Tuesday, April 19, 2011

What’s Really Worrisome About Treasury Debt: Not Its Rating—Its Interest

So on Monday, Standard & Poor’s cut its ratings outlook for U.S. sovereign debt—and the markets had what can only be described as a tizzy

Stocks fell—commodities rose—I noticed things were off when my gold ticker shot up a full percentage point in under sixty seconds. Yikes! (Well, actually, as far as my own portfolio goes, it was more like, Yeay!)

“Not as sexy as a naked chick, I know, I know!
The Fed Funds Rate, 2001–2011.
(click to enlarge)
Tons of people started scratching their heads, stroking their chins, and pompously wondering What It All Means.

Oh brother. Like Capt. Willard said: The bullshit piles up so fast, you need wings to stay above it. Most of the navel gazing was a waste of time—the lone discussion that I’d recommend was the New York Times’ “Room for Debate”, which more or less summed up smart-money thinking on the S&P announcement. (Paywall, but if you really want to read it, refresh the page, then stop the refresh before the page fully reloads.)

My own thinking is that the whole S&P announcement is meaningless—literally a non-event. 

What really matters is something people are starting to consider, as inflation begins to rise, and which the S&P announcement alludes to: The colossal interest payments on the U.S. fiscal debt. 

First, let’s put away the S&P nonsensical non-event: 

If you start analyzing the rating agency’s announcement from any angle, you realize it is nothing more than a blip in The Downward Trajectory. 

First of all, a “downgrade in the ratings outlook” doesn’t mean that U.S. Treasury bonds have lost their AAA-rating—it means that in the next two year, S&P will review the rating it gives them. And then after that review it might lower the AAA-rating. It’s basically the S&P saying to the Treasury bonds, “Play nice, or else I might be forced to think about punishing you—maybe.” So in and of itself, the announcement signals nothing. 

Second, the S&P and everyone else is acting as if its rating matters—as if Standard & Poor had even a shred of credibility and respectability left, when really, it doesn’t. After all, this ratings agency was busy whoring itself out to the mortgage markets, effectively selling ratings to the highest bidder, slapping that precious AAA-rating on all sorts of assets that were garbage—the garbage that created the real estate bubble, and directly led to the 2008 Global Financial Crisis. We don’t call the crap they rated AAA “toxic assets” for no good reason—Standard & Poor was a key player in creating these toxic assets, and the ensuing crisis. 

Third, the S&P is highlighting a fact that everybody already knows: Treasuries are nowhere near as gilded as people would like to believe. Hell, I wrote about Treasuries being the new and improved toxic asset—in August. And if you don’t believe me, believe in PIMCO: Bill Gross and Mohamed El-Erian are out of Treasuries—that’s right, PIMCO! Out of Treasuries! That’s like McDonald’s deciding not to buy any more hamburger meat. 

Now, a lot of people are saying that S&P’s announcement is really a wake-up call for the politicians—or the markets—or the people—or a wake up call for someone at any rate. But really, a wake-up call for whom? (Is it “who” or “whom”? I always get them mixed up.) 

The people who matter in this situation—that is, the people who can make a change in the Treasury bond market, be it government officials or market participants—have already cast their lot: The government officials by doing nothing, just a lot of “We’ve got to bring down the deficit!” hand-wringing, while they nibble at the edges of the problem instead of taking a great big bite out of the deficit; the market participants by getting out of Treasuries altogether—or else shorting them outright. 

So the change in the S&P’s rating outlook of Treasuries means absolutely nothing. The S&P’s announcement doesn’t matter. 

What matters isn’t the credit rating of Treasury bonds—the smart-money consensus is right: Treasuries will never default, period.

What matters is the interest payments on the U.S. fiscal debt. 

Right now—in the Federal Reserve-manufactured Funny Money Universe of zero interest rate policy (ZIRP) and debt monetization via Quantitative Easing 2 (QE-2)—the Treasury Department has shelled out over $215 billion in interest since the start of fiscal year 2011. The total is projected to be over $420 billion for the year. 

This on a FY 2011 deficit of $1.6 trillion.

So roughly one in four dollars the Federal government borrows goes to pay the interest on the debt. 

