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Treasury seeks "unprecedented borrowing"

Thursday, October 30, 2008, 4:19 PM

I nominate this for understatement of the year:

Ryan Says Treasury to Need `Unprecedented' Financing
"This year's financing needs will be unprecedented,'' said Anthony Ryan, the Treasury's acting undersecretary for domestic finance, at a Securities Industry and Financial Markets Association conference in New York, where he was a last-minute substitute for Treasury Secretary Henry Paulson.

"Unprecedented" hardly does this justice; we need a more superlative word.  "Ginormous" comes to mind.

Perhaps the Germans have a single word that means "future destroying" that we could use.

Mr. Ryan continues:

Ryan said the Bush administration's July projection of a $482 billion deficit doesn't include new programs launched to attack the credit crisis. The bank rescue program, a separate mortgage-backed securities program, the Fannie-Freddie takeover and a student loan program all need funding, Ryan said. Also, the Treasury is borrowing money on behalf of the Federal Reserve and the Federal Deposit Insurance Corp., he said.

First, how come we don't have a more recent budget projection than from last July?  A lot has happened since then, and I think the Treasury markets would enjoy a bit of guidance on how much paper they will be asked to absorb.  Also, I deplore the use of budget projections that exclude items that are, uh, part of the budget.  

And here's one estimate of the range of total borrowing:

"The budget deficit for fiscal year 2009 might reach $1 trillion if Congress passes another stimulus package this winter,'' said Lou Crandall, chief economist of Wrightson ICAP, in a research note. "And that's just the beginning of the bad news -- financing needs arising from off-budget items might be nearly as large as the on-budget deficit.''

Crandall estimates 2009's total borrowing needs at $1.95 trillion. He says Treasury could raise this money with an "aggressive but sustainable'' increase in regular borrowing, accompanied by one-time auctions as needed.

The difference, I suppose, between the $1 trillion and the $1.95 trillion number is the difference between the fiscal year (Sept 30 - Sept 30) and the calendar year.  So I guess Mr. Crandall expects nearly a trillion of additional borrowing in the final 3 months of 2009.

For the record,because I factor in a loss of tax revenues and additional stimulus packages, I place next year's fiscal year borrowing at between $2 trillion and $2.5 trillion.

Also, I am cheating a little by knowing that this year's deficit was nearly $1.3 trillion (the first $1 trillion plus deficit on record), even though only $455 billion of that was publicly admitted to by the Bush administration.

I have no good explanation for why the registered deficit was 179% larger than the admitted deficit.  Normally the difference is in the vicinity of the excess Social Security funds that were siphoned off, or about $180 billion.

This difference is a whopping $815 billion.

My suspicion is that some of this can be found over on the Federal Reserve Balance sheet, but I cannot prove that yet.

Bottom line:  The US Treasury department is about to shatter every borrowing record in all of history.  Why is China continuing to hold all those US dollars?

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40 Comments

jgreco's picture
jgreco
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Re: Treasury seeks "unprecedented borrowing"

Because China is sunk without us.  China has made the logical choice that subsidizing US consumers is far cheaper then US consumers abandoning them completely.  How long does this continue?  Until recessions in the US no longer hurt them...based on the results this year that time is a long ways away.

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Davos
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Re: Treasury seeks "unprecedented borrowing"
1
joe2baba's picture
joe2baba
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Re: Treasury seeks "unprecedented borrowing"

thanks for the chart. you will have to forgive me though. i did not major in economics.

i have spent most of my time building things. like houses so now that  i have plenty of time on my hands

i enjoy reading the posts. i for one would appreciate it if the charts would come with a  little explanation.

i assume this chart says this is a big failure. i do like the colors tho. but maybe if it is a bad chart it could be in red

TechGuy's picture
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Re: Treasury seeks "unprecedented borrowing"

Chris Wrote: 

"Also, I am cheating a little by knowing that this year's deficit was nearly $1.3 trillion (the first $1 trillion plus deficit on record) even though only $455 billion of that was publicly admitted to by the Bush administration."

