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Archive for the ‘Treasuries’ Category

Is the Federal debt a criminal enterprise, enabled by a criminal syndicate? Read on before you pass judgment.

Correspondent Doug laid out a compelling case that the Federal debt is fundamnentally a criminal scam, operated by the criminal syndicate of the Treasury and the Federal Reserve:

The Federal Reserve is a criminal syndicate buying debt that the  government eagerly creates and sells for spending money that dumps the debt on us civilians.What perplexes me is that the scam is so simple and all the intellectuals either don’t get it  or are handcuffed by mega-corporate media owners.The scam in simple terms:

1. Uncle Sam borrows money from The Fed, China, oil exporters, Bank of England, etc. by selling Treasury bonds

2. You are responsible for the bonds, i.e. IOUs

3. Uncle Sam collects taxes and pays the bondholders

4. The debt is breaking us; life will not be the same in the years to come

Uncle Sam borrows all its spending money from the non-government Fed and others,  and spends only borrowed dollars raised from exchanging bonds  for dollars as a debt plus interest on your back.

Uncle Sam collects income taxes and funnels the money to the holders  of these criminal Treasury bonds.

The Fed/Treasury is an evil axis defunding you and me: the debt is $14.5 trillion; this is our debt, not the government’s debt. The government does not generally earn money; we do. Therefore every criminal debt certificate (Treasury bond) the Treasury exchanges  for cash is a debt on you and  me–a promise to pay for which citizens are responsible to  pay, IOUs in simple terms. If the government printed the money instead of the  criminal Fed, there would be no debt.

Uncle Sam borrows bucks and you become automatically indentured to pay back the bond and pay the vig! How is this not a criminal enterprise? If you go to a loan shark, at least you get to have  the money in your hand and can spend it before you have to repay the loan and pay the vig!

Thank you, Doug, for explaining the criminal nature of the Federal Debt and the agencies and Fed that enable and enforce it.As we know, the Federal budget  (and the “supplemental appropriations” that add hundreds of billions of dollars in “off-budget” spending) is consolidated. In other words, the government doesn’t specify that taxes collected paid for X spending and that the remaining Y spending is paid by borrowing money via selling TReasury bonds, so what spending is “paid by debt” is a politically charged assessment.

What the ballooning debt actually funds depends on the political convictions and agenda  of the commentator, along with what constitutes “waste” in Federal spending. Some attribute the Federal deficit/borrowing to Medicare, others to hot wars and the Military-Industrial Complex, and still others to the endless bail-outs of financial Elites.

The common-sense perspective is to compare the circa 2000-01 $2.1 trillion annual Federal budgets of the pre-Global War on Terror (GWOT) and multi-trillion dollar bail-outs of banks/financial Elites with today’s $3.8 trillion annual budget (not counting all the political hot-potato spending hidden in “supplemental appropriations” to keep it out of the scrutinized budget). Since inflation was officially low for most of the decade, this vast increase in Federal spending cannot be explained as inflation; adjusted into real dollars (adjusted for inflation), it is still 40% pre-war, pre-bail-out levels.

Yes, Medicare spending is rising at 6%-7% annually, regardless of which political party is in power, and Social Security spending is outsripping the system’s tax revenue income. But clearly, a National Security State with few if any meaningful restraints on its spending (no “anti-terrorist” dictatorship shall go unrewarded/unfunded, etc.) or influence has added trillions in spending with little oversight or accountability.

The same can be said of the endless trillions squandered bailing out the banks and related financial Elites, including the quasi-Federal agencies (Fannie Mae and Freddy Mac) that funded the criminal enterprise known as the housing bubble/bust.

If the majority of the additional Federal spending was in fact squandered to boost the revenues, earnings and political influence of Elites, fiefdoms and special interests,  then the taxpaying citizenry footing the bill did not receive any measurable benefit from all this additional debt. As Doug observed, the taxpayers are in effect borrowing vast sums from the loan sharks and not even getting to spend the money on themselves: the money was squandered on Elites, supposedly on behalf of the taxpayers, who must pay interest (i.e. the vig, “vigorish”) on the fast-rising debt.

