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Deja Broke: Presenting The Treasury's Options To Continue Pretending The US Is Solvent

Tyler Durden's picture


The debt limit was formally reached last week, and we expect the Treasury's ability to borrow to be exhausted by around March 1 (if not before) and while CDS are not flashing red, USA is at near 3-month wides. Like the previous debt limit debate in the summer of 2011, the debate seems likely to be messy, with resolution right around the deadline. That said, like the last debate we would expect the Treasury to prioritize payments if necessary, and Goldman does not believe holders of Treasury securities are at risk of missing interest or principal payments. The debt limit is only one of three upcoming fiscal issues, albeit the most important one. Congress also must address the spending cuts under sequestration, scheduled to take place March 1, and the expiration of temporary spending authority on March 27. While these are technically separate issues, it seems likely that they will be combined, perhaps into one package. This remains a 'very' recurring issue, given our government's spending habits and insistence on its solvency, as we laid out almost two years ago in great detail.


Via Goldman Sachs: Q&A On The Debt Limit (Alec Phillips)

Q: What is the debt limit?

A: It is a legal limit on Treasury's borrowing imposed by Congress. Under the constitution, Congress, not the Treasury, has authority to borrow. Congress delegates this authority to the Treasury. Instead of approving each single debt issuance (as was done many years ago) it imposes an overall limit on debt that may be issued, leaving the Treasury to work out the details. The limit is currently $16.394 trillion.

Q: What is covered under the debt limit?

A: Marketable and nonmarketable debt held by the public, the Fed, and in government accounts. Debt held by the public ($11.6 trillion) consists of marketable securities held by domestic and foreign investors ($9.9 trillion) and marketable securities held by the Federal Reserve ($1.7 trillion). Intragovernmental debt ($4.9 trillion) consists almost entirely of nonmarketable debt held by government trust funds. Most of these trust funds finance specific programs, like Social Security.

Q: When will it be reached?

A: The formal limit has already been reached but the Treasury probably has enough headroom to last until March 1. The Treasury reached the statutory limit on debt on December 31. Since then, public debt outstanding has been held at $25mn under the limit. Even though the Treasury has reached the limit, it can continue to borrow through use of "extraordinary measures."

The Treasury has instructed Congress that it expects to have about $200 billion in "extraordinary measures" at its disposal, which will allow it to continue to borrow under the debt limit. January tends to be a low-deficit month and will probably produce a monthly deficit of $20bn to $30bn. February is a heavy deficit month, and in the last three years has produced a deficit of $220bn to $230bn. This year's February deficit is likely to be smaller than those years, as is the fiscal year deficit as a whole, but it still looks likely to be at least $200bn.

On December 28, the last business day before the debt limit was reached, the Treasury's cash balance stood at $59bn. Along with the "extraordinary measures," this should allow the Treasury to continue to pay its obligations without an increase in the debt limit until at least sometime in the second half of February, even if the budget deficit is at the high end of the range of the last few years. If the deficit over the next two months is slightly lower than the last few years, as we expect, the Treasury seems likely to get to March 1 before it exhausts its funds. Likewise, if the Treasury is able to increase the amount of headroom created by its "extraordinary measures" beyond the $200bn it has estimated, it might also extend the date it would exhaust its borrowing capacity.

Q: What are the "extraordinary measures" the Treasury can use to extend the deadline for raising the debt limit?

A: The primary strategies involve disinvesting government trust funds of Treasury securities. These have been ahead of several previous debt limit increases and have come to be known as "extraordinary measures." There are three primary strategies the Treasury can use to create additional headroom to borrow under the limit:

  • Partial disinvestment of the federal employee defined benefit pension fund (creating $33bn to $93bn in headroom). The Civil Service Retirement and Disability Fund (CSRDF) receives contributions for current employees of $2bn per month and pays out $6bn per month to former employees. Once the debt limit has been reached, the Treasury may redeem securities equal to expected payments and may suspend new investments. The amount of the redemptions depends on the Treasury's declaration of a "debt issuance suspension period" (DISP). For each month it is expected to last, the Treasury can redeem one month's expected payments. In prior debt limit impasses, DISPs have been declared to last as short as two months to as long as 12 months, creating headroom of between $12bn and $72bn, along with a few billion more from non-investment of new inflows. A similar provision related to postal retirement creates $17bn more in flexibility. The upshot is a minimum of about $33bn in headroom and an upper bound of $93bn (in the case of a 12-month DISP), though the law is vague so it is at least possible that an even longer DISP could be declared if necessary.
  • Disinvesting the "G Fund" ($156bn in headroom). The "Thrift Savings Plan" is a defined contribution system for federal employees, which provides several investment options including the G Fund that invests only in government securities. Federal employees and retirees currently have $156bn invested in the G Fund, and the Treasury can temporarily replace some or all of those Treasuries that count toward the debt limit with an IOU that does not.
  • Disinvesting the Treasury's Exchange Stabilization Fund ($23bn in headroom). This fund can be used by the Treasury in a number of ways, with little oversight by Congress. The $23bn portion of the fund invested in dollars is in non-marketable Treasuries, which could be disinvested immediately if necessary.

Q: What happens if Congress does not raise the limit by the deadline?

A: The Treasury would need to immediately reduce outlays to equal income. Without an increase in the limit, the Treasury would not have cash on hand to pay obligations as they come due. Over the next three months, the Treasury is likely to spend roughly 40% more than it takes in, and without a debt limit hike it would need to immediately eliminate this deficit. While the Treasury would probably be able to prioritize spending, it isn't clear what the priorities are, and regardless of which priorities were chosen, the overall reduction in federal spending could result in a sharp downturn in near-term economic activity if it persisted for more than a very short period.

