Posted on 01/20/2022 6:41:46 AM PST by Browns Ultra Fan
Treasury Secretary Janet Yellen is having trouble with the curve (yield curve, that is). It keeps inching up, meaning that Treasury’s cost of debt financing is inching up too.
As Treasury yields keep rising, so does the problem of financing the massive Federal debt load. Here is a chart showing the interest outlays in the Federal budget against the cost of Federal funding at the 10-year and 2-year tenors.
Now, The Fed is predicted to raise their target rate 4 times in 2022 (according to Fed Funds Futures data) and it looks like a whopping 100 basis points (or 1%). Holding the rest of the yield curve constant, this will considerably flatten the 10Y-3M Treasury curve. Resulting in a more expensive refinancing of the Federal Debt load.
If we look at The Fed’s System Open Market Holdings (SOMH), we can see that The Fed’s holdings are primarily Treasuries with non-Treasuries (primarily agency mortgage-backed securities) not maturing (or running off) until 2050.
The majority of The Fed’s COVID expansion was picked-up by The Fed (light blue line).
With Congress trying to spend trillions more (since Build Back Broke failed, Democrats are producing MORE spending legislation with the voting act included, of course), Treasury is going to have progressively more trouble with the (Treasury) curve.
(Excerpt) Read more at confoundedinterest.net ...
I’ve been watching the price of silver and gold for a while now and noticed they both seem to be “breaking out” again. If they raise rates - rather than just threaten to - gold ALWAYS goes up. Eventually the market will expose the “real” value.
Something happened yesterday at 08:15.
Graphs here:
https://silverprice.org/
https://goldprice.org/
I have worked with business headed toward bankruptcy. They are cash flow managers. As long as they have any source of cash there is no problem. Then the cash stops and it is the fault of whoever stopped the cash.
How did the cash flow stop for the Soviet Union?
“How did the cash flow stop for the Soviet Union?”
The problem with the USSR was that without a market system the command economy relied on the notion of “work hard or you will be shot.” Once Gorbachev removed the heavy handed restrictions workers stopped showing up and the economy collapsed.
The problem with the USSR was that without a market system the command economy relied on the notion of “work hard or you will be shot.” Once Gorbachev removed the heavy handed restrictions workers stopped showing up and the economy collapsed.
At some point the cash flow will stop here also.
If you’re having trouble earning money on your investments then look no further than your competition, the federal government. The federal government is investing money at 1%. Why would businesses pay any more for your money?
Not exactly. Reagan properly understand that the Soviet Union had a third world economy. He setup a plan to cut off hard money revenue sources, the biggest being oil and gas exports. Baker as Treasury made the dollar super strong which, along with getting the Saudi to pump like crazy, collapsed the price of oil to $10, starving the Soviet cash flow.
We can see it coming. I am going to use the word no but it’s mostly reduced. No cars, no electronics, no container ships unloaded, no trucks going to/ from Canada, no store re-supply, no Christmas retail surge, no workers, …
Sky high asset prices, wages going up, prices goin up faster …
I make more but everything costs more but yet it’s not in stock. Eventually GDP will start falling. I am not sayin just 0.01% either. When that happens debt to GDP will start looking real bad. It already looks like LA but it will look like LA after a major earthquake with leadership that is so incompetent…
The market always prices these rate hikes in before they happen.
“Not exactly. Reagan properly understand that the Soviet Union had a third world economy. He setup a plan to cut off hard money revenue sources, the biggest being oil and gas exports. Baker as Treasury made the dollar super strong which, along with getting the Saudi to pump like crazy, collapsed the price of oil to $10, starving the Soviet cash flow.”
It’s true Reagan did this, and it was a good policy, but the overall effect was very small. Trade was never a large part of the Soviet economy, and the majority of it was with their satellite countries. It’s very hard to see these policies being any more than a minor contributor to the collapse.
“As Treasury yields keep rising, so does the problem of financing the massive Federal debt load.”
This is what I call a “win-win” situation. Not only will government debt creation and currency devaluation get stalled, but the citizenry might actually be able to earn interest on our savings again.
We are so screwed, and it is intentional. Cloward-Piven. The Great Reset. Call it what you want. Between vaccine murder and fiat money devaluation, we are so screwed.
Kiss the middle class good-bye.
They won’t stop printing just because the electronic ledgers counting the national debt soar. They will continue printing until financial collapse. They don’t care. In fact, I think they want financial collapse. Never let a crisis go to waste.
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