Now, I don't want to write something so incredibly STUPID all my old friends here will jump all over me, but I have a real problem these days with the persistent sale of MORE US Treasuries of duration from anywhere from a few days to 30 years.
Here is the problem I have. On any given day, the US treasury will offer up a few Billion in Notes to sell to other countries. Except that all these other countries and Banks BUYING these notes HAVE no money! OK, granted the Chinese hold some $2T in US Treasuries at the moment as "money" but can you really use old treasuries as collateral upon which to buy new treasuries?
Far as the rest of the world and the Hede Funds are concerned, WHERE are they getting money from to buy more Treasuries? A year ago, we had X Dollars floating around the world. This year, we seem to have 10X Dollars floating around to buy every POS debt offering Treasury makes. All this money to buy this stuff last year was just sitting on the sidelines , just WAITING for Turbo Timmy to produce some more valuable Toliet Paper? Just how is it that when the entire WORLD is losing more jobs all of a sudden there is a few Trillion MORE dollars out there to buy more Treasuries? WTF are they buying those treasuries WITH?
The Fed holds an Auction with a bunch of Primary Dealers. They are REQUIRED to bid on the Toilet Paper, so they do and the auctions never fail! Amazing. WHERE did JP Morgan, Goldman et al get money to buy these Treasuries? $100B a month and they ALWAYS have money to buy new Treasuries? Goldman might be making gobs of money here, but how can they be making enough money to keep buying Treasuries issued at this clip?
Well, of ocurse they are not REALLY buying them, they are just acting as an Intermediary as a Primary Dealer who will sell said Treasuries to some other sucker. Except then WHERE does the OTHER sucker get the money to buy the Treasuries from Goldman? Does he borrow the money from JP Morgan to buy them? What?
I swear, not a day goes by that I don't see a Bigger Number quoted somewhere in the MSM and on the Blogosphere. A year ago it was $50B to Bail Out Bear Stearns, now its coming to $Trillions$ to Bail Out the CRE market in the next year or so. Quadrillions are pitched around like Black Chips in Vegas at the moment in the CDS Market. WTF HAS a Quadrillion Dollars? The Chinese don't have a Quadrillion in Savings, they only have a couple of Trillion, and they are BIG Time savers of US Toilet Paper. In a world where almost EVERYBODY is BROKE and losing his job, from Beijing to Peoria, just how is it that there is somebody out there with enough money to keep buying Toilet Paper? At this point, just what is China using to buy Treasuries? They have to be printing Renminby to buy the dollars, because they sure are not making the dollars when nobody in the US is spending much dollars for them to make.
The term "Circle Jerk" gets pitched around a lot these days, but I am just ASTOUNDED that this business can continue ownward here each day when quite clearly these numbers have lost all meaning, and there is NOBODYout there with enough money to buy all this debt. Its all exchanges of future obligations nobody can ever pay. Irredeemable Debt. What is astounding is that because the system is so HUGE and has gone on for so LONG, nobody will let go of it despite the fact the numbers are blowing up to infinity.
Give it UP already. I fully expect a $Qunitillion$ Bailout by next year if they don't shut this beast down. Supercomputers will lose track of the Zeros at this rate. NOBODY has ANY money! Its just a figment of your imagination.
RE
25 Comments
TampaGold
Good rant.
RE: We live in the land of OZ where fantasy and make believe are reality.
As hard as it is for us geeks to get that, it is what it is.
As far as what's next?
The nuclear powered printing press in the basement at the fed/treasury (same difference) will have to start churning out infinity dollar bills.
After that?
Gold, Silver, Food, Water......they can't print that stuff. Hang in there if you can.
Skyprince
Well...as long as all the players just keep playing and all realize that one major player going down brings all of them down, we'll be okay. I say "okay" in a very relative sense because not okay is almost too harsh to consider. Can you say death and destruction on a scale never ever before experienced? There is a very strong incentive to just keep playing the game. All the central banks have printing presses and central governments have made the decision that it is better to print money and pretend it is okay than to experience the end of the world as we know it. They've decided to lower standards of living worldwide into the forseeable future to deleverage. Inflation, high unemployment, and the slow death of the middle class is perferable to economic collapse, chaos, war....death and destruction. I mean...is there any alternative? Does anyone really think that there is another exit from this mess? I read of all the problems here at TBP and on other blogs, but there are few solid suggestions of what to do to keep us from falling over the cliff without playing this game.