 

 Chris, US Federal Budget fiscal year starts and ends on Sept 30. the FY2008 Budget is from Sept 2007 to Sept 2008. The big increases happened after Sept 2008. The increases will show up on FY2009 budget. The Federal Reserve has about $700 billion in surplus which is independant of the Federal Budget. The Fed spent the whole $700 Billion (and then some) this year, starting back in March with the Bear Sterns Bailout.

If you were to sum up all of the spending programs (starting with the $168 Billion Economic Stimulus package) the Federal Gov't has supplied about $3.9 Trillion in cash or in loans (ie TAF, TARP, etc). I have a suspicion that the bridge loans will remain as off-balance sheet debt under the dubious assumption that the gov't will be paid back. (ie Hank's and Ben suggestion during the $700 Billion TARP program that taxpayers will be paid back near the full amount once all of the assets are sold off).

 

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Re: Treasuries undelivered

Davos's offering of that chart is misleading for the uninformed.   Essentially this is a case of failure to deliver  and is pretty much akin to Naked Short Selling.

So, it isn't as if the government is failing to makes Treasury sells.   Rather it is indicative of a completely different, but still concerning problem.

--

Steve 

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Re: Treasury seeks "unprecedented borrowing"

Hello Joe2baba:

Sorry, could be worse I could have framed her up and then realized I forgot the sill sealer and flashing on the sill. -Never did that!

This link I meant to post with the chart http://www.financialsense.com/fsu/editorials/willie/2008/1030.html

Take care 

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Re: Treasury seeks "unprecedented borrowing"

Hello Steve:

Cut me some slack please, I meant to post the link and forgot. The article, I found to be "a little" out there in the conspiracy theory way. I thought it nailed it with the GDP and the way it is calculated.

Having said that I personally feel that this is a possibility (a default) and I also wonder about the gold leases...

Take care. 

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Re: Treasury seeks "unprecedented borrowing"

 

Jim Rogers, the famous hedge fundinvestor and author, who has ditched life in Americato raise his young daughter in Shanghaiso she can learn Chinese. 

Jim Rogers said once in a Bloomberg interview that "he isshifting all his assets out of the dollar and buying Chinese Yuan because theFederal Reserve has eroded the value of the U.S. currency."

“I’m in the process of — I hope in the next few months — gettingall of my assets out of U.S. dollars,” said Rogers, 65, who correctly predictedthe commodities rally in 1999. “I’m that pessimistic about what’s happening inthe U.S.” Oct. 07...

So that begets the question: how do youinvest in the Yuan?

                Take a look atWisdomTree's Currency Income ETFs. In May 2008 they launched the WisdomTree Chinese Yuan Fund”, under the ticker symbol CYB. 

 

 

 

 

rlee's picture
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Re: Treasury seeks "unprecedented borrowing"
I have to agree with jgreco that China has invested quite a bit in the US consumer, and as a customer, we still continue to buy an awful lot of crap from them.  While it may not seem logical at the surface, the bottom line is that we maintain a good portion of their industrial production.  Also, it's in their interest to see our technology development continue - where else are they going to get stuff to clone?
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Re: Treasury seeks "unprecedented borrowing"

Davos,

1. 'CONSPIRACY THEORY' -- Personally, whenever anyone expresses their paranoia about being remotely connected to remotely even considering the remote plausibility of heaven forbid the reality of a 'conspiracy'..... then I just start to giggle...  

If you ever worked as a policeman, or a criminal investigator; then you KNOW THAT ANY CRIME THAT REQUIRED PLANNING FOR IT'S EXECUTION (I.E. CRIMINAL INTENT) AND THAT REQUIRED MORE THAN ONE PERSONS INVOLVEMENT -- WAS A CONSPIRACY!!!!

What are people so f*&^&ing afraid of? You'd think it's like having leprosy!! Why do you people allow yourselves to be so moronically easy to manipulate to be so moronically stupid and think you are intelligent? when all your brainwashed 'yes sir, no sir three bags full sir,' only indicates your fear to think OUTSIDE THE BOX!!

