Guest Post: Debt Ceiling Dilemma: The Foul Choice Facing Investors

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Thu, 07/28/2011 - 11:20 | 1501189 Hero Protagonist
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What happened to the world will end if the Fed isn't buying at the pace of QE2?

Thu, 07/28/2011 - 11:23 | 1501196 baby_BLYTHE
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aren't they still scheduled to roll-over 200-300b in maturing securites over the next few months?

If so, once that stops things will get interesting...

Thu, 07/28/2011 - 11:37 | 1501206 Ahmeexnal
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"gold or silver" is not an option?

Tell that to CBs all around the globe.

Martenson has no idea who the "big money" really is.

Thu, 07/28/2011 - 12:26 | 1501399 PaperBugsBurn
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Exactly... this system has always been a banksters' rigged game of empire. All of these "markets" (rentier class) have always been pawns in a much bigger game. The fiat was and is used to expand and police their empire and not as solid investments..

speaking of solid


Thu, 07/28/2011 - 12:41 | 1501440 Frankie Carbone
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Hey bro. Imagine you running a large pension fund like CALPERS. Then imagine trying to move your 200B+ dollar pension fund into the gold/silver markets and see what kind of fallout that you see from it. 


Ten billion or <5%. Sure. 50% or more? Woah. 

You'd be removed from your post in 24 hours for breech of fiduciary responsibility. 

It's not unusual for a CB to move big PM money around. It's a headline if a pension fund does. 

Witness UTexas. I think that was 10B. 

All I'm sayin' is that I don't think it's that easy. The mainstream perception right now still is "not right". The sheep don't know what you know so they'll absolutely flip at such a large move. 

Thu, 07/28/2011 - 12:58 | 1501506 TruthInSunshine
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At 12:32 pm est, the fix is in - overt manipulation on an epic scale, bitchez.


Thu, 07/28/2011 - 11:30 | 1501214 Hero Protagonist
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It's still a much smaller amount than the original pace and for that everyone was predicting dooms-day scenarios.  

I think the entire economy is a joke, however, the Federal Reserve's influence via QE on the US's ability to float loans I think has been proven wrong by the fact that NOTHING has changed in the auctions since the end of QE2.  

Thu, 07/28/2011 - 11:40 | 1501230 SheepDog-One
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'Nothing has changed', yea what about the $200 billion or so that Treasury has helped itself to out of govt pension funds to make it seem like 'nothing has changed'? Where does that money get replaced from?

Thu, 07/28/2011 - 11:41 | 1501243 Hero Protagonist
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Good point.  Does that mean that but for the $250 Billion raided by the treasury that Primary Dealers or foreign governments would not have made up the difference in auctions?

Thu, 07/28/2011 - 11:46 | 1501266 SheepDog-One
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Well Bernank says that as soon as the debt ceiling is raised, then that money will be replaced, so then any 'deal' is immediately -$200 billion or whatever the actual number is by now. And if flippin bonds for spectacular gains was such an easy sure thing why havent we just been printing and flipping bonds to fully fund ourselves for decades?

Thu, 07/28/2011 - 11:53 | 1501288 Hero Protagonist
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My point is that I haven't seen any major change in the auctions since the end of QE2.  Many were saying that there would not be enough interest in the auctions and rates would soar.  They haven't.  It calls into question whether the Fed's QE has any real effect on these auctions.  Now if you look at the equity markets, from a psychological standpoint, QE headlines move the heard...just not in the Treasury Auction market.

Thu, 07/28/2011 - 12:36 | 1501434 IQ 145
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 I like the back to basics tone of the post; but without causing huge upset to the "big money", whatever; the long bond contract on the CME could lose a couple of full numbers, or a little more. This contract made a beautiful double top in Setp. and Oct. 2010; and I have considered it a bear market since then. So do, Jim Rogers, Bill Gross, etc. The lack of reaction at present doesn't bother me; I shorted the contract today from 126-08; just because it stuck it's head up. Markets frequently react slowly and then over react. It's a very difficult market; it hops around a lot, but I'm imterpreting the chart as a bearish slide. We'll see what happens.