Or looked at another way: About 2.8% of the United States’ gross domestic product goes to pay interest on the Federal debt. That’s bigger than any other individual player in the U.S. economy except the Federal government itself. It’s bigger than most sectors of the U.S. economy—including Technology, Transport, or Education. That’s right: The interest on the Federal government debt is bigger than those entire sectors. Sad but true.

Or looked at still another way: About 12.2% of the total U.S. government’s expenditures ($3.45 trillion) goes to pay the interest on the Federal debt. That’s more than every single government department except Defense—the fourth biggest expenditure overall, behind defense, Midicare/Medicaid and Social Security. 

Scary when you look at it that way, huh? 

And what’s scarier still, this is all going on in the Fed’s Funny Money Universe—ZIRP, with QE-2. 

In other words, these are ideal conditions for the Federal government to be carrying such a monstrous debt load. The Long-Term Composite Rate is at 4.1%, and the Fed is printing roughly half the FY 2011 deficit via QE-lite and QE-2. In these ideal conditions for the Federal government to be carrying debt, the interest is $420 billion!

What happens when these ideal conditions no longer apply? What happens when QE-2 ends in June, like it’s supposed to? What happens when ZIRP ends because inflation is so high it can no longer be finessed away, and the Fed has to at least give the perception that it is trying to halt inflation by way of interest rate hikes? 

You don’t need a whole spreadsheet to crunch the numbers: As QE-2 and ZIRP both end, the Federal government will find that its interest payments will grow—rapidly, and I’m thinking catastrophically. 

I argued last week that QE-2 would not end in June because the Federal government cannot afford to have it end: The Treasury needs the Federal Reserve to keep on buying its debt via QE-3, because there are simply not enough buyers for Treasuries at their current yields. My position is that QE-3 will start immediately after the end of QE-2. A lot of people disagree: They think 3-4 months will pass after the end of QE-2—and then the Fed will start up QE-3, big time (potatoe, potato, tomatoe, tomato, I wish we could call the whole thing off . . .). 

But setting aside for the moment continued central bank monetization of the Federal government debt by way of a possible QE-3, let’s concentrate on interest rates—just interest rates: 

My back-of-the-envelope numbers say that each basis point of Federal Reserve interest rate hikes will translate into about a billion dollars a year in additional interest—and that’s being generous. (The Scrooge Number is, a 0.01% hike in the Fed funds rate translates to $1.25 billion a year in additional interest payments.) 

Thus a measly 0.25% hike in rates will turn into $25 billion in additional interest payments a year—at least. Maybe even as high as $31 billion in additional interest payments—with just a 0.25% hike. And as regards a full-on, inflation-fighting hike of 1.5%? That would add an additional $150 billion in interest payments—just like that. 

An additional $150 billion in interest payments is something the Federal government simply cannot afford. The United States cannot afford it. 

So in other words, the United States cannot afford inflation. Or more properly speaking: The United States’ fiscal balance sheet cannot afford to fight inflation. 

Think about it: If there is a rise in inflation, then the Federal Reserve would have no other option but to raise interest rates at least a couple of percentage points—

—but the Federal government cannot afford such a drastic rise in rates. Not when a 1% rise in rates translates into an additional $100,000,000,000 in yearly vigorish.

Historically, a real inflation-fighting approach means raising rates roughly 4.5% above the annualized rate of inflation: That’s what Paul Volcker did in 1980, to reign in the spiraling inflation produced by the ‘79 Oil Shock. (See here for my discussion of that crisis, and where I get the 4.5% figure.) And even with such a massive rise in interest rates, it still took Volcker almost four years to bring inflation to heel—which gives lie to Ben Bernanke’s arrogance in thinking that inflation can be cut off as simply as turning off his printing press. 

If a similar scenario were to happen today—that is, a sudden and grotesque rise in inflation that simply cannot be explained away, and a determined effort to fight this inflation by way of the only tool available, which is severe and sustained interest rate hikes à la Paul Volcker—then the Federal government would find its interest payments rising by multiples from its current levels. To mimic Volcker’s approach—a Fed funds rate jump to just shy of 20%—would mean an additional $2 trillion a year. In just interest payments.