MILLIONS OF CONSPIRACIES,LARGE AND SMALL OCCUR EVERY SINGLE DAY, OVER MINOR LITTLE ITEMS OF PROPERTY AND MONEY, LOVE AND HATE, RAGE AND FURY; AND SOME WANT US TO BELIEVE, NOT ONE COULD POSSIBLY OCCUR ONCE IN A BLUE MOON, BY INDIVIDUALS FIGHTING OVER RESOURCES THAT AMOUNT TO BILLIONS OF DOLLARS (SUBSTITUTE YOUR CURRENCY), THAT AMOUNTS TO MASSIVE CHANGES IN PERCEPTION BY THE PROLES TO THIER PARTICULAR FAMOUS POLITICAL, MILITARY, ENTERTAINING, RELIGIOUS, ETC. 'REPUTATION'; AND ACCORDINGLY EMOTIONS OF RAGE, FURY, LOVE AND HATE, THAT MOST AVERAGE PROLE COULDN'T REMOTELY FATHOM..... .

AS USAF GOV. GRAY DAVIS SAID, TO THE INTERVIEWER IN 'ENRON: SMARTEST (SIC) GUYS IN THE ROOM'?

HELLO?????????????
  2. 'DEFAULT': In my opinion, a default is not a possibility -- IT IS A CERTAIN FEW VERY POWERFUL INDIVIDUALS EXPRESS INTENTION....  JMCSwan
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Davos
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Re: Treasury seeks "unprecedented borrowing"

JMCSwan:

Yah maybe right. I liked that documentary a lot, especially the part where Kenny Boy flew out there and talked to Arnie. I also found it amazing how they took the power companies off the grid. Sick. People died.

Maybe I am just slow to spool up and don't believe it until it is a documentary. We ahve a client who believes everything is a conspiracy, maybe it is, but maybe I'd rather not live like that becuase it isn't living.

I think the best thing we all could do is get these crooks out of office. This clearly isn't working and this is the worst time for it to be inoperative. 

 Take care, 

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Re: Treasury seeks "unprecedented borrowing"
[quote=cmartenson]

I nominate this for understatement of the year:

Ryan Says Treasury to Need `Unprecedented' Financing
``This year's financing needs will be unprecedented,'' said Anthony Ryan, the Treasury's acting undersecretary for domestic finance, at a Securities Industry and Financial Markets Association conference in New York, where he was a last-minute substitute for Treasury Secretary Henry Paulson.

"Unprecedented" hardly does this justice, we need a more superlative word.  "Ginormous" comes to mind.

Perhaps the Germans have a single word that means "future destroying" we could use.

Mr Ryan continues:

Ryan said the Bush administration's July projection of a $482 billion deficit doesn't include new programs launched to attack the credit crisis. The bank rescue program, a separate mortgage-backed securities program, the Fannie-Freddie takeover and a student loan program all need funding, Ryan said. Also, the Treasury is borrowing money on behalf of the Federal Reserve and the Federal Deposit Insurance Corp., he said.

First, how come we don't have a more recent budget projection than from last July?  A lot has happened since and I think the Treasury markets would enjoy a bit of guidance on how much paper they will be asked to absorb.  Also, I deplore the use of budget projections that exclude items that are, uh, part of the budget.  

And here's one estimate of the range of total borrowing:

``The budget deficit for fiscal year 2009 might reach $1 trillion if Congress passes another stimulus package this winter,'' said Lou Crandall, chief economist of Wrightson ICAP, in a research note. ``And that's just the beginning of the bad news -- financing needs arising from off-budget items might be nearly as large as the on-budget deficit.''

Crandall estimates 2009's total borrowing needs at $1.95 trillion. He says Treasury could raise this money with an ``aggressive but sustainable'' increase in regular borrowing, accompanied by one-time auctions as needed.

The difference, I suppose, between the $1 trillion and the $1.95 trillion number is the difference between the fiscal year (Sept 30 - Sept 30) and the calendar year.  So I guess Mr Crandall expects nearly a trillion of additional borrowing in the final 3 months of 2009.