As Doug asked: how is this not a criminal enterprise?

Charles Hugh Smith – Of Two Minds

http://www.treasury.gov/press-center/press-releases/Pages/tg1299.aspx

In sum, the net foreign acquisitions of long-term securities, the change in foreign holdings of short-term U.S. securities, and banking flows yielded monthly net TIC outflows of $51.8 billion. Of this, net foreign private outflows were $44.4 billion, and net foreign official outflows were $7.4 billion.

Uh, that’s a problem folks, and one that is directly caused by government ponzi economic policy.

It’s one we better address too – and quickly.

This is a massive downgrade on the economy folks….

Release Date: August 9, 2011

For immediate release

Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected.  Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up.  Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed.  However, business investment in equipment and software continues to expand.  Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity.  Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions.  More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks.  Longer-term inflation expectations have remained stable.

The economy is going to hell.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.  The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further.  However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

In other words, we’re back in recession.

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent.  The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.  The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

ZIRP for at least two more years.  Therefore:

• If you’re a saver, you’re screwed.  Buy stocks and lose half or more of your money or accept nothing (less, of course, any actual inflation.) Senior citizens should be literally in the streets on this announcement.
• The economy is going to suck. That’s The Fed’s projection.  If you’re long the market, you’re in the wrong place.  Oh sure, we might get more bounce for a while, but if the economic outlook really justifies zero interest rates then profits have peaked – period.
• The banks are dead. NIM is going to get destroyed.  The start of ZIRP looks good for banks but the numerical spread, not the percentage spread, collapses as it goes on.  Look at Japan and their JGBs! Now about that profit you think banks are going to earn….. exactly how are they going to earn it lending money with no spread?

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability.  It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.

This is REAL dissent – three, not one.

The market is trying to figure out whether to crap or go blind, but the bottom line here is that not only does The Fed expect a short term slowdown in the economy they have basically said that their expectation is that the economy is going to suck for at least the next two years.

“The 5-year Treasury has become the new 2-year; the 2 year note has become an overnight T-Bill and the 1-year note has become….hell, I dunno.”

Tickerguy, Karl Denninger of the Market-Ticker and Co-Founder of FedUpUSA appeared on Neil Cavuto’s show on FoxBusiness last night with some news that most people here in the US are not even considering with regards to the disaster in Japan.

Is the U.S. government on the verge of a massive debt problem?  For years, the U.S. government has been able to borrow all the money that it has wanted to at extremely low interest rates.  But now many of the lending sources that the U.S. government has been depending on are drying up.  Even before this recent crisis in Japan, a number of big players were moving away from U.S. Treasuries and the U.S. Federal Reserve was having to step in to pick up the slack.  But now this debt crunch is about to get a whole lot worse.  For years, many had feared that it would be China that would start dumping U.S. government debt, but now it turns out that Japan is going to be the real problem.  Right now, Japan is the second largest foreign holder of U.S. government debt.  Japan currently holds about $882 billion in U.S. Treasury bonds and they are likely going to have to liquidate much of that in order to fund the rebuilding of their nation.  So needless to say they won’t be accumulating any more U.S. government debt.  But the U.S. government still needs to borrow a trillion and a half dollars from someone every single year.  So where in the world are they going to get it?

This is called a debt problem.  Have you ever gotten to the point where you are in debt up to your eyeballs and nobody wants to lend you any more money?

Well, the U.S. government is rapidly reaching that point.

Even before the crisis in Japan, several of the big boys had starting moving away from U.S. government debt.

PIMCO, the biggest bond fund on the entire globe, recently acknowledged that they are dumping all of their U.S. Treasuries.

So if foreign nations like Japan are not gobbling up U.S. government debt and big bond funds like PIMCO are not buying any of it, then who in the world is going to be purchasing the massive amounts of debt that the U.S. government is constantly pumping out?