Ahead of the 1985 debt limit increase, the General Accounting Office (GAO, now known as the Government Accountability Office) advised the Senate Finance Committee that the Treasury had the authority to choose the order in which to pay obligations. Whether this opinion still holds today in light of legislation enacted since then is unclear. Prioritization did occur previously, following expiration of a temporary increase in the debt limit on July 1, 1957. As the federal government began to run a budget deficit, the Treasury was forced to delay payments to federal contractors in order to avoid breaching the limit (see for example Treasury Sec. Douglas Dillon's account of the events in "Key Areas in Current Economic Policy", Federal Reserve Bank of New York Monthly Review, June 1963). More recently, as the debt limit approached in early 1996, the Treasury indicated that failure to raise the debt limit would result in failure to make Social Security payments, though Congress provided relief before any delay occurred (see "Debt Ceiling: Analysis of Actions Taken During the 1995-1996 Crisis," GAO, 1996.)

Q: What about Treasury-related payments?

A: A failure to pay interest or principal is unlikely, as it was in the last debt limit debate. The Treasury has around $35bn in semi-annual coupon interest to pay on February 15. There is a good chance that the Treasury's "extraordinary measures" will last longer than this. However, smaller payments of around $6bn and $1bn are scheduled on February 28 and March 15, around the time the Treasury will exhaust its borrowing ability. If Congress has not increased the debt limit by that point, the Treasury seems likely to prioritize spending to make sure these payments are made or to extend its "extraordinary measures" so that it can borrow the amounts to make the payments. The Treasury's ability to roll over existing debt is even less likely to be affected, since replacing maturing debt with new issues should not add to stock of Treasury securities outstanding. Nevertheless, significant volatility could occur around Treasury auctions should Congress fail to raise the debt limit in a timely manner.

Q: If other non-interest payments are missed, would that constitute a default?

A: Not from the rating agency perspective. While some of the public commentary has referred to a failure to make scheduled payments on other obligations as a "technical default," the rating agencies are not required to respond in any particular way to a failure to make other payments. Ratings assigned by the three major rating agencies relate to the government as an issuer of securities and the payment of interest and principal on those securities. That said, a failure to make a scheduled payment could still be seen as a sign of increased risk, so it could still have ratings implications. For example, Fitch Ratings has said it might downgrade the US rating by one notch if the debt limit is not raised in a timely manner; it seems likely that an inability to make scheduled payments would trigger the type of downgrade Fitch has described.

Q: How long might the debt limit increase last?

A: It could last as long as two years or as short as a few months. President Obama has made clear he does not want to return to periodic debates on the debt limit and he is likely to push for at least a two-year extension, which would probably require an increase of around $2 trillion. House Speaker Boehner insists that any debt limit increase should be matched with spending cuts of an equal amount (when measured over ten years). If lawmakers were able to agree on a "grand bargain" involving significant entitlement cuts as well as new revenues, this could allow for enough budgetary savings (if not spending cuts) to allow a debt limit increase lasting two years or so.

However, another increase in tax revenue beyond the one enacted last week seems off the table for now, and there is little left to cut from the "discretionary" segment of the budget that was already cut significantly in 2011. The only major area of the budget left to cut is "mandatory" spending--mainly entitlement programs--but neither party has proposed more than several hundred billion dollars in specific, politically achievable cuts in this area.

If Congress can't agree on cuts to match a substantial increase in the debt limit, lawmakers have a few other options. Congressional Republicans could shift their goal to enacting a few key changes to entitlement programs, rather than hitting a particular dollar target. To make a smaller budget deal look larger, lawmakers might also consider a cap on overseas war spending, which could produce several hundred billion dollars in savings compared with official projections, even though most realistic budget projections (including our own) already assume this spending will decline. Either strategy could allow the debt limit to be increased by at least $1 trillion, good for about a year.

If neither of those strategies work out, the fallback plan would simply be a smaller increase in the debt limit. While larger increases in the debt limit that last 1-2 years have become the norm over the last decade, this was not always the case. In prior periods it was not uncommon to see increases that lasted only a few months, or in some cases just a few days. So while we assume that Congress will enact a longer-lasting increase in the debt limit this year, it would not be unheard of for one or more short-term extensions to come before the longer-lasting increase.

Q: How does the debt limit relate to other upcoming fiscal debates?

A: The debt limit is the most important of three separate fiscal issues Congress must address in Q1. Beyond the debt limit, congressional leaders and the President must work out two other issues: further delay in spending cuts under "sequestration" and an extension of government spending authority. While these are separate issues, it is clearly possible that all three could be wrapped up into one agreement.

Spending cuts under sequestration are scheduled to take effect from March 1, 2013. Those cuts had been scheduled to take effect January 1, but were delayed two months as part of the fiscal compromise reached last week. In the upcoming debate lawmakers will aim to delay those cuts once again, offsetting the increased spending that would result with savings (spread over ten years) from other areas of the budget.

A month later, on March 27, the temporary extension of spending authority (known as a "continuing resolution") that Congress enacted last year expires. Congress is likely to extend spending authority to September 30, the end of the current fiscal year, but lawmakers must first agree on a spending level. If no agreement is reached by March 27, all non-essential government operations funded by congressional appropriations would cease. However, while this sounds severe, it is far less of a risk to the economy or the market than a failure to raise the debt limit, since the lapse would be temporary and the payments that would cease are clearly categorized, would have no effect on Treasury financing nor on most payments to individuals, and are of a smaller overall size.


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Tue, 01/08/2013 - 13:34 | 3133297 Snakeeyes
Snakeeyes's picture

Of course the US is insolvent. Obama and Congress (yes, both Democrats and Republicans) refuse to cut spending and just keep running up the debt. Or have The Fed buy it.

Tue, 01/08/2013 - 13:37 | 3133322 slaughterer
slaughterer's picture

OT: Fuck it, I am going "all in" AA calls today.  This dog is ready to fly.   Another short slaughter ahead, no matter how "right" the shorts might be.  

Tue, 01/08/2013 - 14:51 | 3133614 TruthInSunshine
TruthInSunshine's picture

This is pure gold, bitchez -- even cnBSc laughs Joe Weaselthal off the air as he tries to seriously discuss the "trillion dollar coin" ridonkulousness:

Tue, 01/08/2013 - 15:45 | 3133807 trav777
trav777's picture

oh noze, another debt ceiling limit, just like the last dozen

Tue, 01/08/2013 - 15:57 | 3133842 traderjoe
traderjoe's picture

If you want to End the Fed, you should be in favor of the Treasury-issued platinum coin. 