For the record,because I factor in a loss of tax revenues and additional stimulus packages, I place next year's fiscal year borrowing at between $2 trillion and $2.5 trillion.

Also, I am cheating a little by knowing that this year's deficit was nearly $1.3 trillion (the first $1 trillion plus deficit on record) even though only $455 billion of that was publicly admitted to by the Bush administration.

I have no good explanation for why the registered deficit was 179% larger than the admitted deficit.  Normally the difference is in the vicinity of the excess Social Security funds that were siphoned off, or about $180 billion.

This difference is a whopping $815 billion.

My suspicion is that some of this can be found over on the Federal Reserve Balance sheet but I cannot prove that yet.

Bottom line:  The US Treasury department is about to shatter every borrowing record in all of history.  Why is China continuing to hold all those US dollars?

 

[/quote]

 

Is China closed off to international media sources?  Do they know what's going on?

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Re: Treasury seeks "unprecedented borrowing"

Hello All:

Maybe you can offer some advice.

It seems pretty clear where this is heading - due south. I'm convinced that politicians and the media won't change. I've written both. Both a waste of time. Half of my friends and family won't listen. Been there, done that it was a waste of time.

Rather than concentrate on the doom and gloom as we loose altitude I'd rather bet on loosers and profit from this mess. Might as well, not like anyone is going to wake up in time. Better than getting depressed over it.

My questions are:

 

  1. What do you think the biggest losers will be? (commercial real estate? auto industry? etc.)
  2. What do you think is the safest way to take advantage of these? (ETF's? Shorts? Puts? etc.)
If you could be specific with your thoughts I'd greatly appreciate it. Thank you in advance!

 

gopbg's picture
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Re: Treasury seeks "unprecedented borrowing"
What goes into this public debt figure?
Chris talks about  when you add the entitlement programs Social Security , Medicare and Medicaid the obligations exceed $40 Trillion. I'm getting lost . What debt is included in this  $10 Trillion figure? Does this include  Local and State General Obligation (GO) Bonds and Revenue Bonds?  Someone please help give more definition .
Davos's picture
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Re: Treasury seeks "unprecedented borrowing"

Gopbg

Source: IOUSA (ISBN#978-0-470-22277-5)

The US has about $11,000,000,000,000.00 (trillion) in debt.

Add to that figure the current unfinded obligations for Social Security 7 trillion, Medicare's unfinded promise of 34 trillion, of which 26 trillion relates to Medicare Parts A and B and about 8 trillion relates to Part D (the new prescription that was said would save money). Add another trillion in misc. items.

Grand new total to add to the 11 trillion - a whopping $53,000,000,000,000.00 (53 trillion)

So, what the USA really owes is about 63 trillion bucks. Mind you, this predated the "bail out"/Tarp.

That is my read on what is owed. If you use Chris's 40% of GDP is baked (he did his in 2003, I'm guessing it is at least off by 40% these days...) then we owe 654% more than we make. I know that CNN, CNBC and the rest say our debt is 64% of GDP.

Personally, I feel that the US of A is the subprime borower - sucks to be us and china and the middle east are the bank - ugh oh!

I suppose we fudged our earnings much the way a subprime borower did, hope they have a helicopter ben to bail them out when we stick them with the sorry, cant pay the interest on this months note... 

To answer your question, if I understand what your asking? the 2008 Federal Debt (when it was only 9.7 trillion) was made up of the following (book says this is a partial list):

 

  •  interest on debt 244 billion
  • medicare 330 billion
  • defense dep 479 billion
  • social security 610 billion
  • federal spending 2.9 trillion
Put anouther way as of GAO records in 2007 every person in the US owes $175,000.00, or $455,000.00 per household, or $410,000.00 per fulltime worker.
 
take care, 

 

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Re: Treasury seeks "unprecedented borrowing"

Davos,

There are plenty of people here far more qualified than me to give that kind of advice, but how much you make depends on things like your asset concentration, how much you risk, and leverage.

