3 day into the month - another $169 B borrowed by US gov't ...
(snip)"Three days into the month, and the Treasury has already redeemed $169 billion in debt, of which $137 billion in [ < 1 year maturity Treasury - sic ] Bills. Run-rated (for Bills alone) this is about $5.5 trillion annually, or basically 63% of all marketable US debt. And somehow the Treasury is lowering the amount of new bond issuance beginning next week. We wonder just where Tim Geithner will get the much needed cash to plug not only the increasing daily deficit spending (today alone the US burned $21 billion net of debt transfers, gross the number was even worse), as well as to fund daily rolls once rates start eventually increasing. This is financial suicide, although the Treasury knows that all too well. It is now stuck in a corner and has no way out than to hope for the best.
Total US debt today was $13.06 trillion. Total debt on March 6, 2009 was $10.95 trillion. The government has spent $2.1 trillion dollars to create a bear market rally which has now fizzled, and to fund a fiscal stimulus that is now dancing its death rattle. GDP will now gradually roll over, the unemployment rate will once again start increasing, diffusion indices, manufacturing and all other economic output will begin declining, but not before the bill is in. It cost Americans $2.1 trillion in debt to generate a 14 months sugar high (for which all will promptly receive a much higher tax bill). Luckily, we will never pay this debt off, so perhaps "the joke is on them" after all."(snip)
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To put this in simple terms, the gov't now needs to spend much more money than it is actually taking in via tax revenues in order to fund current spending obligations ... from gov't worker paychecks to federal unemployment benefit checks to medicaid reimbursements to stimulus projects to whatever. In order to do this, the Treasury 'prints up' new bills or bonds out of nowhere, sells these bills or bonds at auction, and uses the cash it receives to meet current spending obligations. However, every new bill or bond sold also carries with it the obligation of US taxpayers to 'pay back' the money it received at the auction sale, with interest !
Actually doing this would require that the gov't abruptly stop spending more money than it takes in via tax revenues to fund current spending obligations, and divert the excess toward (re)payment of these bills and bonds ! Where Treasury bills are concerned, this would have to happen in a time frame of less than one year. And actually reducing gov't spending below the level of actual tax revenues would require firing hundreds of thousands of gov't workers + cutting SSI benefit payments + cutting medicaid / unemployment benefit payments + other cutbacks across the board - which is beyond impossible for Americans to accept ( look what has happened in Greece when such austerity measures were proposed as a condition of the EU bailout). Thus something must be done to change the basic repayment equation !!!
Option one for changing the equation is for the gov't to enact MASSIVE tax increases in order to increase tax revenues such that these T bills and bonds can be paid back with 'current' US dollars ( with associated economic effects of increasing taxes significantly on every American individual and business). Option two for changing the equation is for the gov't to simply start printing up additional US dollars at warp speed such that these T bills and bonds can be paid back with 'devalued' dollars ( with associated economic effects of increasing inflation / interest rates on every American individual and business). Option three for changing the equation is an out-and-out general default by the US gov't on its T bill and bond debt repayment obligations to ALL holders of US T bills and bonds ( with associated economic effects that are too shocking to think about i.e. the USA quickly changing to the point of economically resembling a 3rd world country). And option four for changing this equation is for the US gov't to forcibly 'erase' T bill and bond debt repayment requirements but only to specific large owners of those T bills and bonds ( with the major owners being the Chinese and/or middle eastern Oil Shieks ).