Monday, October 21, 2013

Record Surge In Treasury Debt

The one day explosion of $328 billion to the U.S. debt load smashed the previous record of $238 billion in one day, set two years ago. These are figures that would normally be seen in banana republics.  - (LINK)
Well, I certainly was way off the mark on my prediction for the outcome of the Broncos/Colts game last night.  And the comments on the blog post were sure to let me know it!  But the game attracted a lot of interest, as it posted the highest tv ratings for an October football game in 15 years.  It also was NBC's highest Sunday night prime time tv rating since February's Academy Awards.

But I digress with useless boob-tube trivia there...The most interesting data point of the last week was the one-day jump in the United States' Treasury debt outstanding, which soared by $328 billion the day after the debt ceiling agreement was reached.  Hell, the ink wasn't even dry on the deal and the total amount of Treasury debt increased overnight by 2% (source:, edits in red mine):

Given that there were not any Treasury auctions held to sell more debt, the only way I can think of that the debt loaded exploded like that is that all of the funds borrowed from places like the Federal pension fund and the Social Security Trust - you know, the accounting games that Jack "I'm A Thief" Lew referenced back in the spring - were converted into Treasury IOU's aka Taxpayer liability Treasury bonds.

But that's okay.  Keep issuing debt and printing up paper money to fund that debt and everything will be alright.  At least that's the message the stock market gave us last week.  In fact, now that everyone knows there's no actual debt ceiling in place for the time being we may as well just borrow and print our way into nirvana, right?

While Obama gets on television and lies through his teeth by telling us he's cut down the size of the deficit, in reality the amount of money borrowed over the last 5 months - funded by $400 billion in borrowing since May - actually implies deficit spending at an annual rate of $960 billion.  However, the last 5 months also include some one-time, non-recurring payments back to the Treasury from Fannie Mae and Freddie Mac.  So, in reality, the deficit spending "ex" those payments is back on track to be occurring at a rate well in excess of $1 trillion.  It also means that over the next 12 months we can expect the debt outstanding to approach, if not exceed, $18 trillion.   Still feel good about the latest agreement between Harry Reid, John Boehner and Barack Obama to kick that old can down the road?

But hey, at least there's not a debt ceiling limit in place right now so at least the Government can fearlessly issue the amount of Treasury bonds required to fund that deficit spending - even it the Fed has to print the money to make it happen...


  1. "....were converted into Treasury IOU's aka Taxpayer liability Treasury bonds."

    Exactly. Jack "I'm a Thief" Lew and others openly talked about how that would be done.

  2. As I said in a previous post. $20TRILLION Debt limit is a given!Sure they can pay it! lol! lol! lol!

  3. A trillion her and a trillion there. Pretty soon you're talking serious money. I remember when I
    foolishly thought a million was a lot of money. BTW what comes after trillion.

  4. "To infinity and beyond!" (with apologies to Buzz Lightyear)

  5. If you do not want to assume that if the conditions are presented to you, and know you or are you involved in the practice of the lender, or, do you read the small fine print in search of hidden costs of any?, That was not safe for without understanding how an entity would work fully, to sign a contract money of third-party it. It If it was that something, what happens to your finances within the next few weeks, so you know exactly where you are standing, and questions what-if all negative To the is always a good .

    You can go for time to repay the loan how much this?Of the next paycheck you, can you afford to lose this chunk of funds budget?If you choose to in order to earn more time, do a rollover loan, literally, please do not forget that you are buying time to you. The high interest cost, we will continue to record each time you select this option. The final cost of the loan will grow rapidly when you do not pay off on the date of the original.

    It is a people who know can not afford to pay for it they are back there, I do not care to say frankly. There vulnerable, these are people who all costs money help no matter how cost. Financial trouble is continuing to develop, in the end, this option to close their doors as well.

  6. SEC Has Concerns Over Options Clearing Corp.’s Compliance

    The U.S. Securities and Exchange Commission said it has “serious concern” about regulatory compliance and risk management at Options Clearing Corp., the world’s largest equity-derivatives clearinghouse.

    The regulator listed failings of governance, risk management and financial surveillance in a 22-page letter dated Sept. 18 obtained by Bloomberg News. Jim Binder, a spokesman for OCC in Chicago, confirmed the company received the document. A voice mail left with the SEC out of regular office hours wasn’t immediately returned.

    “The excessive number of repeat findings raises a serious concern about OCC’s overall commitment to establishing a culture of regulatory compliance,” the SEC wrote in the letter. “The pattern of findings across the areas of quantitative risk management, governance, liquidity, policies and procedures, and documentation raises a serious concern about systemic weaknesses in OCC’s risk management and operations.”