Thu, 07/28/2011 - 11:39 | 1501240 SheepDog-One
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What about the $200 billion or so Treasury has dipped out of govt pension funds and piled into its own treasuries?

Thu, 07/28/2011 - 12:05 | 1501326 ww2vet
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what happened was all ugly, nose-picking failure who make up most of zh wrong again again-cant face sucess outside their cell-wishing all the "haves" lose everything so will be on same-0-level


Thu, 07/28/2011 - 11:24 | 1501199 Timmay
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Storm the beaches of Normandy or turn the boat around and go home. Those are the choices before us.

Thu, 07/28/2011 - 11:24 | 1501205 Long-John-Silver
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<===The nick of time

<===Out of time

Cheesy Pole

Thu, 07/28/2011 - 11:26 | 1501207 RobotTrader
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There is no issue with the debt ceiling with the 10-yr. Treasury at 2.96%.  If there was going to be a problem the 10-yr. would be at 5%+ already.

People will feel better owning Uncle Gorilla Notes whether they are AAA-rated or AA-rated.

Still safer than gambling on commodities and especially gold mining stocks.

Even Exxon with $125 billion in quarterly revenues is hated.

The love affair with fixed income continues unabated.

Thu, 07/28/2011 - 11:30 | 1501216 baby_BLYTHE
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umm, there is a big problem. People's money is being stolen through inflation.

10-yr is only 2.96% when real inflation is running between 6-9% per annum.

It's the worst situation in the world for people that are fiscally prudent

Thu, 07/28/2011 - 11:39 | 1501241 Long-John-Silver
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Just once I'd love to see a movie where the guy in hibernation for a hundred years or so gets awakened.

While he trying to get his life back together he stops by his financial institution to check on his investment

in Treasury bonds. Upon entering his name and pass code security immediately shows up.

He's thinking; Wow! I must have a lot of money in my account. He is taken to a private office and told

that he owes $25,000,000,000,000,000,000 to the government.

Thu, 07/28/2011 - 11:45 | 1501261 Hero Protagonist
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Exactly and that's what makes the debt ceiling discussion so maddening. The financial industry through bail-outs and bonuses which both Democrats and Republicans blessed are now talking about fiscal restraint?  Great on the backs of people who actually saved and lived within their means?  It's a horror show.

Thu, 07/28/2011 - 12:22 | 1501379 FeralSerf
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That's "only" losing 3 - 6% per year of your capital and presumes that the USTs are really a no risk investment.  Tell that to the Argentines that had all their pensions in pesos 10 yrs. ago.  The ones that could get out of pesos and  domestic investments didn't lose nearly as much.  Some of those even had enough left so they could still eat and enjoy a San Miguel in Barcelona.  Most people weren't able to get out of their domestic investments in pesos though and their retirements weren't as pretty as they planned.  Many lost everything.

Moral: think and plan internationally.

Thu, 07/28/2011 - 11:33 | 1501222 SheepDog-One
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Hey MORON, the largest holders of those treasury notes is the treasury itself! DUH!

Thu, 07/28/2011 - 11:44 | 1501260 baby_BLYTHE
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1.6 trillion the FED owns needs to be cancelled. Give them the finger and walk.

Thu, 07/28/2011 - 11:38 | 1501233 Central Bankster
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To paraphrase the wise Robot Trader:


"Ignore the author who knows nothing, buy Treasuries and sell commodity stocks."

Thu, 07/28/2011 - 11:59 | 1501308 Central Bankster
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I take it my junker couldn't detect the sarcasm :O)

Thu, 07/28/2011 - 11:39 | 1501237 slaughterer
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No place for big money to run.  They are stuck with Banana Bernankes and Zodiac Timmahs, whether they like it or not.  We all live in Obamica. 

Thu, 07/28/2011 - 12:43 | 1501458 IQ 145
IQ 145's picture

What you say is basically true. However, gambling on commodities produces profits whereas Bonds are instruments of loss, due to inflation. To a great extent, the love affair with fixed income securities does continue abated; this is a give to us by the statistics; I believe that as always, there will be a turning point in this love affair; I think it's possible the "less than wonderful" resolution to this debt ceiling story may take a little gloss off of the bonds.