That won’t happen, of course. If it ever did, Ben Bernanke would be dragged from the Eccles Building and lynched right there on Constitution Avenue.

But a bump up by a couple of percentage points is possible. And just such a modest bump—just a mere 3% above its current levels—would represent $300,000,000,000 is additional yearly interest payments.

How would such a bump up in interest payments be financed? Simple: Either more debt issuance, or cutting spending.

We have seen—depressingly—how spending cuts will never happen. ‘Nuff said.

On the other hand, the political class irrespective of party affiliation is more than willing to issue more debt, in order to cover up its failure of leadership.

Yet to add on only $300 billion per year to the deficit, in order to finance the interest on the debt, will push the deficit to over $2,000,000,000,000 per year—nearly 15% of the United States’ gross domestic product.

The United States can’t afford such a rise in the cost of borrowing. It simply cannot raise the cash to pay such a mind-numbing amount of interest. There simply aren’t enough buyers of Treasury bonds in the world to finance that level of debt. There just aren’t, end of story.

The one—the only entity that could absorb that level of Treasury issuance would be the Federal Reserve. And the only way they could absorb that amount of Treasury issuance is by printing money:


My sense before was that the clowns running the circus—Bernanke in particular—didn’t realize that inflation was on the rise. But thinking the problem through from this end of the telescope—that is, seeing how a rise in rates would cripple the ability of the Federal government to find buyers for its massive issuance, which would mean that Federal Reserve money-printing would be the only solution—I’ve changed my mind. I now better understand—and appreciate—what The Bernank is up against, and what he’s trying to avoid. And no, I’m not being sarcastic:

Bernanke realizes that inflation is on the rise—it’s plain for all to see. But he realizes too that if he acknowledges that inflation is on the rise, he’ll be forced to raise rates. And if he does so, he either bankrupts America—because the U.S. cannot afford to pay the higher vig a rise in rates would bring about. Or he breaks the dollar—because the Fed would be forced to carry out QE-∞, in order to finance the Federal government deficit.

So instead of raising rates—which would bankrupt the American government and/or force Argentine-style money-printing via QE-∞—Bernanke is trying to pretend inflation doesn’t exist.

About 300 years ago, Bishop Berkeley asked the question, “Does a falling tree make a sound if there’s no one around to perceive it?”

I suspect Ben Bernanke will leave us with an equally famous paradox: “If a central banker refuses to acknowledge there is inflation, will prices remain stable at the supermarket?”

I suspect not.

If you’re interested, you can find my recorded presentation “Hyperinflation In America” here. I discuss in detail what I would do, if and when the dollar crashes. 


  1. Object of a preposition (ie for) = whom

  2. When referring to "he", use "him"; when referring to "him", use "whom"(hell, it works for me).

    "He" is the owner of the car, it belongs to "him".
    To "whom" shall I deliver this letter? To "him".

    Another knockout column, Gonzalo. Thanks for cutting through the crap and delivering it to us straight up, as nasty as it is (and give us more gratuitous pics, dammit!).

  3. Oddly, you and Paul Krugman are on the same page when it comes to the S&P warning: Meaningless.

    You are also pointing out the same thing that Paul Ryan pointed out in the Bernanke testimony:

    And you have no kind words for the Fed, just like Ron Paul. Your site was running an ad for Rand Paul.

    You have a real Paul fixation going on.

  4. FYI: I don't control which adverts run on my site—they're sold by Investing Channel.

    So if you saw an ad for Rand Paul, don't take it to mean I endorse or oppose him.


  5. Agree. Bernake isn't evil incarnate--he's not a Congressman without the ability to stop spending. He's just keeping the music playing as long as he can because, fuck, what else is there to be done?

  6. I'm just waiting for some scripture from Romans or Ephesians.

  7. Hi GL.. again great minds think alike as my last two blog posts were on this very subject. But I am seeing something else in this mix. Take a look at this chart:


    What do you think is causing the banks to hoard all of this cash ? Some think that they're preparing for a financial storm of some sort, but my make is that they have been given marching orders to become the buyers of last resort in the Bonds secondary markets and are hoarding FedMoney to make it happen:


  8. "Who is the owner of this car?"
    "He is."