Tue, 01/08/2013 - 17:22 | 3134141 TruthInSunshine
TruthInSunshine's picture

How does the gimmicky scheme accomplish that?

It's being floated, even as an exercise in mental masturbation, as a way to explicitly provide the Federal Reserve with more "money" (the debate turns on this term, as it's actually "fiat" they're proposing) with which to purchase U.S. Treasuries.

So how does this help to terminate the fractional reserve bank, let alone NOT further enshrine it as an implicit 4th branch (unconsitutionally) of government?

Tue, 01/08/2013 - 18:29 | 3134317 Tall Tom
Tall Tom's picture

Maybe it might signal the Foreign Bankers that the United States is not serious when it considers Fiscal Solvency.

Maybe they will move to redeem their Notes as fast as possible and expatriate the US Dollars held in their reserves back to the United States.

Maybe the resulting Hyperinflationary Inferno might consume the muppets wealth and piss them off enough to see that the Fed's policies are a sham.  They will be hungry and hunger is one motivating stimulus.

Maybe after all of this is accomplished then the Muppets will demand that it be dismantled.

Maybe the Politicians will hear them out and act out of fear rather than facing the Guillotine.


Tue, 01/08/2013 - 18:32 | 3134327 traderjoe
traderjoe's picture

1. The Treasury is issuing the fiat - earning the Seniorage from the difference between the metal value and the face value. This is a vastly different form of currency creation than under the current system of privately issued debt money - issued by commercial banks through fractional reserve lending, at interest, with the collateral of productive assets and 'your' future labor. 

2. It would be tantamount to a default under the current paradigm. 

3. The unintended consequences, IMHO, would be that it would demonstrate the lack of intrinsic value to the FRN, and the whim with which it can be devaiued by governments. 

4. This idea is so silly, that it would completely upend the current monetary system. I am all for such silliness. 

Default on the odious debt. Cancel all legal tender laws. Issue United States Notes. Allow Freegold and silver. Let the people chose their form of money, currency, medium of exchanges, and stores of value. 

Tue, 01/08/2013 - 19:01 | 3134408 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

the coin exposes the Zimbabwe States of Amerika more than anything ever could.  


"Go go, get tbills!  Zero risk there" <-- even Krugman would have a hard time after this wonderful coin becomes history.

Tue, 01/08/2013 - 17:24 | 3134142 auric1234
auric1234's picture

It's a FIAT coin. How is this better than FIAT paper?


Tue, 01/08/2013 - 18:33 | 3134331 traderjoe
traderjoe's picture

Fiat is not the enemy. The enemies are private fractional reserve banking and legal tender laws. 

If you like PM's, you should like Freegold more than a gold standard. 

Sat, 01/12/2013 - 09:32 | 3146861 auric1234
auric1234's picture

Indeed, FIAT is only a problem because it is backed by laws restricting use of gold as money, such as legal tender, capital gains, etc.


Tue, 01/08/2013 - 22:13 | 3134859 kchrisc
kchrisc's picture

I have been avoiding the "Platinum Coin" thing because I'm too old for fairy tales, but I watched the video clip and was amazed. It was like one shill trying to out shill the others and they weren't having anything to do with it themselves. Incredible.

Watch it and wonder if the Onion has taken over things.

Additionally, this platinum coin thing is already what they do now: they print a bond and "sell" it to the FedRes for a check against "money" the FedRes creates out of thin-air.

Now think about this for a second: the US gov is so broke that it has its shills out seriously putting out there for the sheeple's consumption the idea of using an arbitrarily valued trillion dollar coin to save the day. Or is it more like Wiley Coyote--they don't want anyone to look down lest they realize that the ground is far below and then have reality and gravity takeover.

Tue, 01/08/2013 - 13:34 | 3133304 Cognitive Dissonance
Cognitive Dissonance's picture

If anyone gave the IRS an interest free loan last year and is looking for a refund I would suggest you file early and often.

Tue, 01/08/2013 - 13:36 | 3133313 CPL
CPL's picture

Most people don't have anything to file now that most of the US population is under the poverty line.


Weird how that is never mentioned anymore.

Tue, 01/08/2013 - 13:39 | 3133332 Cognitive Dissonance
Cognitive Dissonance's picture

Doesn't really matter anyway. The IRS said that some forms won't be finalized until mid to late Feb, just in time for the next Mexican Congressional standoff.

Tue, 01/08/2013 - 13:51 | 3133386 CPL
CPL's picture

When they do that trick in Canada (we over run our budgets regularily, set the watch to it).  It usually means layoffs are coming.  



Update your resume.  Just kidding, there is no job waiting for anyone.  lol

Tue, 01/08/2013 - 13:58 | 3133418 Cognitive Dissonance
Cognitive Dissonance's picture

At least you got NHL hockey back to help kill the pain.

Why the hell did Canada allow the USA to take over your beloved hockey?

Tue, 01/08/2013 - 14:19 | 3133489 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

"file early and often"

Gotta get me summa them multiple taxpayer ID numbers all the illegals have been using to file multiple returns. JACKPOT!!

Tue, 01/08/2013 - 15:35 | 3133777 thecoloredsky
thecoloredsky's picture

I think the moral of the story is to drop your social security number and become a non-citizen national (if you were born in the US) to preserve your natural rights of keeping the income you make -- aka prior 1913 -- But I do find it odd that a non-citizen "illegal" can receive benefits on top of no income tax.

Tue, 01/08/2013 - 15:23 | 3133747 asteroids
asteroids's picture

Greed, learned from Amerikans of course. The expansion of the NHL, a longer season, stupid rule changes have turned it into a boring game. Pity. As a Canadian kid in the 70's, the playoffs were magic. I hope the NFL playoff's are exciting. The superbowl is pure spectacle as only Amerikans can produce.

Tue, 01/08/2013 - 16:48 | 3134036 Liquid Courage
Liquid Courage's picture

Oh yeah! The 1976-77 Habs ... only 8 losses in an 80 game season! Those were the days, my friend ... we thought they'd never end. There'll be no more dynasties like Les Glorieux of the late 70s.

