In 2008 Eric Sprott and David Franklin calculated that $2,041,000,000,000.00 of debt would have to be issued to "balance" the fiscal 2009 "budget".
Three times the debt issuance of 2008 or, as they put it: A 200% increase by each group purchasing treasuries.
No liability column gushes over with 2 TRILLION DOLLARS worth of red ink. It becomes blatantly apparent that any governmental servent referring to this ledger as a "budget" is absent of mind and scribbling in the ledger's column of the insane.
Gone is any and all grips with reality.
Add in the word "balanced" to this "budget" and without any doubt you have a very unbalanced politician.
Sprott and Franklin, like a handful of super financial bloggers, sliced up the debt that was issued in 2009 and categorized the buyers by group:"So who bought all the new Treasury securities to finance the massive increase in expenditures? According to the same report, there were three distinct groups that bought more than they did in 2008. The first was “Foreign and International Buyers”, who purchased $697.5 billion worth of Treasury securities in fiscal 2009 – representing about 23% more than their respective purchases in fiscal 2008. The second group was the Federal Reserve itself. According to its published balance sheet, it increased its treasury holdings by $286 billion in 2009, representing a 60% increase year-over-year.
So who was the third large buyer? Drum roll please,... it was “Other Investors”. After purchasing $90 billion in 2008, this group has purchased $510.1 billion of freshly minted treasury securities so far in the first three quarters of fiscal 2009. If you annualize this rate of purchase, they are on pace to buy $680 billion of US treasuries this year - or more than seven times what they purchased in 2008."
And who the buyers weren't:"So to answer the question - who is the Household Sector? They are a PHANTOM. They don’t exist. They merely serve to balance the ledger in the Federal Reserve’s Flow of Funds report."
The Simple Math Formula: Foreigners 698 billion + (Federal Reserve "financed" 286 billion + a Phantom "purchase" of roughly 704 billion) ='s The Federal Reserve "financed" about a trillion dollars.
Under the ledger column labeled "sane" there would be one entry for the foreign financed purchases. Personally, I'd question their motive of saving their investment by tossing good money after bad, but nonetheless it was indeed a purchase. Of course, let's not be terribly surprised should we see Alan Grayson questioning Ben Bernake a few months from now.
The exchange would go something like this, Grayson (heated and playing the part of his old attorney persona): "This entry for half a trillion given to foreigners, can you explain it?" Bernake (voice cracking but scoffing like his past persona, that of condescending professor): "Foreign governments were having difficulties of their own. Reduced demand would have put pressure on treasuries, so we,,, loaned,,,(yeah that's the word), the foreign central banks funds so they could purchase securities". Grayson: "Which countries did you give three quarters of a trillion to?" Bernake: Shrugs then states, "Central banks". He isn't intimidated by Grayson's "I'm going to strip your bark off" tone. Grayson after all is taking trillions of Bernake's funny money to fund his beloved Health Care Reform.
So let’s not mince words here: When it comes to Federal Reserve appearing in conjunction with the words "finance" and "phantom purchase" the scribble in the column of the insane becomes a Rorschach doodle of some nightmarish Steven King character.
Quantitative Easing is neither finance nor purchase. Quantitative Easing is counterfeiting. Counterfeiting is the only crime listed in the Constitution other than treason. Bernake and every member of Congress (read: just about everybody but Ron Paul) who allow this atrocity to continue should be tried for both.
We are on a absolute charted course to becoming the United States of Zimbabwe.
2010 will be a pivotal year: David Reilly over at Bloomberg did a good piece on Barney "I don't know what (my boyfriends) Marijuana plants look like" Frank's latest bill. I've seen roadkill decimated by eighteen wheelers that look prettier. It affords bankers another 4 trillion bucks the next time TSHTF. This guy must have aides look both ways before he crosses streets. One can only assume this is Geithner's 'Plan C' for when the 3.5 trillion dollar CRE meteor traveling 30,000 mph impacts planet earth and blows up what is left of the "economy"."Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.
Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.
Another 4 trillion.
John Williams of Shadow Statistics has updated his forecast for when we could have a currency crisis and enter into hyperinflation based on the deficits and GAAP (Generally Accepted Accounting Practices) he sees hyperinflation as a distinct possibility within the next 12 months.
Reality: "Our biggest deficit is a leadership deficit", this according to David Walker.
Delusion: Secretary of Treasury Geithner says the recession is over.
President Obama agrees.
Upon receiving the Nobel Peace Prize he has focused on adding expenses to our two wars, seven and eight years long now, which are looking more and more like Vietnam every day. A good leader would have declared victory, and packed up. I admire the US military, but the bottom line is if Gangas Kahn, Napoleon and Russia couldn't win then a 98 pound dripping wet Commander-in-Chief with no military experience stands no chance at all.
Bribing the Talaban with US tax dollars isn't going to tip the scales in our favor either.
He also sees Health Care and Cap and Tax as the most important issues. Two more nails in the nation’s economic coffin and one giant blundering pallbearers step into the grave itself.
Is David Walker wrong about the leadership deficit?
No offense to the Honorable Walker, who I admire and respect a lot, but a statement and actions like these indicate - without a shadow of a doubt - that neither of these names are worthy of the the words "leadership" or "deficit". Well meaning, misguided economically afoul creatures following the Keynesian fairytale of how things worked before they reached critical mass and began imploding - maybe. Delusional - closer. Falling under the ledger column titled insane is probably closer to reality.
Google "don't let a crisis go to waste" and .28 seconds later the top link out of 7.5 million search results is White House Chief of Staff Rahm Emanuel. I don't know if his name belongs scribbled in the column of the insane or if he should be nominated for the Nobel Prize of Missing the Biggest Crisis in History.
Making good, out of a bad crisis, is a super and admirable trait. Of course, the trick is that one has to have the ability to RECOGNIZE a crisis first. When you miss the biggest crisis in the history of the world --- who cares what your crisis motto is.
In Summary: Instead of assembling a team of the best and brightest (about 25 economic bloggers come to mind) to lead us out of this crisis our president has put together a team of proven failures. Failures with resumes littered with contributions of creating this economic nightmare. Ben Bernake who missed and disputed the biggest bubble in the history of the universe - the housing bubble. His donation of blowing money into that bubble was second only to Sir Alan Greenspan. Larry Summers, nuked Harvard's pension and endowment funds with a billion in derivatives and then jumped in and helped Robert Rubin and Alan Greenspan and Congress muzzle Bixley Born when she advocated derivative regulation. Recall that 1.5 trillion in derivatives blew up the economy in 2008. Remember that wave 2 (Alt-A's and Option Arms, another 1.5 trillion dollar wave is forecasted to reach shore in Q2 of 2010).
We have 1.6 quadrillion in unregulated derivatives, at least 200 trillion of that resides at banks in the United States. As John Williams states. "You can take 100% of peoples' income and corporate profit and you'd still be in a deficit. There's no way you can raise enough money in taxes. Our total debt is over 12 trillion, we have 106 trillion of debt which is Enronesqly stashed off balance sheet (under the column "certifiably insane") for "unfunded" (read: looted and long since spent by Congress) liabilities.
And we have "leaders" (read: unwitting financial terrorists) who are doing what they did to blow up the economy. The only difference from before and now is that this time they are calling it a fix this time.
No peaceful citizen relishes in the fact that they haven't elected the best and the brightest. Somehow I can't picture our forefathers grabbing teabags. When I ask myself what they would have done with these financial terrorist I see the vision of pitchforks and torches.
But hey: Don't let reality ruin your day.
Friday, January 1, 2010
Our friend Davos is reflecting on the past year and starts off the New Year by speaking his mind. Don’t let it ruin your day, nice job Davos, thanks for sharing!
Posted byAmy Jamison at4:17 PM