Thu, 07/28/2011 - 11:52 | 1501213 Paper CRUSHer
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Btw,it was me ol' grandpa juiced to tell chilling tales 'bout the future of the economoney. Working as a part-time clairvoyant possessing telepathetic powers ol paps wrote a poetic log of his visions and warned of this decades ago.

Although 99% of his predictions failed to come trus including the 'Dow To 36000' long before it was ever made public,this however stands out......

DATED AUG 15th 1971........Coincidence?




















Thu, 07/28/2011 - 11:32 | 1501221 gaoptimize
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Exactly what economic factors do the CBO think are going to change to make next year's deficit less than this year's?  I wish that every time someone posts these CBO decifit projections they were accompanied by the projections from 1, 2, 5, and 10 years prior compared to actuals.

Thu, 07/28/2011 - 11:36 | 1501229 CrashisOptimistic
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All CBO baseline projections presume 3+% GDP growth.  That translates into tax revenue and that cuts the deficit.

There are also Iraq wind-down costs in the baseline that reduce spending.

The one thing that the CBO projections never do is raise interest rates in response to their presumed GDP pop.  If they did that even 1%, the 15 trillion debt generates another 150 Billion in spending.



Thu, 07/28/2011 - 11:36 | 1501231 TSA Thug
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Listen. The fact is that this discussion is nonsense.

Corporations are sitting on huge bundles of cash and soon they will plow into US Debt like crazy. The writing is on the wall. Ignore it at your peril.

Like Glenn Beck said today: "There will be change in this country like most do not expect". And I'm sure he was talking about the bond market. Glenn is a real patriot who everyone should be listening to if for nothing more than to expand your intellect.


--You WILL Obey!

Thu, 07/28/2011 - 11:42 | 1501252 SheepDog-One
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Glenn Beck Mormon Zionist shill I've got no use for that crybaby fraud.

Thu, 07/28/2011 - 11:51 | 1501284 Long-John-Silver
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For a "crybaby fraud" his predictions have been running at least 90% correct.

I know I am way ahead with my Gold and Silver investment.

He also predicted this debt blowup years ago when he was on CNN.

Thu, 07/28/2011 - 11:59 | 1501307 TSA Thug
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"Glenn Beck Mormon Zionist shill I've got no use for that crybaby fraud."

This sort of slander from you WILL END NOW! You're jealous is showing so pipe-down.


--You WILL Obey!

Thu, 07/28/2011 - 12:49 | 1501485 IQ 145
IQ 145's picture

I almost decided to Google Glenn Beck just to find out who he is; but then I thought, nah. I've got along this far without dipping into the popular culture; I don't want to get any on me. He's one of those AM radio wing-nuts, isn't he?

Thu, 07/28/2011 - 11:46 | 1501265 Central Bankster
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No they won't, because shareholders will force them to either distribute the cash or invest it wisely ( not in something with a negative real return).

Thu, 07/28/2011 - 12:05 | 1501325 TSA Thug
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You may be thinking of shareholders from days past.

The new shareholder mentality is rooted in preservation. Circle the wagons and prevent erosion of the very foundation that you and your fortune have been built upon.

A Renaissance if you will.


--You WILL Obey!

Thu, 07/28/2011 - 11:39 | 1501235 Hearst
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If the Republican tactic is to purposefully not reach an agreement with the Democrats  so that a default happens and a 'derivative event' takes down the bankster's grip on the US since 1913, then Boehner and the Republican's hard stance of not giving in to the white house makes sense.

Thu, 07/28/2011 - 11:48 | 1501274 wang (not verified)
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The strategy of the statists (D&R) is to rid themselves of the tea party either by getting them to cave and/or framing them as the cause of the pseudo default. My guess is the TP will cave but if not then we'll have drama Monday and Tuesday and a resolution by Friday of next week. The media and the "leadership" of both parties will lay the blame at the foot of the TP (now being labeled as right wing extremists by the MSM) who are a threat to the Dem and Rep establishment.

Thu, 07/28/2011 - 12:52 | 1501474 JR
JR's picture

The crisis is going to vindicate the Tea Party whether they cave or not, IMO,  because they have been the ones creating this much needed friction.  Even if the entrenched Ds&Rs roll over them now, or even if the TP agrees to go along, it seems to me that they are the harbinger and result of Americans beginning to stand against this bailout government.  And that’s only going to continue, IMO.