Free agency ... too much money ... too many damn lawyers and agents attracted by the too much money ... too many dumb rules made by dumb-asses who really don't understand the game (Trapazoid? Are ye nuts? Can't figure out why so many D-men get their bells rung going into the corners with power forwards hot on their heels? Idiots.)

I know I'll sound like a grumpy old fart, but for me the game's Golden Age ended right about the time they changed from the old nets ... from there, the rule book started balooning up from a handbook you could read in ten minutes into a tome it takes a comittee of damn lawyers to figure out.

As pop philosopher Cindy Lauper pointed out: Money! ... money changes everything!

Tue, 01/08/2013 - 15:31 | 3133764 CPL
CPL's picture

Once someone in Winnipeg decided the businesses reasoning was sound, they moved down franchises when nobody cared about Hockey in the late 80s.  Two white guys boxing and scottish dart leagues had more viewership in the US.

They bought it all for dimes on the dollar.  Put the flashing light on the puck to get a US viewership used to ice time and strategy.  Then they grabbed guys from the Hells angels that could skate from the Gatineau region (swear not making this up) to be Enforcers.  After a couple of really impressive televised haymakers on skates, people started to actually watch it.  Beer makers Coors and Molson pushed to move NHL extensions south closer to market.

...and that's "Canadian" hockey today.  God there are some great players out of Russia and Norway...kick ass....however...I'm not watching any of them.  

If I have to pay to play a full season with a bunch of old men on my own time.  I'm certainly not turning the knob to watch a bunch of whingers play part of a season and get paid to play with pro's.


Besides leaves more time for the grand sport of Curling.  Like golf, harder you play the shittier it gets.

Tue, 01/08/2013 - 16:16 | 3133903 Liquid Courage
Liquid Courage's picture

Why the hell did Canada allow the USA to take over your beloved hockey?


Why else: $$$$$s

Tue, 01/08/2013 - 13:40 | 3133336 Freddie
Freddie's picture

Hope & Change.  Rigged elections do that.

Paul Krugman's trillion dollar platinum coin will save us.

Tue, 01/08/2013 - 14:09 | 3133454 Oldballplayer
Oldballplayer's picture

Make two or three....just for yucks.

Tue, 01/08/2013 - 16:00 | 3133859 Beam Me Up Scotty
Beam Me Up Scotty's picture

Make enough so that no one has to pay any taxes again.  If one is good, 100 should be really good right?  And think how stimulative to the economy it would be if everyone could keep all of those tax dollars and spend them, right?

Tue, 01/08/2013 - 18:36 | 3134341 Tall Tom
Tall Tom's picture

Yeah. That is good. I was just thinking 20 of them to pay off the debt completely. When we strike one hundred of them then the World can actually see how insane and stupid that we really are. Great idea!!!


So do tell me. Just how do we deal with the resulting Hyperinflation. Damn. I have to spoil the something for nothing dream with reality.

Tue, 01/08/2013 - 13:46 | 3133368 DeadFred
DeadFred's picture

Tax refunds will be the killer. They can keep the Ponzi going by manipulating the refund rules. If refunds take five or six weeks instead of days (due to technical difficulties of course) they might even be able to stretch this thing into cash positive April and May. I expect bugs to be discovered in the IRS software, but then I'm a bit paranoid.

Tue, 01/08/2013 - 14:03 | 3133434 Cognitive Dissonance
Cognitive Dissonance's picture

I can't wait until the next Congressional "fix" coming up in a few months "accidently" makes some retroactive tax changes that forces 50 million people to amend the 2012 taxes they just filed.

<At least the accountants will love it. Tax season extended to August.>

Tue, 01/08/2013 - 14:23 | 3133509 I Am Not a Copp...
I Am Not a Copper Top's picture

I always make sure I owe a couple grand and always file on last day.

Tue, 01/08/2013 - 20:36 | 3134595 John_Coltrane
John_Coltrane's picture

Me too.  I used to select 4-6 deductions on my W-2 even though I was single just to make sure I didn't overpay.  Too bad more don't do this.

Tue, 01/08/2013 - 13:35 | 3133306 CPL
CPL's picture

Market is losing steam!!


Put a guy talking about nothing on CSPAN quickly!!

Tue, 01/08/2013 - 13:38 | 3133312 Snakeeyes
Snakeeyes's picture

And if we opened Ft Knox, our gold depository, they would find enough gold to decrease the Federal deficit by 25% FOR ONE YEAR ONLY! 

How insolvent can we possibly be?

Tue, 01/08/2013 - 15:59 | 3133852 Stuck on Zero
Stuck on Zero's picture

We could hand over Detroit, LA, New York, and Chicago.


Tue, 01/08/2013 - 18:56 | 3134366 Tall Tom
Tall Tom's picture

Are you even sure that is there?

The US Mint said on its webpage in 2009

"The United States Mint is working diligently with current and potential blank suppliers to increase the supply of bullion coin blanks, so it can offer to the public the proof and uncirculated versions of American Eagle silver, gold, and platinum coins in 2010."

I have just some simple questions...

If they are working diligently with current and potential blank suppliers then they do not have the supply, do they?

If they have to rely upon OUTSIDE SUPPLIERS then do they have the Gold?

  In other words they do not have the Gold. Fort Knox is the US Mint's Gold Depository. If they do not have the Gold then Fort Knox is empty.

Tue, 01/08/2013 - 13:37 | 3133323 Winston Churchill
Winston Churchill's picture

Your card is declined, Sam.

Tue, 01/08/2013 - 14:28 | 3133518 AgAu_man
AgAu_man's picture

Oh, wait, Uncle Sam... as long as you have real assets as collateral -- even, or especially zee Precious --  we can raise your card limit, as we like your FICO score.

Tue, 01/08/2013 - 13:37 | 3133325 lizzy36
lizzy36's picture

I heard they are minting a Platinum Coin and all Yank fiscal problems are solved.

So what the hell is Goldman yammering on about?

Tue, 01/08/2013 - 13:42 | 3133345 Dr. Engali
Dr. Engali's picture

Just raise the damn thing already and be done with it . You know you're going to, so stop pretending ... you look like idiots already.