Well, many of you already know that answer.

The Federal Reserve is going to step in of course.  The Federal Reserve knows that if the U.S. government cannot borrow gigantic quantities of money at super low interest rates it will go broke.  So the Federal Reserve is just going to keep buying up most new U.S. government debt.  It is just that simple.

But isn’t that a Ponzi scheme?

Of course it is.  Let’s not mince words here.  It is a total scam.

And it is a scam that cannot go on indefinitely.

The truth is that the Ponzi Scheme of the U.S. Treasury issuing bonds and the Federal Reserve buying them up cannot last forever as PIMCO’s Bill Gross noted in his March newsletter….

“Basically, the recent game plan is as simple as the Ohio State Buckeyes’ “three yards and a cloud of dust” in the 1960s. When applied to the Treasury market it translates to this: The Treasury issues bonds and the Fed buys them. What could be simpler, and who’s to worry? This Sammy Scheme as I’ve described it in recent Outlooks is as foolproof as Ponzi and Madoff until… until… well, until it isn’t.”

Gross also noted in his recent newsletter that the Federal Reserve is currently buying up about 70 percent of all new U.S. government debt.

So now that Japan is out of the picture, how high will that figure go now?

80 percent?

90 percent?

Over the past several weeks there has been all kinds of speculation about whether “quantitative easing” will be extended past June or not.

Well, whether they call it “quantitative easing” or not, the truth is that the Federal Reserve is going to have to continue to “buy” most new U.S. government debt or the system will crash.

We have gotten to the point where the U.S. federal government cannot continue to function without Federal Reserve monetization of the debt.

This is a sign that we are rapidly approaching the financial endgame.

So why doesn’t the U.S. government just stop spending so much stinking money and stop getting us all into so much debt?

Well, because there isn’t enough political will in Washington D.C. to do any real budget cuts, and if our politicians did balance the budget at this point it would crash the economy.

Just the other day, the U.S. House of Representatives passed a continuing resolution to fund the federal government that would cut 6 billion dollars from U.S. government spending.

On that exact same day, the official U.S. national debt figure rose by 72 billion dollars.

Now the debt normally does not go up that much on a typical day.  But what this example does show is the losing battle that our politicians are fighting.

On Wednesday, U.S. Treasury Secretary Timothy Geithner warned a House of Representatives appropriations subcommittee that they should not even think about not raising the debt ceiling….

“Congress has to do it. There’s no alternative.”

The truth is that the U.S. government has to keep going into more debt.  Under the current system the alternative would be to collapse the economy.

But the debt that we have already piled on to the backs of future generations is absolutely criminal.

How mad do you think future generations are going to be with us for heaping 14 trillion dollars of debt on to their shoulders?

Talk about a debt problem!

But this is what we get for allowing a private central bank to run our financial system.  This debt-based system was designed to fail from its very inception.

The man supposedly “in charge” over at the Federal Reserve, Ben Bernanke, has a track of record of incompetence that is absolutely staggering.  It is a mystery why our representatives in Washington D.C. are not howling for his resignation.

Instead, most of our politicians continue to express blind faith in our current financial system and they continue to insist that everything is going to be okay.

Well, everything is not going to be okay.  The Obama administration is projecting that the federal budget deficit for this fiscal year will be an all-time record 1.65 trillion dollars.

Of course they are also trying to convince us that budget deficits will go down in future years, but by now we should all know not to trust the rosy future projections of government officials.

After all, it was only a few short years ago that Bush administration officials were promising that we would be swimming in huge budget surpluses by now.

The truth is that the government has been lying about all of this for a long time.  For now, the Federal Reserve is just going to keep monetizing U.S. government debt for as long as it can.

This Ponzi scheme will keep on working and working and working until someday it simply doesn’t anymore.

When that day arrives, the U.S. government debt problem is going to unleash hell on world financial markets.

The Economic Collapse