I am having the same type of problem getting people to warm up to this information.  It's hard for some of the information not to give the "next great depression" and survivalist impression.

The problems are accounted for by Chris in explaining the continuum that everybody falls along - from "status quo will prevail" to "it all implodes and we have a new civil order."

So my first recommendation is to tell people you understand their apprehension or distrust of the information.  Tell them it  took you some time and that you're still questioning it.

Then take the lesson from Chapter 20 that risk mitigation is a responsible adult brain exercise.  Something like a new age crossword puzzle.  With so many unknown outcomes - climate change, financial industry, social services, energy, transportation, food distribution, etc., - everybody can contribute valuable information to some variable.  Once they do, they are involved and may just seek more information.

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Re: Treasury seeks "unprecedented borrowing"

Hello Sjdavis:

Thanks. Good advice!

To be honest with you though, I am really fixated on making a few bucks as things go down the tubes. Maybe when they go down a bit people will begin to listen and I pray, change.

I'll try some more then.

Until that time though, I feel my energy will be better spent appying this new knowledge to making my family more financially secure. It will also improve my state of mind by focusing on something positive.

Take care 

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Re: Treasury seeks "unprecedented borrowing"

Well said, JMCSwan!  I posted a similar statement on "conspiracy" in a previous thread.  Conspiracies are the NORM.  For instance, certain types of lobbying could be considered conspiracy since these are groups of people that are influencing law makers to change or create new legislation in order to circumvent the law by making actions and pracitices legal that are currently considered illegal.

I have friends and family who view the world as fairly haphazzard.  Things "kinda just happen" and if you suggest that there was any planning or forethought, especially in terms of larger scale societal and/or structural phenomena, then you are some type of nutty conspiracy theorist.  Things don't just happen...people need to get this through their heads.

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Re: Treasury seeks "unprecedented borrowing"

Hi rlee and jgreco,

About China: the right wording is not that the US 'maintains a good portion of their industrial production', but rather the US consumes a good portion of China's production.

It is not in China's interest to maintain US consumption, nor to keep up their production if they do not get anything useful in return. They are interested in US dollars (rather than US consumption), because the dollar is useful for them:it buys oil, technology, and if necessary goodwil from American leaders (maybe even Taiwan?). So they will continue to produce whatever crap as long as they get good pay for it.

 

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Re: Treasury seeks "unprecedented borrowing"

ajparrillo,

I agree with what you say here. The mainstream in general (media and society) think that things "just happen" and to ascribe some sort of pre-planning to many events is unacceptable.

However, among thinking people (like the denizens of Chris Martenson's website no doubt) the debate arises when it comes to the vaunted grey area.

For example, most people I interact with in my normal course of events think that government manipulation of the stock market to prevent a total collapse is a "conspiracy theory." Whereas I, agreeing with JMCSWan, just take it as a given, and that the real conspiracy theory is believing that such manipulation is not happening.

When it comes to other ideas though I balk, and may use the phrase myself. For example, I don't believe that our current global leaders are merely masquerading as mortal humans but are actually an intergalactic race of reptiles sent here millenia ago to enslave the human race. Because of how my mind operates (after all those hallucinogens) I can never rule anything out, so it comes down to probability for me. And I take the probability of the preceeding to be exceedingly low to the point of being functionably false.

I take market manipulations, war for the sole purpose of select corporate profits, and manufactured elections as a given throughout the world.

An example of the grey area for me would be something like the idea that Osama bin Laden and Dick Cheney are good friends and frequently meet secretly in Dubai to plan out the next few weeks of geopolitical events and, more specifically, the next big one.

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Re: Treasury seeks "unprecedented borrowing"

Davos,

 Sure, I understand the motivation.  Nothing wrong with that.