IOW, this is a movement that can’t be stopped; a Tea Party defeat today is just a lost battle in a war where the bankers are making a last stand. And the TBTFs are going to be defeated because the rising current is going to continue against them.

The war has been long in coming.  Now the war is here.

You are right about Republicans demonizing the conservatives: Banker buddy John McCain already has stepped out to criticize the TP and Congressman Paul Ryan (R) was on radio yesterday bad mouthing the Tea Party while making a call for lifting the debt ceiling.  He dismissed any idea of a 1% across the board cut in all government departments in case of a government refusal to implement any future cuts.  Why?  It would cut military spending!

Said Ryan: We need to raise the debt ceiling, avoid the contention, and deal with the debt problem in 2013 when the Republicans take over the presidency and both houses of Congress.

Where have I heard this before?

BTW, wang, I always note and value your analyses.

Thu, 07/28/2011 - 11:48 | 1501275 Hero Protagonist
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I wish, however, the fact that Boehner and the Republican party was an accomplice to bailing out the banks with our money and then letting that same industry pay bonuses would indicate that this is NOT their tactic.

Thu, 07/28/2011 - 11:49 | 1501276 Dr. Engali
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I think both side know we are fucked. It's just a matter of who gets the blame. There is nobody left to buy our debt,other than uncle Ben and his magic printing presses.

Thu, 07/28/2011 - 11:56 | 1501293 Hearst
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That's my point.  The Republicans and Democrats know the end of the fiat Dollar is nigh.  The Republicans will sieze power by allowing the default to happen, kill off the criminal banking powers that have strangled the country for so long, and come off as the hero's in the end.  And that end will be a wiping clear of ALL debt held by the US government and privately.  Unfortunately this will mean that all paper and electronic money denominated in in US Dollars is also worthless.


Enter new constitutional monetary standard in the US.  Got Gold and Silver? 

Thu, 07/28/2011 - 12:10 | 1501344 Chief KnocAHoma
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Ding ding ding

Thu, 07/28/2011 - 12:48 | 1501479 Z Beeblebrox
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It's a nice scenario to think about, but I doubt the coming collapse will be used to benefit the people. More likely we move to the Bancor, and the IMF/BIS or a new international central bank is given complete rule over the planet, based on the same fiat model, now globalized.

A monopoly over the monetary system is one of the most horrific evils imaginable. That's why it will happen. World socialist dictatorship, here we come.

Thu, 07/28/2011 - 11:50 | 1501277 Downtoolong
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I'm more inclined to believe that the Republican tactic is to create havoc and panic in the market to stimulate lots of transactions and trading. That helps Wall Street right now more than anything by adding commissions, fees, and trading margins to their bottom line.

This isn't about our long-term future; it's about the next 90 days. And the Tea Party thinks it's all for them, ha!

Thu, 07/28/2011 - 11:58 | 1501302 slaughterer
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If the US defaults, I am very sure that a good portion of the bankers will do quite well with their credit derivative positions on US sovereign debt.  Many of them levered up their bets on a US default this month.  If the Boehner plan leads to a default, Boehner will be a hero of Wall Street and probably ensure millions of dollars of campaign contributions for he Republican Party from Wall Street for next year.   What remains to be seen is how the Fed and giant funds like PIMCO levered up their credit derivative positions against US debt.    I am sure they will do very well in any default situation.   

Thu, 07/28/2011 - 12:08 | 1501340 Chief KnocAHoma
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These positions will get slaughtered in a true default.

Here have all the FRNs you want, since the USA will now being working with a new commodity backed currency, and all you banking bitches can whine all you want and threaten to take down the economy, but that trick ain't gonna work again, so blast off.

I am The Chief

Thu, 07/28/2011 - 12:04 | 1501322 Chief KnocAHoma
Chief KnocAHoma's picture

Ding ding ding...

We have a winner!

Stay strong

I am The Chief

Thu, 07/28/2011 - 11:46 | 1501262 Dr. Engali
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The average lifespan of all fiat is 40 years.

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