Tue, 01/08/2013 - 15:00 | 3133657 laozi
laozi's picture

You have a point Sir. This debt ceiling discussion is retarded.

Tue, 01/08/2013 - 13:43 | 3133354 realtick
realtick's picture

Can someone in Manhattan go down to the Business Insider office and explain to Joe Weisenthal that money is debt and he's digging his own personal subway tunnel right now?

Tue, 01/08/2013 - 13:43 | 3133355 larz
larz's picture

Our representatives large and small have just pulled the biggest screw job to the 'merkin sheeple I have ever seen no spending cuts and a huge tax hike all the while dangling the fiscal cliff bullshit in front of us WTF This is laughable WTF WTF WTF Republican? Democrat? try thieves - give me a frickn break. Schumer! here boy! how much to renounce my citizenship? Can I pay in a tungsten coin?

Tue, 01/08/2013 - 13:48 | 3133376 Winston Churchill
Winston Churchill's picture

Have another nationality ready first.

Unless you've gobs of money in hand,even Mexico probably won't have you.

Tue, 01/08/2013 - 13:59 | 3133421 larz
larz's picture

gilligan's Isle-ian

Tue, 01/08/2013 - 13:49 | 3133379 Ness.
Ness.'s picture

+500 for the merkin reference.



Tue, 01/08/2013 - 13:57 | 3133416 larz
larz's picture


Tue, 01/08/2013 - 13:51 | 3133389 Thisson
Thisson's picture

People will figure it out (eventually) when they see their paychecks shrinking and grocery/gas prices increasing.

Tue, 01/08/2013 - 22:28 | 3134903 NumNutt
NumNutt's picture

I am already seeing all that....I think you ment people will notice when they see their EBT cards no longer being excepted.

Tue, 01/08/2013 - 14:53 | 3133631 hooligan2009
hooligan2009's picture

merkin...did you say merkin....shudder...

Tue, 01/08/2013 - 13:45 | 3133361 tooriskytoinvest
tooriskytoinvest's picture

Jim Sinclair & Peter Schiff & Michael Pento & Bill Gross: The Dollar Is The King Of Depreciation. QE Is Going To Infinity…AND BEYOND!! Fed Gold Certificate Claims On Fort Knox Bullion Holdings Which May Not Actually Exist!!


Tue, 01/08/2013 - 13:52 | 3133396 chubbar
chubbar's picture

Does anyone know if Congress sneaked through an extension of the Feds Charter that expired the end of Dec 2012?

Here's a good primer on why we are in the wars we are fighting and where this is ultimately heading (Spoiler alert: Petrodollar and war). Regardless of the spoiler, its is a well done and short video (13mins). Please pass it along and give it the widest dissemination!


Tue, 01/08/2013 - 15:43 | 3133801 thecoloredsky
thecoloredsky's picture

I believe there is no 100 year charter. See:

"Upon the filing of the organization certificate with the Comptroller of the Currency a Federal reserve bank shall become a body corporate and as such, and in the name designated in such organization certificate, shall have power—

First. To adopt and use a corporate seal.

Second. To have succession after February 25, 1927, until dissolved by Act of Congress or until forfeiture of franchise for violation of law. " I don't see anything in there with 2013. They are here forever until they aren't.
Tue, 01/08/2013 - 13:47 | 3133374 AnAnonymous
AnAnonymous's picture

'American' nations being insolvent is irrelevant.

Solvency in a world put on the path of depletion of resources is nothing advantageous.

It only means you've got some left in to be consumed by 'americans'

The future is drawn: there will people who inherited from people who consumed it all and there will be the others.

Tue, 01/08/2013 - 13:51 | 3133383 Dr. Engali
Dr. Engali's picture

Isn't there a cat you need to be skinning somewhere?

Tue, 01/08/2013 - 13:58 | 3133420 Inthemix96
Inthemix96's picture

His best friends mothers cousins aunt is busy putting anti-suicide netting around the Foxconn building so he can enlighten us every day after he has done his his 26 hour shift making shit that will break in 6 months for us fuckers to buy just after to keep him in work for $1.25 a day.

Hope that cleared that up like, no wonder he hates "Americanizsmsns".

Tue, 01/08/2013 - 14:35 | 3133544 AnAnonymous
AnAnonymous's picture

One thing was cleared up a long time ago

'Americans' love their fantasy.

Without fantasy to prop up them through life, they would not make up.

Keep up the fantasy tales, it is part of the 'american' nature, which commands any action in 'americans'

Tue, 01/08/2013 - 14:43 | 3133571 Inthemix96
Inthemix96's picture

Very nice AmAmnomynous.

But seeing as you replied to an Englishman, who is in Englishland, let me give you some of the Queens finest response.

Go and take your iliterate typing, dog frying, curb shiting, communist wearing, pollution building, and down right unfriendly and uncouth behavioured head for a shit.

And leave the people of Tibet alone you little tinker of small proportions, before we come over and teach you dwarf yellow buggers a lesson you deserve.

Now take my word China man.  You have been warned.                    :-)

Tue, 01/08/2013 - 15:02 | 3133663 TheFourthStooge-ing
TheFourthStooge-ing's picture

Inthemix96 said:

Go and take your iliterate typing, dog frying, curb shiting, communist wearing, pollution building, and down right unfriendly and uncouth behavioured head for a shit.

Well done, sir. A smashing response to the hateful little blighter with the unwiped bum.

Tue, 01/08/2013 - 15:16 | 3133724 Inthemix96
Inthemix96's picture

Well thank you kindly my friend.

One day these curb shitters will learn the uncouthness of shiting outside of ones house, I believe it is our right, indeed duty to remind these backward, third world, 26 hour a day Foxconns to adhere to our far higher standards of participation of dialect.

Bottoms up chum.....                       ;-)

Tue, 01/08/2013 - 17:34 | 3134162 Liquid Courage
Liquid Courage's picture

@ Inthemix96 ...

Thought that looked like a Bearskin you're wearing ;-)


BTW, I just heard yesterday that there's a new series of Yes, Prime Minister (with a new cast, of course) starting in a week or so. Love that show ... have all the DVDs. Not sure when it'll be on this side of the pond, but I can't wait.