    OCC doesn’t periodically evaluate the assumptions on which its risk model is based and doesn’t have a comprehensive document that summarizes the key processes and methodologies it uses to monitor and model market risks, the letter said. Senior management “lacks a fundamental understanding of the compliance department’s role” within the firm, the SEC said.

    “This is an examination letter that we are obviously taking very seriously,” Binder, an OCC spokesman, wrote in an e-mailed statement. “We are diligently working on a response that will confirm our commitment to resolving the issues identified in the letter, and that will describe the processes that we’ve put in place over the last year or so to prevent a recurrence of similar shortcomings in the future.”
    Biggest Banks

    OCC guarantees all options trading on U.S. exchanges. It has 120 clearing members, including the biggest banks and brokers, and processes trades for exchanges such as ELX Futures and NYSE Liffe US that compete with CME Group Inc., the world’s largest futures market.

    OCC is owned by four of the U.S. options exchanges and its board comprises both banks and exchanges. The Chicago Board Options Exchange owns 20 percent of the clearinghouse and NYSE Euronext (NYX) owns 40 percent. In July 2012 the U.S. deemed OCC to be a systemically important financial market utility.

  7. This Has The “Money Masters” Of The World Truly Terrified

    This leads us to Russell’s KWN piece from earlier this year: “At any time in history, there is a great and all-encompassing THEME. And I've wondered what the theme of today could be -- what is the great theme of our times? I grew up in different times during the '30s and 40s. The theme of my youth was -- stop the dictators, Hitler and Mussolini, from taking over the world.

    This is what I believe the theme of our times is. We are in a period where the “haves” are determined to hold on to their positions in the world. The “haves” include the world's leaders and politicians, and the world's “masters of the earth,” which includes those who control the world's money.

    Those who control the money make the rules, and their main aim is to remain in power. Currently, the various central banks control the creation and the issuance of money. To ensure that they remain in power, the central banks are spewing forth a veritable avalanche of fiat currency, money created out of a computer -- money that has been created out of “thin air.” In turn, we are supposed to bow down and thank the money creators, those who are saving us from a new world depression.

    So to sum up my search for a THEME, the theme of today is the “haves” remaining in power, and in doing so, also keeping the “have-nots” content and happy. Everything we are dealing with now, including stocks, bonds, real estate and possible sources of income revolves around the central theme that I have presented.

    One further comment. The key to control by the “haves” is the production of fiat, unbacked money. Gold is the enemy of money created out of a computer. When gold was removed as a discipline behind money, those who could create money out of thin air discovered the path to riches and control. And they developed a hatred towards gold that was understandable.

    CUT THE “Money Masters” ENTITLEMENTS ,,,,,,,,,,,,,,,,,,,,

    1. I am a "have-not" who is NOT happy (and I have a lot of company!).

  8. Gold Premiums in India Climb to Record as Curbs Widen Shortage

    Gold premiums in India, the world’s largest user, climbed to a record as jewelers rushed to secure supplies to meet soaring demand during festivals and weddings amid government curbs on imports.

    The fees paid by jewelers to banks and other importers climbed to as much as $120 an ounce over the London price this week compared with a discount of $60 a month earlier, said Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation. Premiums may surge to $150 to $200 if the shortage persists, he said.

    The raw material scarcity is worsening as imports slumped after the government linked shipments to re-exports in July and increased tax on overseas purchases for a third time this year to curtail demand. Purchases of gold and silver tumbled to $800 million last month from $4.6 billion a year earlier, the Commerce Ministry said Oct. 9.

    “There is a shortage in the market and there will be panic in the market with each passing day” if supplies don’t increase, Bamalwa said. “The government is comfortable because import of gold is reduced but it’s a problem for consumers. Gold is in our culture and we can’t change that.”

  9. One way that the whole thing can go based on a prediction is we as a world overall run out of oil.
    Or at the very least face very hard times as a result of such a downward dynamic occurring .
    Now mind you I am not looking forward to such an unbelievable hardship anymore then the next guy but maybe this is the reason why the 1% is running havoc with ALL investments be it paper , hard assets and so on.
    More so the reason to load up on precious metals. The one and only tool for turning a good or service if things should go upside down ! Cheers !

  10. michael schumacherTuesday, 22 October, 2013

    Goldcore eh? No mention of disconnecting Treasury from reality so that its treated like entitlement programs we all know and love, and more importantly NOT counted against limits.

    Goldcore...yea thats a real unbiased site there. Why dont you get the Israeli times to do an op-ed piece on how unfair the palestinians are to them...just about the same logic. But since I know you wont print this no one else but yourself will read it. Thats enough for me....

