The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Sweet, Sweet Quantitative Easing

Posted on | April 11, 2011 | 4 Comments

by Smitty

There is something special about nihilistic joy. You spot doom on the horizon. You track it. Doom comes in, at constant bearing and decreasing range, despite every possible maneuver to avoid it. And the doom is so huge as to cause the people in charge to loop in stage one of the Kübler-Ross Model, not merely denying the problem, but actively repeating behaviors that worsen it.

In the month of March, the U.S. government spent more than eight times its monthly tax receipts, when you include the money spent for maturing U.S. treasuries. The U.S. treasury netted $128.18 billion in tax receipts during the month of March, but paid out a total of $1.05 trillion, which included $49.8 billion in Social Security benefits, $47.4 billion in Medicare benefits, $22.58 billion in Medicaid benefits, and $37.9 billion in defense spending. However, by far, the U.S. paid out the most for maturing U.S. treasuries, which equaled $705.3 billion.

In order for the U.S. government to stay afloat with only $128.18 billion in tax receipts, it had to spend $72.5 billion from its balance of cash, which ended the month at $118.1 billion, and sell $18 billion worth of TARP assets. But most importantly, the U.S. treasury had to sell $786.5 billion in new treasury bonds.

The U.S. government is the largest ponzi scheme in world history. We can only fund our government expenditures and pay off maturing debt plus interest, by issuing larger amounts of new debt. Americans are lucky that we have been blessed with record low interest rates for an unprecedented amount of time, but NIA believes that as we roll over U.S. treasuries in the future, we will have to refinance them at much higher interest rates. Our national debt is now so large that interest payments on our debt will become the government’s largest monthly expenditure.

If the Federal Reserve doesn’t implement QE3, NIA believes it will just about guarantee a bursting of the U.S. bond bubble in the second half of 2011. If the Fed stops buying U.S. treasuries, there is a chance that we won’t find foreign buyers for our bonds no matter how high interest rates rise. The world is waking up to the fact that the U.S. government is insolvent, and the benefits of propping up the U.S. dollar are no longer worth the expense to our foreign creditors. The U.S. government ponzi scheme will soon be exposed for the world to see.

Oh, it’s the elephant in the room. The question will be whether the plutocrats will step up to the plate and buy some debt to keep the entire system from blowing up in their faces. It could happen. Or not. As with a punishment from dad whenever I broke something as a child, I just want to get it over with.

Category: Uncategorized

Comments

Comments are closed.