ReverseEngineer
You hit the nail on the head Skyprince. People wonder, "why do the chinese keep playing along here and buying the debt?" The reason is because nobody wants the music to stop playing. ALL Goobermints are dancing to the same tune of a Monetary System that began in 1692, and gradually grew to Rule the World. All held ALAYS in the hands of the same families through the ENTIRE period, gradually expanding until it even took over China, which happenned at the SAME time Nixon took the US off the Gold Standard. No Coinkydink there at all. The Republican Party and the Conservatives which controlled it for most of the last 30 years are the ones primarily responsible for the final death, though it was written long ago as inevitable because you cannot make Something from Nothing. Conservative Republicans merely made a bad situation worse and utterly unsalvageable. Of course, Liberal Democrats would not have done better, but they didn't have the POWER at the crucial junctures. That came under the administration of Nixon, Reagan and Bush I for the most part, all ideological conservatives who believed in "trickle down" economics. Idiots one and all, as ALL Conservatives are actually.
So yea, the incentive is strong to keep the game marching on, but it appears now to me that all the King's Horses and All the King's Men won't be Putting Humpty Dumpty Capitalism together again. You got one VERY big Broken Egg here, Ostrich Size and until we get rid of the Jackasses who think Capitalism is some kind of magic Potion that makes Something From Nothing and Conservatives who think THEY deserve the profits while the "Leechfucks" who occupy the lower strata of society don't, we will remain in the Deep Doo Doo. When the collapse does come, I would NOT want to be espousing Conservative principles. Your head will be rolling down Main Street. That is the way of History, has alays been, always will be. Eternal Retribution and Eternal Justice is unavoidable. Conservatives are EVIL, and their Heads will Roll as a result. You cannot do anything about that, so Live With It. Or Die With It, if you are a Conservative.
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Newblood
Just to help put the number "Trillion" in perspective: One Trillion, one dollar bills, laid out end to end, would make a line of dollar bills that would stretch out (get this) 94 million miles. If you were to drive next to that line, from beginning to end, at 60 miles per hour, 24 hours per day, every day (no potty breaks!) it would take you 180 years to reach the end of the line. No matter how I do the math, I always arrive at the same conclusion: Buy more Silver Eagles, more canned goods, and more ammo.
gainsmore
It has been out in some of the online financial news sites like The Market Oracle that he fed has been 'lending' money to other central banks so that they can come back around again and buy up the tresuries at auction and make the appearence that the party is still on. Exposing the Fed's balance sheet would/might expose this. As right as Ron Paul is, I doubt that even if the Fed is forced to disclose the true nature of the extent of the fraud they will lie there as well to keep the whole thing from unraveling before they want it to. The only way out of this mess and still stay within a fractional reserve system is to annouce a julbilie(sp)..... where all debt/most debt is forgiven and the paper holders do not get their usury fees. More on that later , will I share.....
later
ReverseEngineer
Thing that I wonder about is given mathematically astute people, just how long can you revalue and balance out the system through a collapse phase? That is what deflation and inflation amount to, rebalancing. It appears we have reached the mathematical limit of such rebalancing, but Im not sure of that yet. Only once Walmart won't take my Dollar digitaly encoded on my Debit Card will I be SURE the monetary system is in complete failure.
I walk the aisles of Walmart, Fred Meyer and Costco on a weekly basis. some signs that inventory is decreasing, but overall no problem so far with getting tem to accept my Debit Card in exchage for a 20 lb bag of rice, or anything else they got on the shelves, which is LOTS. In fact,the fact there is SO MUCH on the shelves tells me that its unlikely that it totaly disappears overnight. I think product will disappear selectively over time here as some areas are "cut off" and TPTB attempt to maintain control over a core network. If you are inside the core network, you might not perceive any shortage at all. It will all seem "normal". Meanwhile somewhere else, people will be being Recycled at the Human Waste Recycling Facility in San Antonio into Soylent Green. "Gee, I never KNEW poor people were being Boiled and rendered for Fat to make Soylent Green" some future FSofA citizen will declare. It doesn't seem possible, but just ask the Jews at Bergen-Belsen and Buchenwald and Auschwitz if it was possible. It IS possible and unless we string the Banksters up by their Gonads in a big hurry here NOW, it will be possible again. There is little TIME left here now. It will take a MASSIVE exploration of Justice to resolve this problem, an INQUISITION that will make the Spanish Inquisition look like a Sunday Picnic. ALL RICH PEOPLE who do not REPENT of their Wickedness must suffer Eternal Puniishment and Burn in Hell. either give up ALL your Wealth NOW, or go to Hell in Fire on Earth. This is the CHOICE everyone has now, take it or leave it. Either give up your claim to wealth, or BURN IN EVERLASTING DAMNATION IN THE FIRE AND BRIMSTONE OF HELL. So it was written, so it shall be DONE.