 It still plays into what the videos teach though.  For example, if you put a higher possibility on a banking system failure than say an automotive failure, then there are many more profit making variables.  To start, that means you have to ask if profit is still going to representated in dollars.  If you think so, then buying puts or selling calls on banks is a great way to profit.  If you don't think dollars are going to be what is seen as wealth or profit, then you need to think like a chess player.  Assuming that we skip dollars, what are other possible stores of wealth, money, profit.  Obviously gold and silver become that once deflation turns to inflation, which at some point it will.  Then there's other things like necessities, such as food and energy.  I'm not sure what the US equivalent is, but Russia's crisis about a decade ago made vodka a very valuable liquid asset - nice pun.  So where you are on the continuum will give you incite into where you can make profits and what your tolerance for risk is.

Also, if you think the markets in general are going down the tubes and want to only risk the actual capital you have, then dip into RSW when you think the rally is done.  It's a 2x's inverse of the SP500 index.

 To answer your questions directly:

1.  The industry still at most risk, IMO, is financial.

2.  Best way to profit may be to let this rally run for a bit and then use a leveraged strategy, realizing that leverage has a lot to do with the mess we're in.  So limit your potential losses. 

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Re: Treasuries undelivered

thanks sateve as one of the uniformed .....yet willing to be informed

could you expand on  your explanation a little.

thanks

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Re: Treasury seeks "unprecedented borrowing"

thanks davos

you would just have to loosen the anchor bolts and jack it up then put the sill sealer  and flashing in.

1 inch caulk and half inch paint work well too.

or add a sweater in winter and run around naked in summer

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Re: Treasury seeks "unprecedented borrowing"

Good follow up, mainecooncat.  I can't agree more.  There is also the added issue with the human mind making sense out of what may appear random.  Our minds want order and we will create order when it is not present by filling in gaps and sometime making leap of association.  Historical events can easily be linked into global conspiracies when looking back and only seeing information that fits...this becomes model/curve fitting. 

I always think about the old addage of "follow the money trail, which requires asking who is benefitting from current circumstances or new circumstances when change occurs.  It is then necessary to evaluate how these circumstances came about and identify power networks and relationships, which establishes relative probablities.  If this information is not clear or hidden, any relative changes of wealth and power may indicate the purveyors of conspiracy...assuming illegal activities.  This is a bit wishy washy, but this is not an absolute science.  I also think of civil court standards of evidence (I admit I stole this from peoples court so excuse if this is over simplification)..."is it more likely than not?"  Again, not absolute, but a good way to establish possible interconnections that can be verified or augmented with additional information.  The key is obtaining as much information as possible and continually gathering that information.

In the end, I try to keep myself in ideoligical limbo, only choosing "sides" if I must depending upon current circumstances and routes I think should be undertaken.  I have developed the perspective that adherance to any one ideology is a self set intellectual trap which can lead to an individual and/or a collective persecution complex leading to societal clevages.  These cleavages allow power players to manipulate and control...thereby enabling conspiratorial networks.

I love these conversations...and I wish this was a global extraterrestrial conspiracy so that I would not be so ashamed of society for being so misinformed and duped.  I, of course, assume that these aliens would utilize higher abilities and technologies to control us....without this outlandish scenario, the responsibility lies at our feet.

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Re: Treasury seeks "unprecedented borrowing"

I think this nail it... I was looking for other reason aside from the obvious manipulation.

 http://www.financialsense.com/fsu/editorials/willie/2008/1030.html

 Until the global interest rate cut was announced, the USFed had not created much new money, despite the numerous rate cuts on the US side. The policy was unconventional and deliberate, with a two-fold purpose to aid Wall Street and to keep a lid on the gold price.

 

 i.e. money are created, but they don't pour into the economy ..so the inflation is a bit subdued for a while.. giving a chance to those who got the money to play their game and make some bucks.

Make perfect sense.

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Re: Treasury seeks "unprecedented borrowing"

I know this is off topic, but please enlighten me.

 

Why does Chris suggest buying gold only? Why shouldn't I buy silver instead?

 

Any insight would be greatly appreciated.

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Re: Treasury seeks "unprecedented borrowing"

This is a great thread.  I've done some background work on the personal connections between members of the crisis management team.  I strongly believe the current market crash has been engineered.  When you dig into the groups people like Paulson and Bernake belong to there is a great deal of intermingling.  These are groups like the Council on Foreign Relations, Group of Thirty, and Bilderbergs.

