Italy and Greece don’t have to default to cause Uncle Sam a serious rash

Agora Financial ^ | July 11, 2011 | Addison Wiggin

[Vintage Freeper]

According to this report by the Bipartisan Policy Center, just over $500 billion in U.S. Treasuries mature in August 2011. (If you’d like, you can read the entire report right here. But for quick reference, just check out the chart on Page 33.)

To “roll over” that debt, the Treasury must auction new debt in its place. They’ll use the proceeds of the new debt auction to pay off the old debt.

To add insult to injury, that $500 billion rollover is on top of an August deficit of roughly $150 billion (Page 12 of the report.) Assuming, of course, that the debt ceiling gets raised, the U.S. government will then have to issue $650 billion worth of new debt in August alone. By comparison, that’s more debt than the entire QE2 debt-buying campaign... in one month... without the Feds as the backdrop to buy the debt.

Beyond August, it doesn’t get better.

According to a separate report from the United States Government Accountability Office, just over $3 trillion of debt matures during the next four years.

Somehow, someway, the Treasury will have to find a way to roll over at least this amount plus any additional spending. What happens when that much debt is issued... without the Federal Reserve standing by with its checkbook?

The Bipartisan report explains that “Treasury will have to pay higher interest rates to attract new buyers... [or] it is possible, if unlikely, that not enough bidders would appear.”

The latter scenario means a government default.

[Vintage Freeper]

Does the road to good intentions always pass between a rock and a hard place?

Government, and lot of others, have been promising free lunches for so long that free lunches must exist someplace. Is that what we are going to find at the end of the road when we get to the good intentions?

The beauty of the intrinsic value of all that paper is that it conceals the problems where they can't be seen by papering over the rocks and hard places. Sadly, it only works until it all goes up in flames at the end of the road.