    "To whom does this car belong?"
    "To him."

  9. @ Gonzalo: great piece again!

    Lew Rockwell thinks the real interest would be sky high:

    @ Doug

    Krugman is an asshole. The lower rate after S&P doesn't mean anything. It is effectively no free market rate, since the Fed manipulates it by buying almost all debt. See also Rockwell.

    Question for my dear American friends: don't you feel terribly humiliated by Obama/Congress/Bernanke/Krugman, who are in fact treating you as kids or imbeciles, depending on the printing press for "economic growth" or "more employment"?

    Instead of balancing the budget and giving money back to the people, who can then consume, save and invest it to their wishes. After all, America used to be a free country, with gold money and people producing and selling goods, making themselves and the country prosperous (or at least fulfilling needs); not to be run by socialistic clowns and their fake money, basing their acting on numerous ancient economic fallacies (so clearly unmasked by the great Henry Hazlitt), stealing from the population for their elite-friends and running endless boom-bust cycles.

    I think many did *get* capital punishment for far less. And I also think there's now a bunch of people that *deserve* it.

  10. Everyone that matters is printing money. The FEDs, the ECB and the Japanese Central Bank.

    The Chinese are also printing Yuan to purchase US$ from its own people who wish to get out of the US$.

  11. "Fed Reserve Chairmen and Treasury Secretaries need to say what they need to say... in order to avoid a financial panic." - John Williams

    "The Fed, in addition to printing money, is also a gigantic propaganda machine" - Jim Rickards

    I've never thought that Ben actually believed what he said. Of course there's inflation, of course the core CPI number is bullshit. Anyone who pays attention can tell you that. Bernanke is no fool. Now our elected officials, that's another story....

    "Looks like those clowns in congress did it again, what a bunch of clowns" - The DJ 3000

  12. Well I ( we?) can hope that Bernanke takes his mandate seriously. Now some Keynesian types like
    to talk about a Phillips curve where maximum employment is accompanied by rising inflation but the empirical evidence since we went to full fledged fiat doesn't seem to bear that out.
    The stagflation of the 72-82 period only gave us
    the price increases never the full employment.

    So my hope is Bernanke will put price stability first realizing it is the quid pro quo for full employment and force the government to deal with its fiscal problem. My fear is he is a Democrat and will do what it takes to try and keep that party from imploding in the 2012 election if he does.

  13. A note about federal govt. interest payments. The total figure of $215B FYTD includes
    the faux interest on the trust funds, the intragovernmental IOUs. These "payments" are not real money, but simply more IOUs. This is how the SS trust fund can continue to increase on paper even though it's running a cash deficit (an occurence that came 10 years earlier than projections).

    What matters is the real money interest payments on the outstanding debt held by the public. That is, this is real money payments to bond holders, not just accounting entries, where the left hand pays the right hand.

    Accoring to the latest DTS, coupon payments total $104B FYTD on a cash basis. This is cash basis, mind you, while the govt. logs interest payments on an accrual basis, so the reported interest expense for a given month will disagree with the actual cash payments.

    And second, that figure from the DTS includes only actual coupon payments on notes and bonds. The interest on zero coupon bills, the amortized discount, will not show up there, but with ZIRP, it's not much.

    You have to dig around in the Treasury statements to properly pull out the real money interest from the faux IOU interest.

  14. Who does Barnank work for?
    ok, who nominates the Bernank to become fed chairman? Why the banks of course. Correct
    The WH butler mearly approves the appointment.

    So the Bernank is going to run up rampant inflation so I can pay back the bank held mortgage on my property with worthless dollars?

    How does the bank make money on this deal?

    And the Bernank works for the banks?


  15. This comment has been removed by the author.

  16. 'I suspect Ben Bernanke will leave us with an equally famous paradox: “If a central banker refuses to acknowledge there is inflation, will prices remain stable at the supermarket?”

    I suspect not.'

    The other possibility is that the prices at the supermarket becomes fixed ala Soviet Style and result in empty shelves and allows the Big Ben to declare he is losing the 'deflation fight' and therefore QE 3 is needed to save the world..