Here's an excerpt from "Crash the Market and Monopolize It"

"For instance, Hank Paulson was Chairman/CEO of Goldman Sachs and on the board of governors of the International Monetary Fund which is closely tied to the Rockefellers who have the Rockefeller Center at Dartmouth where Paulson went to school. They also owned Chase Manhattan Bank which merged with JPM after Phil Gramm paved the way. They sit on the Senate Finance Committee and have guys like Timothy F. Geithner of the New York Fed in their personal think tank called the Council on Foreign Relations."

There are lots of good stories on market manipulation at:

www.gamingthemarket.com

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Re: Treasury seeks "unprecedented borrowing"

GamingTheMarket:

Let's not forget that Paulson worked for Nixon's plummer. To me, that alone, gives the guy a * * * * trust rating! 

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Re: Treasury seeks "unprecedented borrowing"
along with rumsfeld and george schultz
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Am I the only one to 'get it'?

I'm finding this thread fascinating..... especially the way some of you lot want to make money out of the crash!  Don't you get it?  Capitalism is FINISHED, game over, a new world order is coming, and I doubt money has much of a part in it.  Take these two recent stories that landed in my Running on Empty Aussie list:

 

Alan Kohler
31 Oct 2008

The end of deflationary trade (SHOULD have been called "the end of globalization"!)

The global shipping crash continues to get worse and this morning’s GDP data shows the US recession is already deeper than 2001 and probably 1990-91 as well.

Meanwhile the International Monetary Fund seems determined to make the whole thing worse by imposing the most ruinous strictures on supplicant nations.

Yesterday the Baltic Dry freight rate index fell below 1000 for the first time in six years and last night it fell another 40 points to 885. In June the index was 11,900, so it has fallen 93 per cent in a few months – a crash far worse than anything ever seen in the stockmarket.

The spot daily rental for a Capesize ship is now $6365, down from $234,000 per day over the space of a few weeks. Maybe that previous price was absurdly inflated, but at $6365 it is just $365 above the average daily cost of crews and fuel.

As a result the world’s ports are filling with empty ships because shipowners can’t afford to run them, as well as some full ships because the owners of the cargo won’t unload without a bank letter of credit, which banks are refusing to supply.

<SNIP>

 Which is why global shipping has collapsed: it is the harbinger of the end of the era of trade, in which third-world labour costs kept first world inflation down and allowed interest rates to fall and stay low and debt to be increased to an historic degree.

That process of importing deflation (or, more precisely, disinflation) from developing nations – especially China and India – relied on trade: raw materials in; finished goods out.

The fall in freight rates for both dry bulk carriers and container ships is telling us that it’s over.

 

AND......

 

 

http://www.newstatesman.com/economy/2008/10/european-banks-crisis-imf

Europe's looming crisis

Iain Macwhirter

30 October 2008

It all started with sub-prime loans in the United States. Or did it? As the IMF is called in to bail out failing economies, the scale of European exposure to toxic debt is becoming clear

It was Europe’s dark secret. While American banks were lending irresponsibly to homeowners who couldn’t pay, European banks were lending to emerging countries who couldn’t pay. Europe’s sub-prime crisis has now come home as heavily-indebted nations of the eastern bloc – Hungary, Ukraine, Belarus, Bulgaria, the Baltic states – are collapsing one by one into the arms of the IMF. “Icelandisation” is the new spectre stalking Europe.

And, as with sub-prime in urban America, this latest crisis was shockingly predictable. I visited Latvia at the height of the credit bubble 18 months ago, and it was clearly an accident waiting to happen. Riga, the capital, was bristling with upmarket shopping malls and classy bars that were all quite empty. Stalin-era flats were being sold for $200,000 in a country where the average wage was less than $400 a month. Latvia has hardly any industry, no energy and few natural resources apart from trees. But such was the irrational exuberance of foreign banks like Swedbank, it was awash with credit.

