"The government is expected to offer $2.5 trillion in bonds this year to cover shortfalls. They aren't going to be able raise that much, much less whatever it takes on top of TARP 1.
I don't know if it will be one month or 6 months, but the FED will be stepping in to buy treasuries. China and Japan's exports are collapsing. Not enough dollars to come back and fund our debt. We will either print money to fund our deficit, thru the FED, or we'll just put a halt to the stimulus and deficit spending. We're in deep s***.
The primary brokers of Treasury debt are already experiencing a supply overhang and we're just getting started. They won't be able to get rid of it within months. Go to bloomberg and do a search for "supply overhang". We're looking at weekly auctions of $50 billion +.
"Economists expect reports this week to quash any lingering hope that the economy might be approaching a bottom." - From front page of Marketwatch.
Economically speaking, this is unlike anything the world has ever seen."
China will buy our debt for two reasons:
Even with the prospect of Argentina-like inflation, US Treasury securities look like the safest investment out there; and,
China will do everything it can to make sure that US consumers are able to purchase Chinese products.
I can even conceive of a situation where China will borrow money just so it can buy US bonds if export revenues continue to fall.
Whether China, and the rest of the world, can buy up $2.5 trillion in Treasury securities this year, well....that’s a different story.
Treasuries Post Weekly Loss as Auctions Highlight Supply Issue
Becuase the problem is a cash-flow problem. As long as the money was going around, it could keep happening. Now, one hiccough, and the system falters, stumbles, and ....?
One thing is certain, a lot of dollars are being pumped in one end of the pipeline, and they do not seem to be coming out anywhere. Someone is jamming the pipes or playing with the valves and is going to profit hugely from it.