  17. Just because Bill Gross completely got out of the US Treasury market, doesn't mean it is a smart financial decision. I don't see how US Treasuries can start a bull run, but that doesn't mean that the US government won't think of schemes undreamed of to get us out of our debt nightmare.

  18. I was looking up and down the keyboard for the ∞ symbol.

  19. Controlling element in the Federal Reserve: Rothschilds. They are crashing the system on purpose because it is, they think, easier to globalize a smoking ruin than a healthy middle class/nation-state. But, having failed to seize control of the internet and put through gun-control, the actual result for the Tribe - and us - will be Civil War and a bloodbath. I don't know; maybe these things just have to happen from time to time. History suggests so.

  20. Balance the budget: Cut the military-security complex by 40% and stop the wars, savings $400-600B. Spend 11% of GDP on health care instead of 18%, save $900B. Devote 2/3 of that to the deficit and return 1/3 to the people, so that'$600B to the deficit. But, to do that you have to have a universal single payer system like all the other civilized countries do. Total savings so far, over $1T. Return tax rates for everyone to the days of Clinton, I believe the savings is about $300B. Stop the tax give aways to corporations, all bank bailouts, both overt and disguised, along with a few other things and you balance the budget plus some.

    All empires go down in the end because they refuse to tax their elites, don't control military spending, strangle trade and industry with intense levels of both public and private corruption, and finally end up trying to survive by borrowing vast sums of money and/or debasing their currency along with neglecting spending on all forms of public infrastructure, and by sucking the life out of their working and middle classes. Once the process sets in, history tells us that it's pretty much irreversible.

    Now, any takers on serious deficit reduction? I didn't think so. Which is why all the blather about balancing budgets by both democrats and republicans, liberals and conservatives, progressives and libertarians is all so much hot air. America has become a depressing and dangerous place to live in. Eisenhower, the greatest president of the second half of the 20th Century wouldn't recognize the place.

  21. I disagree.
    Tier 1 capital investments downgraded not only cause interest rates to rise, but,
    Many investors call for AAA rated securities or a AAA rated insurer to back it up.
    Otherwise they are forced to sell them off.
    Similar to the action taken by the Texas University who took possession of their physical rather than hold paper gold.
    The risk of not being able to get physical drove them in this direction.

  22. In normal times I would agree with the logic of this article. However it seems to me that current inflation is being driven more by the "extraordinary" Fed programs like QE (which in turn feed speculative bubbles that drive up input costs), rather than the "traditional" inflation driver of artificially low interest rates (as total credit outstanding is actually contracting while bank reserves bulge). Therefore a reduction in these extraordinary programs while maintaining ZIRP may not actually lead to particularly elevated inflation (although all financial markets will certainly crater), once what's already baked into the system passes through. Maybe this partly explains The Bernanke's smugness regarding inflation.

  23. @Doug: instead of Romans or Ephesians, how about Job?

    "For the thing that I fear comes upon me, and what I dread befalls me. I am not at ease, nor am I quiet; I have no rest, but trouble comes." Job 3:25-26

  24. Bernanke might be able to deny inflation in the U.S. (although I paid 5.09 a gallon for milk on 4/15!!) - the fact that he's getting some help from the food industry (keeping prices the same but reducing the amount of product) doesn't hurt - but the rest of the world has us nailed. Our monopoly money doesn't just affect us - since we are (were?) the world's reserve currency, every buck we print raises the price of rice in the Middle East too, and THEY KNOW IT! Why do you think they hate us so much? Why are there secret meetings regarding USD that we are not invited to? Why are China and Russia dealing without USD conversions? Why is the IMF pushing its SDRs as an alternative reserve currency?

    Inflation and food shortages are inciting the riots overseas. We can continue with QExxx all we want, it only works as long as there is a demand for our dollar. No one wants it! China is buying up everything they can in USD to dump our dollar - quietly while it still has some value. They've already written off their "investment" in us as useless - that's why they don't mind overpaying.

    The debates in Washington over spending cuts and raising taxes are all completely useless. We all know that we've crossed the point of no return, now we're just treading water waiting for the sharks.