  11. It's five o'clock and I'm sitting here racking my brain with how I can help my son get money for his college and then I think about how my silver investment is shit! Wait a minute - those bastards who have held both physical gold and silver hostage ! They're to blame !! They control the physical metals with a total paper approach ! What a joke !! What , is the physical world nothing more then a bunch of pussies !?!!
    The only thing that I can figure with this whacked out equation is that some dynamic knocks the paper schmucks on their asses, and some day soon !!

  12. New Rules for Italy Banks "I'll Guarantee Your Derivatives If You Guarantee Mine"

    New Basel III rules require extra capital for derivative positions. Banks in Italy have already figured out a way around that rule.

    Eurointelligence reports ...

    We have been on the watch-out for stories that government and central banks encourage banks to continue to act as buyers of last resort of government debt. Here is one from Reuters, according to which Italy is planning to circumvent the Basel III requirement that banks must hold more capital against derivative contracts through which they hedge their exposures on government bonds.

    Reuters has the story that the 2014 budget includes a two-way guarantee whereby banks and the state guarantee each others’ derivative positions.


  13. Switzerland Has Never Exported This Much Gold

    Four of the largest gold refineries on earth are located in Switzerland, being Metalor, Pamp, Argor-Heraeus and Valcambi. It's estimated 70 % of the world's refining is done near the Alps, therefor massive amounts of gold are distributed here; Switzerland has imported 808 tons of gold in the third quarter of 2013, and exported 680 tons in this period. Year to date import is 2420 tons, and export 2184 tons. Switzerland has never exported this much gold in 9 months, or in 12 months, the yearly total estimate is 2912 tons. I dare to say more than 1100 tons of this will hit the Chinese shores,

  14. Fed Gives Middle Finger to Congress, Commodities Customers, and Public, Proposes to Allow More Banks to Participate in Commodities Business

    Nothing like watching a captured regulator like the Fed use a public hue and cry to execute a big bait and switch. Here the ploy is to change rules to further disadvantage the parties making complaints. But it takes finesse to make the finger in the eye look plausible and reasonable, so that when the well-understood bad effects show up later, the perp can pretend to be mystified.

    The issue at hand is commodities speculation and price manipulation by major financial firms. In 2003, the Fed relaxed the rules that had formerly prohibited depositing-taking banks from trading commodities. In the early summer of this year, four members of Congress wrote to Bernanke asking whether the Fed had given adequate consideration of the systemic risk of letting major banks participate in the physical commodities. What, for instance, if a systemically important bank had its commodities trading operation fail? And these questions were raised in the backdrop of more general concerns about bank participation in the commodities business leading to other troubling outcomes, such as increased financialization and price volatility, which works to the detriment of real economy users.

    A timely bit of reporting by David Kocieniewski of the New York Times in July showed that these reservations were valid and used Goldman to provide a concrete example of demonstrable, measurable harm. And that harm was the direct result of the 2003 rule changes that allowed financial firms to operate in physical commodities, not just as traders in financial contracts. They started backward integrating into owning major components of the delivery and inventorying systems. They gained not only a big information advantage by having better access to underlying buying and selling activity. but also the ability to manipulate inventories, and thus, prices. This piece created a firestorm at the time of its release and increased pressure on the Fed to take the Congressional inquires seriously. And Congress kept the heat on: the Senate Banking Committee held a hearing in late July.


  15. Repo, Baby, Repo

    Newly appointed Fed chairman Janet Yellen summarized what happened in the panic in a speech she gave earlier this year. She said:

    “The trigger for the acute phase of the financial crisis was the rapid unwinding of large amounts of short-term wholesale funding that had been made available to highly leveraged and/or maturity-transforming financial firms.”

    Why do banks borrow in the unregulated, shadow system instead of conducting their business in the light of day where regulators can check the quality of the underlying collateral, oversee the various transactions on public trading platforms, and make sure that capital requirements are maintained?

    It’s because the banks want to deploy all their capital, leverage up to their eyeballs and play fast-and-loose with the rules. Here’s what the New York Fed has to say on the topic:

    “One clear motivation for intermediation outside of the traditional banking system is for private actors to evade regulation and taxes. The academic literature documents that motivation explains part of the growth and collapse of shadow banking over the past decade…

    Regulation typically forces private actors to do something which they would otherwise not do: pay taxes to the official sector, disclose additional information to investors, or hold more capital against financial exposures. Financial activity which has been re-structured to avoid taxes, disclosure, and/or capital requirements, is referred to as arbitrage activity.” (“Shadow Bank Monitoring“, Federal Reserve Bank of New York Staff Reports, September, 2013)

    Now check this out from the NY Fed:

    “While leveraged lending collapsed in 2008 from a peak of $680 billion in 2007, it has rebounded very quickly, and is now at record levels of volume, projected to be larger than $1 trillion in 2013…” (NY Fed)

    How’s that for progress, eh? So, Bernanke’s reflation efforts have effectively restored the same shabby, poorly designed system to its former glory putting all of us at risk again. Here’s more:

    “One area of concern, however, is the significant increase in the fraction of covenant lite loans, which have increased dramatically from 0 percent in 2010 to 60 percent in 2013. This deterioration in loan underwriting has come hand-in-hand with an increased presence of retail investors in the leveraged loan market, through both CLOs and prime funds, as relatively sophisticated investors, like banks and hedge funds, are exiting the asset class.” (New York Fed)

  16. Half of nation's foreclosed homes still occupied

    Foreclosure sounds like the end of the line, but actual eviction can take months or years -- even after the bank has repossessed a home.

    RealtyTrac estimates that 47% of the nation's foreclosed homes are currently occupied. The percentage actually tops 60% in some hot housing markets, like Miami and Los Angeles.

    Those still living in repossessed homes include both former owners and renters. Either way, their time in the homes is mortgage and rent free.

    To arrive at its estimate, RealtyTrac compared its database of foreclosed homes with postal records showing whether mail was still being collected and whether change-of-address forms had been filed.

    Even when occupants leave voluntarily, old owners typically take about two months to vacate.

    With renters, it can take a year or more. "If someone has a bona fide rental agreement, we have to abide by that," said Amy Bonitatibus, a spokeswoman for JP Morgan Chase.

  17. Beyond, Genoa 1 December, V3day #OLTREv3day

    In the last few months, Italy’s problem has become the M5S’s populism. We are the guilty ones. But we are guilty of honesty standing up to scoundrels. We have no choice. We need to go further. We need to get into government and get rid of these incompetent predators that have fleeced Italy for the last twenty years. No one is exempt: politicians, big industrialists, journalists, bureaucrats, and bankers. These people have brought the country to bankruptcy and yet they still flaunt themselves in public. We need to go further. Beyond finance. Beyond the parties. Beyond the sick institutions. Beyond a disgusting journalistic system. As well as this Europe without rhyme or reason. We have to imagine a new frontier. We have to see reality with new eyes, we have to open up the route to the future. We will never give up. It’s as well that they know that. We want to win the next elections, starting with the European elections. The next time, if they want to stop us getting into government, they’ll have to send in the tanks.Lift up your hearts. To Genoa!

  18. The Age of Bullshit Investments Is Back!

    There was a time, not too long ago, when a fool who wandered into the world of investments could very well be separated from his money with the help of any number of dumb, overpriced, or downright fraudulent schemes. Then, in 2008, the economy went into freefall, and everyone who had money left held onto their checkbooks a little more tightly. Fear bred caution, and some of the worst offenders in the dumb-money chase were forced to close up shop, or at least become a little more discreet about their advantage-taking.

    Now, with five years of air between Lehman Brothers and the present, the seal has been lifted. Athletes and virtual currencies are being traded alongside Ford and General Electric. Venture capitalists are pitching start-up stocks to the unwashed masses. And later today, the SEC is expected to propose new rules that will make it even easier for companies to fleece the unsuspecting public.

    Yes, ladies and gentlemen, the age of bullshit investments is back.

    I'm not the only one noticing that things are getting dangerous. Felix Salmon says that years of near-zero interest rates and the JOBS Act gold rush mean that "even the smart money has started funding companies at utterly bonkers valuations." Josh Brown, a financial advisor and CNBC regular, told me in an e-mail that the "ludicrous" investing climate "is a byproduct of the giddiness we're seeing amongst the owners of financial assets. We've eclipsed the 2007 peak of household net worth but the makeup is very different. More has accrued to the upper echelon and the lesson that group has learned about the nature of investing is that even if we blow up, the Fed and Congress will ensure that come out of it in even better shape." And the SEC has been busting record numbers of petty thefts and boiler-room schemes — many of which reflect the intersection of well-intentioned but underinformed investors with slick profiteers claiming to have access to the next big thing.

    The truly scary part of what's happening now is that it's not a particular asset bubble, nor the sketchy practices of a coterie of bankers, that's endangering the investment portfolios of normal people. It's the deregulated system itself that poses the threat. Unlike in 2008, this exuberance won't end in a sudden crash, brought on by shady practices at large investment firms. It will be a slow flow of assets from the information-deprived to the information-rich, in the form of fees and other completely legal wealth transfers.

  19. NEWSNIGHT - Paxman vs Brand. Full Interview.

    Published on Oct 23, 2013

    Newsnight's Jeremy Paxman talks to Russell Brand about voting, revolution and beards...