Tue, 01/08/2013 - 14:54 | 3133619 akak
akak's picture

One thing was blobbed-up a long time ago

Evil Chinese citizenism trolls love their fantasy.

Without fantasy to prop up them through life, they would not blob up.  Hypocritizenistic offuscation would be beyond their reach without their anti-'american' bigoted and hate-filled fantasies to float their crap-covered boat.

Keep up the fantasy tales, it is part of your bigoted and hypocritizenism nature, which commands any action with which you disagree as being conducted by strawmen 'americans' --- whatever the fuck that means in your autistic, hate-filled, perfectly evil sick and twisted little mind.

Tue, 01/08/2013 - 15:56 | 3133837 pods
pods's picture

He's pissed that his ruxury boat wouldn't froat when they raunched it.


Tue, 01/08/2013 - 16:05 | 3133871 trav777
trav777's picture

you may as well use 'qwerakfjds' instead of 'american' because you just made the word mean wtfever you wanted to

Tue, 01/08/2013 - 14:33 | 3133537 AnAnonymous
AnAnonymous's picture

Remember the time when US Americans used to represent themselves through animals in cartoons?
Mickey Mouse, Donald Duck etc...

Tells about 'americans' in general.

Tue, 01/08/2013 - 15:05 | 3133674 Chump
Chump's picture

Hell yeah.  Muthafuckin' Donald Duck.  NO ONE tells him to wear pants.  NO ONE.  Just like me on the weekend.  Damn straight!

Tue, 01/08/2013 - 17:39 | 3134187 Liquid Courage
Liquid Courage's picture

But when he gets out of the bath, he wraps a towel round himself. Go figure.

Tue, 01/08/2013 - 15:09 | 3133688 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

Remember the time when US Americans used to represent themselves through animals in cartoons?
Mickey Mouse, Donald Duck etc...

Chinese citizenism non sequiturd.

US Americans now represent AnAnonymous in cartoons as Mr. Hankey.,_the_Christmas_Poo

Tue, 01/08/2013 - 15:11 | 3133695 akak
akak's picture

Remember the time when rapacious, blobbing-up Chinese citizenism citizens used to try to boost their flagging virility and miniature pee-pees through consumptionalizing rare and endangered animal parts?

Tiger penis, bear gall bladders, 'dragon bones', etc...

(Oh wait, that time is still today.)

Tells about short-sighted, materialistic Chinese citizenism citizens in general.

Tue, 01/08/2013 - 13:56 | 3133409 forwardho
forwardho's picture

Aint you a purdy little ray of sunshine today!

Tue, 01/08/2013 - 14:41 | 3133563 akak
akak's picture

Roadside-crapping Chinese shitizens being incontinent is irrelevant.

Flush toiletry in a Chinese shitizen world is nothing advantageous.

It only means you've got some (few) unshat-upon roadsides left to be contaminated by Chinese shitizens.

The future is drawn: there will "half people, half things" who inherited from sheeple who consumed the wokked dogs and then shat them out on the Chinese roadsdes, and will be the others who used flush toilets instead.

Alas, alas, 1.3 billion alas, eternal Chinese shitizen insanitation nature will prevail. 

Just have to bear with it.

Tue, 01/08/2013 - 13:49 | 3133380 buzzsaw99
buzzsaw99's picture

If I ran the treasury CONgreff would be the first to not get paid.

Tue, 01/08/2013 - 13:51 | 3133388 Darth Mul
Darth Mul's picture

Not sure why folks aren't more supportive of a fiat coin, actually produced by the government  {the fed ain't the government, right?} to be handed over to the private federal reserve as 'legal tender' which would immediately extinguish the equivalent amount of fed-fiat dollars.


What's the Fed hold in US treasuries at this point, a few trillion?  More?


For fuck's sake, fellas, is there not a certain subtle beauty to the idea of the Congress or Treasury extinguishing that debt outstanding with its own fiat?


I understand lots of people find this silly, I did too.  But in reading about this, I think it makes some sense.  It's a kind of end-run around the federal reserve's power.  It printed money and took in exchange an IOU for future tax revenue....  that's a jack from all of your paychecks.....


handing over the fiat coin, as I see it, because it's "legal tender" - basically extinguishes the futures taxes on income we'd need to hand over to the fed... 'deinflationary' in a sense.


While silly, it's sillier to let the Fed be the only fiat creation game in town, while we all have to labor 1/3 of the year to hand over our earnings to a group of magicians who did nothing.


While not perfect - it may be a 'crack' in the wall of fed power.



Obama is a narcissist. He is backed by wealthy Chicago gangsters with a healthy penchant for world domination.  If they can be used as lever against the Fed's power....


Divide and conquer, I say.

Tue, 01/08/2013 - 13:53 | 3133397 Thisson
Thisson's picture

It's called inflation, you retard.  Whether the treasury issues the fiat or the fed, it creates inflation, which is a regressive tax.  So no, it's not a good idea - it's a fucking stupid idea.

Tue, 01/08/2013 - 15:02 | 3133664 Panafrican Funk...
Panafrican Funktron Robot's picture

I agree that the coin devalues the dollar, but there is no wealth extraction value for the banksters with the coin.  We all kind of take the ass fucking equally, but at least the banksters are also getting fucked.  

Tue, 01/08/2013 - 19:08 | 3134421 Tall Tom
Tall Tom's picture

You are mistaken. It allows the continuation of the Ponzi Scheme.

Tue, 01/08/2013 - 14:39 | 3133558 Freddie
Freddie's picture

Mint The Obama coin! Mint The Coin!  USSSA! USSA!

Save Amerika - Mint The Trillion Dollar Platinum Obama Coin!  