RE
Salty
There was a lot of sense in your original rant (Gawd, that was hard to admit RE), but I think most of the problem is confined to the US. China, India, Singapore, Japan, Korea, OPEC, and even Europe have not experienced any more than a true recession which is nearing an end. They are still holders of vast wealth and natural resources. They have reasonably priced labor and capital available to convert their resources to useful marketable goods. Most have not grossly diluted their currency as we have. Autos, energy, electronics, banking, textiles, and much more are produced in massive quantities in these countries without regard to the US and its problems.
They must be lending to us because there is still some faith in the dollar and because we are a huge customer. Over time, if we do not amend our ways this will certainly change. We have seen India and China amassing large amounts of gold, certainly in preparation for the day when the world stops believing the promises of deadbeat Uncle Sam.
Anonymous
The world markets have been in a massive rally for many months. A trillion dollars isn't shit. Quit crying and get over it.
Thunderbird
It appears that we are fast heading for a new form of government that controls people and commerce - and that is communism. The paper this morning in my state (front page) states: "Employer tax to increase 10-fold next year. This increase is from about $90 per year to more than $1000 per year. With many employers only bearly surviving with employee cut backs to part time employment, this will break many businesses including mine. I am out of here after the first of the year.
It appears government has no concern for the survival of business. Public employees are fighting furlows and losing their jobs and are keeping up the good fight. There are so many collecting unemployment insurance and new claims keep coming in. The unemployment lines are so long in my county that even if a new claimant comes in the morning to file for unemployment, he or she is lucky to be processed the same day. Things are getting tense at the unemployment office. No news coverage on this - only word of mouth.
In fact if you take notice the States having the highest unemployment problems are States that also have the highest taxes and social welfare programs. Also they are the States that one party controls the political scene (democrat) and have exercised brutal control and badgering of small businesses.
These States are on the road to communism. Small business is on the road to ruin with this mentality of the State. Lets see how far the Almighty State can run with the ball without the taxes and employment capabilities generated by small business. The State has killed the golden goose.
tbessi
Re your article was good, but I disagree with your take on conservatives and capitalism. The same could be spun and said about liberals and socialism. The democrats are as much or more at fault as the Republican's. The people have been lied to by both parties and both parties have been ruled by progressives. Capitalism didn't fail it never fails, but like you've said before we've never had true capitalism. You seem very angry. Remove Capitalism and put Corpratism in its place and then I will agree with you. I have no problem bashing the Republican's when is the last time we really had a conservative politician there is only a couple in the entire system. Yes there are a lot of progressive Republican that claim they are conservative, but that's total horse shit.
ReverseEngineer
Tyler Durden (one of them anyhow) over on Zero Hedge just demonstrated pretty well how the current currency in circulation of the Dollar (around $980B) is effectively worthless because it is backed by around $997B of virtually worthless MBS/Agency debt currently held by the Fed.
"A picture is worth a thousand Krugman essays, which is why we present a chart comparing the US Monetary Base (and by subtracting Reserve Balances with Fed Reserve Banks, Currency in Circulation), and the Fed's holdings of MBS and Agency paper (worthless GSE/FHA garbage). In summary: Currency in Circulation: $920 billion; MBS/Agency Holdings: $997 billion. The dollar in your pocket is now entirely backed only by worthless, rapidly devaluing and subsidized housing. "
http://www.zerohedge.com/article/here-why-dollar-now-effectively-worthless
The article goes on to pull a few juicy quotes from the currency crisis in Weimar Germany, and the parallels are of course astounding. However, one has to recall that at the time Weimar went south, there were other functioning economies and currency systems operating elsewhere. Due to the interconnectedness of all the current currency systems and computerization of the trading systems, it seems likely to me that when the Dollar finally crashes here, ALL the currencies will crash simultaneously. It will be darn interesting to see with the few Gold coins out there for possible circulation exactly how they will be used to keep world trade moving. Will everyone be paid in Gold?
This should start getting interesting pretty soon.
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newtrick
fascism, socialism, communism, crony capitalism, theocracy, social democracy, etc. etc. are all different faces of totalitarinism. come on people, lets call a spade a spade.