“There is a very good chance that America will default on its government debt sometimes during this administration.”
“And there is an extremely good chance that the currency will be very debased and weakened a lot during this presidency.”
(JIM ROGERS WAS RIGHT (05/06/09))
Let’s see if I can count this up….
70 day CMBs, $30 billion (tomorrow)
13 week Bills, $32 billion (July 27th)
26 week Bills, $31 billion (July 27th)
52 week Bills, $27 billion (July 28th)
2 year Notes, $42 billion (July 28th)
5 year Notes, $39 billion (July 29th)
7 year Notes, $28 billion (July 30th)
19 year, 6 month TIPS (reopened), $6 billion (July 27th)
That’s two hundred thirty-five billion dollars over the next week!
Almost one quarter of a trillion……. geejus.
I guess you should get while the getting is good, but this is going totally parabolic. That money has to come out of somewhere, by the way, in order for the sale to succeed, which is going to get rather interesting at some point – but exactly where it matters is impossible to know.
I expected that when we crossed the $100 billion threshold in a week the market would throw up all over it, but it didn’t. Now we’ve got the government trying to sell a quarter of a trillion dollars in debt over the next week, the announcement is out there, and while the bond market is selling off to a material degree equities could care less!
This is flat-out insane. At this run rate we would be trying to sell twelve trillion dollars over one year’s time, an obviously ridiculous and impossible-to-peddle amount of debt at any price.
When does the rest of the world wake up (not to mention the primary dealers) and say “NO!”? Never? Is there a truly insatiable demand for our government’s debt, despite the fact that President Obama got up on the national stage last night and promised to spend another trillion dollars we don’t have?
How do equities power higher into this sort of debt issuance? Is it simply that the market has deduced that the government will hand all of this zero-interest money out – indefinitely?
Guess what – that which is impossible won’t happen, and the stock market is now telling you that the impossible will become reality. There has been and will not be any amount of fiscal sanity on the part of our government until the market imposes it, and when it does it is going to happen in exactly the same way it happened to Bear Stearns, Lehman, Fannie and Freddie. May I remind readers that it was said that Fannie and Freddie “couldn’t” get in trouble due to their implicit government guarantee? Well guess what – they both effectively failed, but when the US Government finds itself in the same situation it has nobody who can take it into conservatorship and as such we’re just going to have to deal with the consequences of failed debt auctions – that is, dramatically increased funding costs across the board in the economy, including the government, which will choke off any hope of economic anything.
Folks, this is how you get detonation of a nation’s monetary and political system. Timing the “event” it is not easy, but the certainty of outcome given this sort of outrageously irresponsible activity is not in doubt.
I’m increasing my stock of things that “will never go to zero” and keeping my ear to the ground. The “short the phone book but make sure you get out fast before you get trampled” moment approaches – mark my words.
Thursday, July 23. 2009
Posted by Karl Denninger
Source: The Market Ticker