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| Economy |
| Debt Roll Concerns Becomes Acute |
| 2010-04-28 |
| Here is the primary risk of why front loading the US Treasury with ultra-short holdings is just asking for a capital markets/liquidity/solvency/sovereign crisis. So far in April, the US Treasury has redeemed over $484 billion in Bills. That's nearly a half a trillion in mandatory cash outflows, interest payments aside. In April the cash out for interest expense will likely be one twentieth of this. What people don't realize is that the Treasury in April was down to just $9 billion in cash. Unless the UST can roll its debt not on a monthly but now weekly basis in greater and greater amounts, the interest rate doesn't matter. All it takes is one semi-failed auction and it's game over as hundreds of billions in bills become payable. When one adds the redemptions on non-Bill Treasuries, and we get well over half a trillion in redemptions in April alone. Roll issue aside, the UST issued a net $113 billion in debt in April, coupled with a gross cash burn of 27 billion for a net cash outflow in the month of $140 billion. Add the $120 billion or so in coupons in the last week of April (which likely won't settle until May), and the UST will have a $260 billion in cash burn in April. |
| Posted by: Anonymoose |
| #6 Economic depression or hyper-inflation, take your pick. Although the world will probably get both. It's like watching a runaway train and being reassured that the train has brakes and will start to brake soon, while all the time the train gets faster and faster and is on the verge of derailing at any moment. |
| Posted by: phil_b 2010-04-28 21:34 |
| #5 JohnQC: It's a lot worse than that. In addition to actual expenditures, those birds in D.C. have been making insane promises, commitments, for the future, in the tens of trillions of dollars. And supposedly, these are "mandatory" spending that cannot be reduced. They haven't just killed the golden goose. That thing is roadkill after a few weeks on the Interstate. Just a few dirty and decrepit feathers left. |
| Posted by: Anonymoose 2010-04-28 19:36 |
| #4 I don't know about you but the following gives me a bad case of heartburn: Public debt $12.28 trillion (January 2010)[8] 84% of GDP Revenues $2.106 trillion (2009)[9] Expenses $3.515 trillion (2009)[9] |
| Posted by: JohnQC 2010-04-28 16:22 |
| #3 25-50% annual inflation by year's end? If true, Jimmy Carter ain't lookin so bad. Well maybe that's an overstatement. |
| Posted by: JohnQC 2010-04-28 15:57 |
| #2 The way things are going right now, the USG is planning inflation spurts based on monthly debt monetization. What this means is that with no one buying US bonds, each month they print money to pay the previous month's debts, which converts directly to inflation. Keep an eye peeled at retail stores. They will probably boost prices before each new monthly printing. This will be a cue as to how painful the "continuing resolution" federal budget is working out. As things are right now, it would not be unlikely to have 25-50% annual inflation by years' end. |
| Posted by: Anonymoose 2010-04-28 10:07 |
| #1 and the UST will have a $260 billion in cash burn in April. Makes the Greek debt problem look like a tiny pimple on a 15 year old's pizza face. But I guess pointing that out makes me racist or ageist or sexist. |
| Posted by: ed 2010-04-28 09:47 |