An Interesting Find About Treasuries...

[GigantorX]

BLATANT Monetization Uncovered
Remember the Dallas Fed's Fisher saying that "The Fed will not become the handmaiden of Treasury"?

He was lying (The Fed already has), and now there is proof.

Mad props to both Zerohedge and Chris Martenson for noticing this; I missed the facts buried in the CUSIP list.

The upshot: The Fed bought nearly half of LAST WEEK'S 7 year Treasury Issuance TODAY.

Huh?  Remember, after the 5 year auction that went badly (and which I wrote about) the 7yr auction went "well."  Rick Santelli (and a lot of other people) agreed - demand was strong.  That made no sense to me at the time, coming one day after a near-failure in the 5 year.

Well now we know what happened: The Fed pretty clearly pre-arranged, either explicitly or by "suggestion", that the Primary Dealers take up the auction with the promise that The Fed would immediately monetize half the issue!

Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!

If you think the economy and credit markets are "on the mend" why would The Fed do something like this?  It would not be necessary unless The Fed was told (by those very same Primary Dealers) that they were going to be unable or unwilling to take down any more Treasury Debt.

Folks, let me be clear: The United States HAS OFFICIALLY HIT THE TREASURY DEBT WALL and The Fed and Treasury are engaged in subterfuge and conspiracy in an attempt to hide this from the market.

There is no other explanation for what just happened.

None.

This is likely what the market figured out:



When it sinks in to the market's consciousness - we had two failed Treasury Auctions last week, both 5 and 7 year, yet we intend to try to borrow ANOTHER $400 billion next quarter and nearly $100 billion this coming week - the consequences could be extremely severe.

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An interesting find about monetization of our debt and just how far this Admin. will go, and has to go to fulfill its spending agenda.

[GigantorX]

This also points to the hypothesis that the rest of the world, and more importantly the Chinese, has caught onto the fact that our spending levels have reached the point of insanity and we will not be able to pay any of the debt back or make the interest payments on the bonds. So they are now not going to finance our surging debt.

I wonder when our Govt. will start having to borrow and print just to make the interest payments...

[Bindare_Dundat]

Does this mean we're out of the woods?  I would pay to see a guy like Benny debate Karl.

[GigantorX]

Does this mean we're out of the woods?  I would pay to see a guy like Benny debate Karl.

I'm not surprised that almost no-one has commented on this post and Denningers article. This is huge news and clear look into how fast the world as caught on to the fact that our insane levels of spending, insane levels of future spending, two wars, health reform, stimulus, bailouts etc cannot be financed anymore by other nations. They know that we can't pay this back in a meaningful way, so either they don't buy or Treasuries or they buy them only if the interest is high enough. As Karl states...we look to have hit the wall.

How will we pay for the new levels of spending? And how will we repay the debt? Well, either we default or we monetize it through hyper inflation and give the Chinese cargo ships worth of toilet paper dollars.

[GigantorX]

The spending has always been crazy and insane, but now it has taken a swing towards lunacy and complete unsustainability to the point that (FINALLY) the rest of the world is going to just stop giving crack to the crack addict.

The rest of the world has caught on to our scheme. China is probably looking to exit the dollar and has shown signs that it wants to. And the world may have actually run out of money to buy our debt.

[a_joker10]

The rest of the world has caught on and is slowly divesting from the US.
http://online.wsj.com/article/BT-CO-20090720-709838.html

It makes me laugh that all these people keep posting about the increase in the Dow even the American Dollar has dropped almost exactly as the same rate as the Dow's rise.

Your economy is in terrible shape and all the nations that would help are scared like crap the real bubble is coming.

Canada is trying to diversify in India and in China by making preferential trade pacts because your economy is not safe.

Even relatively strong US companies are scurrying away.

http://www.siliconindia.com/shownews/Obama_gets_tougher_firms_look_to_move_out_of_US-nid-58642.html/1/2
Obama gets tougher; firms look to move out of U.S.

Bangalore: At least half-dozen major corporations in the U.S. like Tyco International (TYC) and Ingersoll-Rand (IR) have proposed reincorporating in Ireland or Switzerland since October because of the U.S. President Barack Obama's plans to clamp down on corporate overseas tax maneuvering, reports Business Week.



This is because both Ireland and Switzerland offer big tax savings than the U.S. or Europe. Also, both of the countries have well-established tax treaties, which decide which country has primary taxing rights and help avoid double taxation. Paul Schmidt who heads the international tax practice at a law firm Baker Hosteller told Business Week that Switzerland's 'statutory' tax rate is 24 percent, which is a huge savings over the potential 35 percent federal tax rate that the business firms could owe in the U.S. Meanwhile, Ireland has a 12.5 percent corporate tax rate and a good working relationship with the Internal Revenue Service (IRS), according to Conor Begley, an independent tax consultant and Former Director of international tax at Grant Thornton.

[Bindare_Dundat]

give the Chinese cargo ships worth of toilet paper dollars.

lol

[Bindare_Dundat]

THIS SHIT IS HITTING THE FAN FOLKS!!!!

Brian Benton posts regularly on Ron Paul forums and Karl Denninger got this Fed story from him originally. His handle on  Ron Paul forums  is gonegolfin He posts on the economics board. Anything anyone needs to know about the Fed, he knows the answer.


Monetization And Bernanke Perjury?

This was apparently first broken by Brian Benton, not Chris Martenson; the original link was to a Financial Sense article (of which I was unaware.)

All the previous comments in my other post, however, still apply - here it is in video....

There is also evidence showing up that this was not the first purchase of essentially "as-issued" bonds, especially in the 7-year duration.  I am looking into this and will attempt to quantify the percentage of "support" that is in fact monetization, irrespective of what Bernanke said in front of Congress.

http://market-ticker.denninger.net/archives/1305-Monetization-And-Bernanke-Perjury.html


http://www.ronpaulforums.com/showthread.php?t=204081&page=2