    BTW, how about some Isaiah? From chapter 45

    20 “Gather together and come;
    assemble, you fugitives from the nations.
    Ignorant are those who carry about idols of wood, who pray to gods that cannot save.
    21 Declare what is to be, present it—
    let them take counsel together.
    Who foretold this long ago,
    who declared it from the distant past?
    Was it not I, the LORD?
    And there is no God apart from me,
    a righteous God and a Savior;
    there is none but me.
    22 “Turn to me and be saved,
    all you ends of the earth;
    for I am God, and there is no other.

  25. I couldn't agree more, these theories are all happening facts.

    I just wonder what's the FedRes agenda behind this scenery...Perhaps an auto-dissolvement of this republic, as we know it?? to open a path to an open-autoritarian-plutocracy..?

    Nothing will surprise, when jews are in power.

  26. grab the rug. the mother of all ponzi schemes is about to hit the fan,

  27. "Nothing will surprise, when jews are in power."

    No place for that kind of smear here. Are there some Jewish power brokers? Yes. But let's not lump a whole people group together indiscriminately. Too close to Nazi philosophy to be tolerated by thinking men.

  28. Could you elaborate how you arrive at the 1bln/basis pt number? My simple back of the envelope calculation tells me that 1bp of change in the interest rates across the curve is worth about 400 million in interest. That assumes a simple paralell shift and that issuance would stay at the same level, both which are not true, obviously.

    Lets assume a more complex model where issuance goes up 20% - a very agressive assumption and where we assume a beta of .5 in 10s for each bp of fed hike (thats what we realized across the last fed tightening). Simple excel tinkering will tell you that a 1% hike would drive interest payments up some 40bln. The 3% that, accodring to you, we need to fight infration would produce an increase in interest payments of some 110-120 billion dollars.

  29. I have been wondering about the interest rate and what that equates to in regard to the debt. Interesting figures and numbers.
    One possible solution may be to buy more "Made in America" even if it costs more, because it is the right thing to do both in the short and the long term.

  30. How about if we abandon the Fed, create new currency that are not notes but just dollars with no further debt attached to them, give US citizens credit in the new currency for their T Bills and write off the rest of the debt - we have plenty of guns if anyone doesn't like the idea...

  31. There is one lingering question I have which has never been satisfactorily answered (or for that matter even asked) Is it worse to betray your country by selling secrets to foreign powers or by trying to destroy the national economy? To my mind it is the latter, because ""secrets" eventually become public knowledge, but the damage caused by banking fraud or extreme debt monetization (inflation) can last for centuries.
    To my mind, the only reason for inflation is to reduce the national debt as much as possible. Consider this: You buy a 30-year treasury bond for $1000. At 5% average inflation in 14 years, its buying power has been reduced by half, and by the time the bond matures, its buying power is almost completely gone. So why would any thinking person ever buy such an instrument?

  32. The fed returns 95% of the interest to treasury. The real problem lies in the backdoor bailouts it's giving to their buddies in the banks. Much of the rest of this post is moot as neither t-bills (what people have misnamed as 'borrowing') nor taxes fund the government.

  33. If the Fed returns 95% of the interest to the Treasury then we owe ourselves the national debt? Currently funding the government creates debt and that is the part that we can simply change by spending the money directly instead of creating debt (borrowing) when we create dollars.

  34. It seems to me that QEx would be (is) a vicious circle. As QE3, QE4, etc is dispensed, markets and commodity prices go up (just as they did during QE1 and QE2 - which Apallooza hedge fund manager David Tepper correctly predicted). Why? Two reasons: 1) The US$, being the world's reserve currency gets debased, thus commodities, priced in US$, must rise to offset the curency devaluation. 2) The money injected by the FED gets invested in the markets (sellers of US treasuries to the FED buy equities with the money). Thus higher commodity prices = higher inflation = higher rates = higher interest payments = lower value of US$ = higher commodity prices, etc.

    Is this analysis correct? If not please indicate where the logic fails?

  35. GL, you know that the Fed controls short-term interest rates. If the Fed were to raise rates by 300 basis points tomorrow morning, the long end of the curve would drop -- because it would see we are serious about tackling inflation. If later that afternoon the US Treasury sells 30 year bonds...to replace some fictional expiring 30 year bonds, the interest payments would likely be LOWER. But, you know that, I don't need to tell you.