Tue, 01/08/2013 - 14:49 | 3133596 hooligan2009
hooligan2009's picture

similarly, the Fed could extinguish the 1.6 trillion of treasruies out of its 2. trillion in SOMA holdings and wipe 10% of the total debt.

you have roger altmann in todays FT claiming that the actual government debt to GDP excludes non-marketable securities and is only 70% so everything is fine really, so it's all Tom Sawyer and Huck Finn anyway

Tue, 01/08/2013 - 23:29 | 3135031 strayaway
strayaway's picture

Absolutamento! But why just have Congressional magic coins or the Fed? We can have both. That way, Congress (think Pelosi, Reid, Boehner) and the Fed could both be issuing money when needed without conflicts. We would never run out of money again! Wheee..Keynesianism forever. Better do it before she has her baby.

Tue, 01/08/2013 - 13:53 | 3133398 forwardho
forwardho's picture

. The Civil Service Retirement and Disability Fund (CSRDF) receives contributions for current employees of $2bn per month and pays out $6bn per month to former employees. 

Houston... We have a Problem.

This is happening at every level of our entitilements.


Tue, 01/08/2013 - 13:56 | 3133407 Bluntly Put
Bluntly Put's picture

Maybe I'm an idiot, but to me the dollar is either backed by the ability of government to collect taxes (force and coersion) and the economy's performance to provide the tax base or it is backed by the legal system legitimizing the FRB credit/currency creation scheme (as money and credit are fungible in our economy).

If the dollar is backed by our legal tender laws and other budgetary measures taken by congress to define its scarcity, then the above discourse on this cluster fox trot in Congress demonstrates very little "value" to the dollar. The dollar must be backed by its demand overseas as the reserve currency, meaning all this insanity in Congress has nothing to do with what underpins the dollar and our economy.

I need another cup of coffee.

Tue, 01/08/2013 - 14:01 | 3133428 unplugged
unplugged's picture

soon to be backed by $US Trillion coins - problem solved

Tue, 01/08/2013 - 15:00 | 3133656 strayaway
strayaway's picture

Paul Krugman brought us a ray of sunshine by supporting the minting of trillion dollar platinum coins. However, I have a slightly better idea. Instead of platinum, Congress should plant a magic coconut tree in the Capitol Rotunda. Harvested magic coconuts that could be designated as coins and turned in to the Fed for a trillion dollars each will keep our economy growing. Since coconut trees can only produce a finite number of magic coconuts no matter how much water and fertilizer is supplied, we would eliminate the possibility of infinite zeros; one Zero already being enough. Besides being a sacred tourist attraction, the magic national coconut tree would represent the greening of and increasingly banana republic status of our country. 

Tue, 01/08/2013 - 15:42 | 3133796 secret_sam
secret_sam's picture

    meaning all this insanity in Congress has nothing to do with what underpins the dollar and our economy

I'm of similar mind.  There MUST be a reasonable explanation for why the amount of FEDGOV deficit spending over the past decade hasn't yet caused runaway inflation.

We have certainly seen price increase in most commodities, but is that increase really directly explained by the $11T of deficit spending since 2000?

Tue, 01/08/2013 - 19:17 | 3134444 Tall Tom
Tall Tom's picture

The Banks are being paid off by the Fed to hold those reserves that they were recapitalized with. The Cliff Chart that the St. Louis Fed published in late 2007 or early 2008 demonstrated that Banking Deposits and Reserves had dropped sharply into negative territory. Without the recapitalization of the Banks in September 2008 the Banking Industry would have been toast. (That is what needed to happen.)


Once the Banks start to release this capital it will be a Inflationary Event that will blow your mind. They MUST loan to make money. Sooner or later the Fed will not be able to pay them enough to hold that capital. On that day you will see the effects of the madness that the Fed has sown.

Tue, 01/08/2013 - 21:16 | 3134697 secret_sam
secret_sam's picture

     Once the Banks start to release this capital it will be a Inflationary Event that will blow your mind.

Yes, yes, I know.  According to Johnny Williams and/or Petey Schiff, it's been "about to happen" every day for at least 4 years.

Who will the banks release this money (it damn sure ain't CAPITAL) *to*?  Are the 0.0001% of the global population with good credit histories suddenly going to take out ginormous loans for the purpose of buying tens of thousands of houses each?  Or billions of bushels of wheat?

I personally think velocity can continue to slow a hecka lot longer than the bankster-boys can keep their home countries from imploding. Obviously this is not a widely-held opinion around here, but maybe I'm just the real contrarian.

Tue, 01/08/2013 - 14:00 | 3133422 unplugged
unplugged's picture

"While these are technically separate issues, it seems likely that they will be combined, perhaps into one package."

Wrong - they will be cut up into the smallest possible chunks and settled hours or minutes before the deadline, probably settled by extending the deadline. 

Tue, 01/08/2013 - 14:00 | 3133423 hooligan2009
hooligan2009's picture

  • Partial disinvestment of the federal employee defined benefit pension fund (creating $33bn to $93bn in headroom).The Civil Service Retirement and Disability Fund (CSRDF) receives contributions for current employees of $2bn per month and pays out $6bn per month to former employees. 
  • Disinvesting the "G Fund" ($156bn in headroom). Treasury can temporarily replace some or all of those Treasuries that count toward the debt limit with an IOU that does not.
  • Disinvesting the Treasury's Exchange Stabilization Fund ($23bn in headroom). The $23bn portion of the fund invested in dollars is in non-marketable Treasuries, which could be disinvested immediately if necessary.

So, hmmm, how many "real" Treasuries are maturing in the "real world" that need to be refinanced/rolled/Ponzi'ed, alongside the fiscal deficit of the odd quarter of a trillion dollars in the next 6 weeks/two months?

Tue, 01/08/2013 - 14:07 | 3133438 Cycle
Cycle's picture

However, another increase in tax revenue beyond the one enacted last week seems off the table for now, and there is little left to cut from the "discretionary" segment of the budget that was already cut significantly in 2011.

Why is the mil-ind budget that directly and indirectly consumes almost half the US budget considered a sacred cow?  In the abence of any declared war, the US spends more than all the rest of the world on "defense."

Tue, 01/08/2013 - 14:45 | 3133580 hooligan2009
hooligan2009's picture

wonder why you can't be up arrowed?

Tue, 01/08/2013 - 15:44 | 3133802 secret_sam
secret_sam's picture

Lots of our politicians work for the military-industrial complex.  They don't want to eliminate their own careers.