<SNIP>

 When heads of the "G20" group of nations meet in Washington on 15 November for what is being called "Bretton Woods II" they will not just be dealing with a banking crisis. They will be deciding the future of civilisation.

NOW....  I wonder if they will cancel all debts?  To me, it looks like the only sensible way to end the pain.  Start with a new blank slate, a new zero growth system to build the essential sustainable future we have to have while we srill have some oil....

Mike. 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Treasury seeks "unprecedented borrowing"

Hello Damnthematrix:

Dow @ 9325. One could make a lot of money from that point to 4,000 when I would assume they step in and perhaps do what Argentina did and put it in the treasury.

We can buy gold but if history repeats itself http://fraser.stlouisfed.org/docs/meltzer/bogsub040233.pdf and face it, how creative do you think they are today? Then we can kiss gold so long.  

I'll take all the worthless $ I can get. What else do you propose? Write Congress? Did that. Talk to your friends and family? Did that. Stock up? Did that. Buy some PM? Did that.

There are some billionaires who made a ton of money off the subprime mess. Call me dumb but if there is a new order coming I'd rather have a few things to trade....

Believe me, I don't disagree about what you are saying... 

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Treasury seeks "unprecedented borrowing"

I'm with you, Davos. 

Someone will make $ from this and it might as well be us. No one will be looking out for our families if we don't. Keep sharing any ideas. Inflation vs. deflation; timelines; how to survive and thrive..big questions, no easy answers, IMHO.

 

SG

 

 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Treasury seeks "unprecedented borrowing"

Hello CapeSurvivor:

http://globaleconomicanalysis.blogspot.com/ on "Mish's" site I found a link to 3 "Implode-O-Meters". I'm going to check them out. I think we are going to use puts, as our "risk" will be fixed, and our profit will be dependant on how bad things get - these days that is all I see.

Buffett picks companies who are worth more than they are selling for and will appreciate.

My nutty idea: I want to pick companies who are selling for more than their worth and failing fast.

Take care. 

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Treasury seeks "unprecedented borrowing"

I guess you could check insider sales and short interest on the companies you (dis)like, unless you're trying to find undiscovered crummy companies!

 

Good luck.

 

SG

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Treasury seeks "unprecedented borrowing"

Hello CapeSurvivor:

 

Super, let me be niave, what is the best way to do that?

 

Thanks in advance! 

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Treasury seeks "unprecedented borrowing"

Well,

 

Very recent insider sales I think you might need to pay for with a subscription service. I don't short or buy puts but I suspect that www.bigcharts.com or www.yahoo.com (their finance section). might give you this info. I think Barrons carries the "Short List" every week; you can buy or look at in libe. As a last resort, Google what you want to find and some free stock site probably has most of it. Good luck; let me know what happens.

 

SG

SlipKid727's picture
SlipKid727
Status: Member (Offline)
Joined: Sep 7 2008
Posts: 1
Re: Treasury seeks "unprecedented borrowing"

Insider Trading: http://finviz.com/insidertrading.ashx

Short Interest: http://quotes.nasdaq.com/asp/MasterDataEntry.asp?page=short

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Treasury seeks "unprecedented borrowing"

Great, 

Good sites for our man. 

There's always someone who knows more.

 

SG

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Treasury seeks "unprecedented borrowing"

Hello CapeSurvivor & SlipKid727:

Thank you both! I greatly appreciate the info!!!

Take care. 

caroline_culbert's picture
caroline_culbert
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 624
Re: Treasury seeks "unprecedented borrowing"
[quote=capesurvivor]

I'm with you, Davos. 

Someone will make $ from this and it might as well be us. No one will be looking out for our families if we don't. Keep sharing any ideas. Inflation vs. deflation; timelines; how to survive and thrive..big questions, no easy answers, IMHO.

 

SG

 

 

[/quote]

 

"Tragedy of the Commons"

http://en.wikipedia.org/wiki/Tragedy_of_the_commons

I think this is one of the reasons for the failure of this country.  Many of us think:  "They're going to do this; why not it be us?"

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