  36. Silver seems like a good investment...it goes up 2% every day. I'm afraid a pop in the sliver market is going to roil the gold market. Interesting times ahead.

  37. CompassionateFascist said at... April 20, 2011 1:13 AM

    "Controlling element in the Federal Reserve: Rothschilds. .......But, having failed to seize control of the internet and put through gun-control, the actual result for the Tribe - and us - will be Civil War and a bloodbath."

    I agree that their are powerful forces gathering that are leading towards a backlash against the Tribe. However, it is critical that devout Christians never forget that Jesus remained a JEW til his death. 95% of American Jews are innocent of the economic and geo-political crimes committed by their small but very influential brethrens. There is little doubt that 5% have dirty hands and 1% deserve serious payback as do Catholics and Protestants who helped them on Wall Street and in DC.

    Jesus will judge us by our mercy and compassion or lack thereof. Dramatic changes in the power structure are coming, but let's make sure that we protect all innocent Jews. It is critical that their be no innocent blood on our hands. Make Jesus proud!

    As to my Jewish Brethrens, wake up and read the tea leaves! Helps us take down all the criminals who have destroyed our country. Don't allow the global hidden elite to manipulate you as they have your ancestors.

  38. - That little 'sign' that Mr. Lira uses next to QE, is the sign of 'infinity' - as in 'QE-to-infinity'.

    I caught it because I'm a fan of old Infinity loudspeakers, and that 'infinity' symbol is what they used on all of their loudspeakers. So there you go...

    And one more thing: 'Paul fixation'...?

    I'm not much on fixations - especially with politicians, but if I were, I'd certainly rather be 'fixated' on Ron Paul, than Gerald Nadler, or Nancy Pelosi, Harry Reid, Henry Waxman, John Boehner, or just about any of the other 2-party plutocrats...

    Ron Paul just so happens to have a fixation on Liberty - as in trying to do something to return some of it back to us that has been Stolen over the past 40 years...

    Those who have a 'fixation' on Liberty, are worthy of my fixation as well.

  39. http://americanmadenot4sell.myblogsite.com/entry1.html#body

  40. For about 2 years I've been predicting that the FederalReserve will buy ALL federal government debt by 2013.

    Why do I say ALL and not most? Because then these two utterly collaborating (and utterly non-independent) predators, the FederalReserve and FederalGovernment will have instigated a "closed loop" wherein the FederalReserve can infinitely indebt AKA own taxpayers by lending infinite sums of money to the FederalGovernment, and the FederalGovernment can buy anything it wants, including all the lastest high-tech population monitoring, control, brainwashing and imprisonment technologies.

    This is what these predators want... total financial control of the world, and total physical and political control of the world (starting with the USSA).

    Eventually people need to start a new revolutionary war, or earth will become a permanent slave planet. This is now certain.

  41. Dave,

    "Behold - I make all things new." Revelation 21:5


  42. Who tells the Beranke what to do? Who owns him? when he goes "hey, gotta take this, it is my boss" - who is on the other end?

  43. These machinations are all directed at China. First the US fed everyone worthless MBS under the guise of spreading them around reduced the risk. Sure. This lead to a consumption boom that boosted Chinese exports and rural chinese migrated to the cities for work and money. When the GFC hit and consumption demand in the developed world fell, chinese exports declined and these same chinese workers went back to their agrarian roots with little money and no prospects. This agony was compounded by the oil shock from the falling US dollar and interest rates.
    Panicking, the Chinese authorities jump started their economy with a massive boost from spending on anything. The US did the same.
    The US QE's drove up inflation everywhere in the peripheral economies, especially China, the intended victim. Of course, there is no inflation in the home of the currency printing press, except if you go out to buy food, fuel and most other things - if you can afford it with your stagnant wage growth being eroded by the non-existent inflation.
    OK, so the Chinese now struggle to contain their inflation with everything they can, except a decent rate rise or letting the yuan appreciate, both of which would cause them to fall into the trap laid by the US.
    The rating agencies, asleep at the wheel in the property boom, when they rated Z grade rubbish as A grade gold, have just sprung to life and told the world that the US had a lot of debt which was unsustainable. Wow, what breaking news! Only been talked about on the internet for several years now. This recent event has lowered the US dollar value, adding to the pressure on the Chinese with their currency tied to the US dollar - this reduces the value of the Chinese 'reserves' AKA US IOU's.
    Add to this the Chinese are elbowed out of their Libyan investments and oil, which is starting to look a little like the US oil embargo on Japan which pushed the Japanese towards war with the US.
    The Chinese are in the process of choosing their next generation of leaders which will be announced next March.
    A touch of civil instability courtesy of the imported inflation and squirming attempts to get out of the tightening grip of the US python is now threatening to destabilise the Chinese government.
    The whole thing is coming to a head in the coming months. Let us enjoy the ride!!

