US Starts New Fiscal Year With $14.837 Trillion In Debt, $142 Billion Increase In Two Days

Anyone tearing their hair out trying to answer how it is that this great Keynesian experiment of a nation managed to sneek by with so little new incremental debt over the past month can now relax. As Zero Hedge reported yesterday, the US closed out Fiscal 2010-2011 with a $95 billion surge in debt in one day brining the total to just under $14.8 trillion. That, however was not nearly enough to settle all outstanding debt, and on the first day of the next fiscal year, Timmy G added another $47 billion in debt, to have a closing balance of $14.837 trillion on the first day of the 2011-2012 fiscal year. In other words, in just the past two work days, America has technically settled a whopping $142 billion in debt. There was a time when a year was needed to issue this much debt. Then, a month. Now, we are officialy down to two days. What is ironic is that the recently expanded debt ceiling of $15.194 trillion has just $400 billion of additional dry powder. At this rate, it won't last the US until the end of the calendar year.

Today's Debt summary:

And Yesterday:

Comments

[PaperWillBurn]

First, there remain factors that create Triffin-dilemma-like pressures on the IMS. In particular, the official sector of several emerging market economies (EMEs) still consistently adds its own demand for safe US assets to the market-based private demand for US dollars. Even when a shock originates from the United States, sizeable and persistent official capital flows to that country seek out the dollar as a safe store of value and a precautionary source of liquidity. As a result, total net capital stemming from EMEs taken as a whole flows uphill to advanced economies (the Lucas paradox), even though private capital continues to flow downhill, as the theory would predict. This would not be a problem if it did not increase the fragility of the US financial system by pushing down risk premia and real interest rates, thereby boosting financial innovation and encouraging upswings in the degree of leverage. ^[7] But it does increase that fragility.

Three core drivers of reserve accumulation can be identified, in particular:

1. A few surplus EMEs buy dollars as a by-product of a strategy aiming to systematically keep their real effective exchange rate undervalued;

2. Other EMEs with largely open capital accounts, which are exposed to capital flow volatility, purchase dollars to build up precautionary reserves in the event of a reversal of capital inflows;

3. The commodity exporters recycle their current account surpluses into safe dollar-denominated assets.

As in Triffin’s day, however, this cuts both ways. The demand for safe assets feeds that exorbitant privilege enjoyed by the United States. This contributes to a weakening of US policy discipline as the country tends to excessively rely on easy credit in normal times and very expansionary macroeconomic policies in times of crisis. The outcome is excessive US indebtedness. The corporate sector was in debt prior to the burst of the dot-com bubble in 2001; so were the household and financial sectors before the eruption of the sub-prime crisis in 2007-08; and the official sector is in debt today.

http://www.ecb.int/press/key/date/2011/html/sp111003.en.html

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[Fedophile]

So about 100% debt/GDP

[karmete]

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