Tue, 01/08/2013 - 14:04 | 3133439 q99x2
q99x2's picture

Why doesn't someone ask GS what they have decided the US government will do?

Tue, 01/08/2013 - 14:06 | 3133446 ShrNfr
ShrNfr's picture

Oh boy. Raise the debt ceiling by 2 Tn for a year, and gnerate cuts of 2 Tn over 10 years. What could ever go wrong?? After all, there is a 1 Tn a year shortfall, and 100 Bn a year in reductions.

Tue, 01/08/2013 - 16:25 | 3133947 SKY85hawk
SKY85hawk's picture

If only CONgresss would think as clearly as you do, sir.

Or, they be thinking the sheeple can't read between the lines.

sigh .  .   .

Tue, 01/08/2013 - 14:12 | 3133466 Steve in Greensboro
Steve in Greensboro's picture

Shut the U.S. government down until we get a balanced budget and a balanced budget amendment for the states to vote on.  The U.S. government has more than enough cash coming in to service its debt.  And if it wants to spend anything more, let it sell off Federal assets (including Federal lands) to the highest bidder.

Tue, 01/08/2013 - 14:22 | 3133504 lolmao500
lolmao500's picture

and marketable securities held by the Federal Reserve ($1.7 trillion)

Make that disappear.

Tue, 01/08/2013 - 15:19 | 3133731 dcj98gst
dcj98gst's picture

I like it.

Tue, 01/08/2013 - 14:23 | 3133505 NEOSERF
NEOSERF's picture

With the trillion dollar coin debate raging, I am taking the bull by the horns, minting my own debt coins and plan to mail them to my mortgage provider with a "paid in full" note...thx for the great idea Congress!

Tue, 01/08/2013 - 14:29 | 3133522 cxl9
cxl9's picture

Why don't they just index the debt ceiling to inflation? Surely that would fix everything.

Tue, 01/08/2013 - 14:42 | 3133568 hooligan2009
hooligan2009's picture

you forgot the need to pay the banksters their annual 100 billion bonuses and the pentagon its 600 billion a year to keep men off the streets who would kick their asses into the middle of next week if they werent carted off to fight other peoples wars PLUS the 500 billion in food stamps for people who arent allowed to work because of jobs created in emerging markets by sacking those people (US workers). 

Tue, 01/08/2013 - 14:37 | 3133552 Freddie
Freddie's picture

I am deeply offended and outraged that the Tylers referred to the Trillion Dollar Platinum coin plan as "idiocy." 

It is backed by Nobel Prize winning economist Dr. Paul Krugman.

Tue, 01/08/2013 - 14:42 | 3133569 magpie
magpie's picture

Nice...whilst gold is naturally backed by nothing - platinum is backed by the Krugman

Tue, 01/08/2013 - 14:44 | 3133574 hooligan2009
hooligan2009's picture

the krugerrand! that is krug...err...and?

Tue, 01/08/2013 - 14:45 | 3133584 magpie
magpie's picture

and the fractionals shall be dubbed 'Gross'

Tue, 01/08/2013 - 14:38 | 3133554 AnAnonymous
AnAnonymous's picture

The question when it comes to the USD:

can you prevent 'Americans' from buying from you and paying in USD? The relevant question.

Carry on with the 'american'styler, it is an 'american' world after all...

Tue, 01/08/2013 - 14:46 | 3133585 fuu
fuu's picture

AnAnonymous = On Man Anus Yo!

Tue, 01/08/2013 - 15:07 | 3133682 akak
akak's picture

O, My Anus Anon!

Tue, 01/08/2013 - 19:26 | 3134461 Tall Tom
Tall Tom's picture

I will let you in on something of which you may not be aware. I can refuse to take Dollars. Furthermore there is NO LAW which compels me to do business with anyone. If I choose to take Gold and Silver for goods or services rendered then that is which what I will take.


The other day I was hungry and wanted a sandwich. I went to the local delicatessen and ordered one. The asking price was $5 USD. So I had a US Silver Quarter with me. I offered the clerk a tender of $5 or the Silver Quarter. He took the Silver Quarter.


Yes I can prevent it. Yes others can too. We are not Communist China yet pal. We will never be.

Tue, 01/08/2013 - 21:53 | 3134800 Thisson
Thisson's picture

True but you'll still be liable to tender USD to the IRS in settlement of your taxes.

Tue, 01/08/2013 - 15:10 | 3133696 Tombstone
Tombstone's picture

The Kommunists in Washington don't care about debt limits.  What, they've only raised the darn thing 60 times or something.  This is another totally meaningless number.  When you have central planning by socialists who want to create a welfare state of redistribution, the old measurements of capitalism become next to useless since they are fudged and inhibited by government intervention.

Tue, 01/08/2013 - 15:12 | 3133706 CitizenPete
CitizenPete's picture

So if I get on gist of this correct: The pension funds of "hard working" federal workers who managed to get up every day and take the Metro to the coffee machine downtown, is being raided, and for all accounts, vaporized into the waste that government is?   How many federal workers are actually aware that there may not be a light at the end of the tunnel.  Perhaps bags of wheat or US rice will suffice as pension payments in the not so distant future. 

Wait, the US government could invest in Gold, simply by seizing Germany's hoard in NY (if it still exisrs).  

The Chinese are laughing harder and harder watching as the serpent eats it's own tail.

Tue, 01/08/2013 - 15:13 | 3133714 ivars
ivars's picture

Silver chart I tried to post but messed up and image was missing:


Quaterly  expires has marked 9 out of 10 trend changes over last 2 years. Now we are bottoming out:

Tue, 01/08/2013 - 15:59 | 3133846 AgAu_man
AgAu_man's picture

Dear Maggie Thatcher, Ben, Tim, and Bush’ama,

(Reserve Currency Status) + (fiat-FRNs) + (QE) is like Socialism: Eventually you begin to run out of Other People’s Money.

No doubt War 3.0 is to follow, if Bread, Bailouts & Theater fail to calm the Plebeian masses.  Beta-testing (War 3.beta) is ongoing with established clients in the Middle-East and Asia right now.

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yang46's picture

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