  44. "The one—the only entity that could absorb that level of Treasury issuance would be the Federal Reserve. And the only way they could absorb that amount of Treasury issuance is by printing money."

    There is one other possibility and you can be sure that when QEn becomes politically untenable the debt addicts in DC will take it because they MUST HAVE their next debt fix. That other possibility is nationalization of retirement savings through mandating that some percentage be in "safe" U.S. Treasuries. That will of necessity sacrifice the gains in the markets, crashing them (because those funds will have to come from somewhere), starting off another massive bout of de-leveraging and dropping the USA (and likely the world) economy into a deflationary spiral. But the debt addicts in DC MUST HAVE their next fix, so they will sacrifice the markets (ironically, thereby "saving" the U.S. dollar, at least temporarily), using that crash to justify an ever increasing percentage of retirement funds in "safe" U.S. Treasuries. Eventually this will cause the people, most of whom don't understand what is happening, to beg for more and massive QE, likely kicking off the hyperinflationary catastrophe so many are currently predicting. But that will not come until after the deflationary collapse, in my opinion. You see, in order to transfer as much wealth as possible from the producers and savers to the looters running the game, the looters must get as much wealth out of any assets with some intrinsic value (so they can buy them up for a song) and into treasuries and other cash equivalents before the dollar is destroyed through hyperinflation. Because the looters running the game will ALWAYS do what is best for them, no matter what it does to anyone else.

    Leland Hosford

  45. GL, this recent move by the S&Pnut gallery, is somewhat of a smokescreen for politicians to conduct business as usual. The Keynesian loons can say, “see, we still have a AAA rating…the sky is not falling,” while labeling deficit hawks as extreme, so they can continue unsustainable deficit spending as far as the eye can see. Even if S&P eventually downgrades, the politicians will say, “See, we’re still a AA+…the sky is not falling,” …rinse, repeat. They will ride that wave all the way until it crashes against the shores of reality.

    As for the Fed, they have no good options left. It's like the age old question; would you rather burn to death or freeze to death? I don't care so much anymore, I just wish the Fed would get it overwith.


  46. What would happen to inflation if 50% of households started a vegetable garden; reduce driving and energy consumption by 50%; and stayed out of shopping malls for 6 months?....just wondering if we are simply a big whining country.

  47. Could this be any worse than "Forced Annexation" as practiced in North Carolina? Yes, municipalities can annex nearby land/properties whenever they wish, for nothing more than monetary gain. Typically this doubles ones property taxes and fees from then on.

  48. The Bernank is doing the only thing that he can do.
    Interest on the Debt is high and the total debt is already too far gone. The only way to reduce the debt is to inflate it to hell and beyond.
    Lets say he manages to drop the value of the dollar to 1% of its current value, then we can pay off the debt no problem. GDP goes up 5x, the interest payments are peanuts, social security is nothing, old people starve to death and most of our liabilities disappear with them. End of story. Inflation is the only cure.

  49. yup -- "who" represents a subject, like "who is your daddy?" .. .. and "whom" represents an object, like "she was donkey-punched by whom?!"

    (the "english-prime" or "e-prime" style of writing strictly forbids the use of any form of "to be" -- thereby eliminating the passive voice, which i admittedly just used .. .. a very late robert anton wilson describes it, sorta, in the link below jajaja)


    as for the rest of your post -- i think this kid will just "go dark" for a decade or two, and then give it a go once things clear up .. .. that puts a helluva lot of faith in people to fix things, though

    fuck em

    j.j., pittsburgh


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