile of debt?

Fri, 09/25/2009 - 11:43 | 79586 Anonymous
Anonymous's picture

Dont worry! ApparentlyAmerika is loaded! Miami just agreed to build a 2.4billion$ stadium for the Marlins (which no watches nor cares about). America just built a 3billion$ stadium for "Americas Team" (Dallas Cowboy)! We have tons of taxpayor monies for private companies who are broke. Endless riches, I say. Endless.

Fri, 09/25/2009 - 13:04 | 79708 snorkeler
snorkeler's picture

CB's stadium was $2.2. It won't help. They still suck. Yea Giants for ruining the homecoming game!

While we watch football, Rome burns.

Fri, 09/25/2009 - 12:15 | 79629 Anonymous
Anonymous's picture

there is no funding crisis....dollar crisis maybe but no funding crisis....

china, japan, europe are not buying and it doesn't matter...

qe is indellibly now and forever usa will not end until the dollar ends...

Fri, 09/25/2009 - 13:44 | 79754 Anonymous
Anonymous's picture

If mortgage rates are generally linked to the 10-year yield, it makes sense the Fed would manufacture demand to dampen the yield. Otherwise, mortgage rates will become unhinged from their green shoots, no ??

Hard to believe the Fed will give up it's PNP status next week. There must be an alternate, more devious scheme afoot to keep a lid on the dated issues.

Otherwise, housing sales will drop like an even bigger rock....a boulder. And all of Imelda Marcos' thousands of shoes will fall out of the closet.

Fri, 09/25/2009 - 14:03 | 79785 Anonymous
Anonymous's picture

"Exactly, I have been saying this for months, if you really care about this country, you will NOT bank with the Stress Test 19."

Oddly, this type of financial solidarity is exactly what brought down the Marcos regime in the Phillipines in 1986.

Corizon Acquino would speak in a downtown park once or twice a week reporting on recent events and which banks to boycott to put maximum pressure on Marcos' government/supporters.

Within several months they brought down the whole system!

Fri, 09/25/2009 - 14:27 | 79817 Anonymous
Anonymous's picture

ZeroHedge was out in front even of insiders at the NYFed, who found out about the numbers, believe it or not, from the WSJ. No joke.

Fri, 09/25/2009 - 16:39 | 79985 Ned Zeppelin
Ned Zeppelin's picture

So play it out.  You have an auction and it fails.  Now what? Cascading defaults by Uncle Sam? Last I checked there is no world bankruptcy court, no UCCs filed, no assets securing the promise.  A very, very big pile of unsecured debt, with a debtor who is heavily armed and considered relatively dangerous in many corners of the world.  Domestically, what is the plan?

Per Special Order #____, Treasury issues new Dollars to continue payment of all internal debts, which are required to be accepted as legal tender by emergency act of Congress.  Sheeple fall in line quickly, and the domestic issues are managed. 

Per Special Order #_____, oil in situ in the Middle East and elsewhere is summarily declared to be "an American entitlement," and while payment arrangements are being sorted out, the US military assists by escorting contango- laden tankers to US ports.


Fri, 09/25/2009 - 18:59 | 80097 Anonymous
Anonymous's picture

I want the Fed gone and I want Congress to issue money at zero percent interest.

Fri, 09/25/2009 - 20:17 | 80145 Gordon_Gekko
Gordon_Gekko's picture

"This crisis could hit as soon as October."

Can't wait for it. I will be CELEBRATING. Let the CRIMINALS go bankrupt.

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