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FSoA Sovereign Debt Hockey Stick Blues

Started by RE, Jul 14, 2023, 05:49 AM

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While Commercial RE and CMBS are certainly a huge problem for the banks, the exponentially growing sovereign debt here in the land of Good and Pllenty is the elephant in the room.  Testing the hypothesis "Debt doesn't matter", how long will the trick of piling on more debt to pay old debt keep working?  Not to mention of course, who besides Da Fed (directly, this is illegal) is out there to buy all this debt?  You think the Chinese want any more of this trash?  Belgium with backdoor funding from Da Fed?

Of course, DEFAULTING on the debt is out of the question, even just defaults by pipsqueak countries like Greece and Argentina gives banks the heebee jeebees.  So how does it end?  One of these days we'll find out, just hope I am still above ground when it comes.  Should be something to behold.

The debt crisis Ray Dalio warned of may already be happening as US borrowings surge by $1 trillion in just weeks



Here we go...

As James Carville said

I used to think if there was reincarnation, I wanted to come back as the president or the pope or a.400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.

There is no bigger Red Flag in the world of macroeconomics indicating a crash is underway than when the Bond Market, led of course by the premier instrument of debt in the world US Treasury Bonds, takes a major dive and heads south for the winter.  With yields now surpassing 5% and rising, the stock market, real estate, gold and every other form of investment you can imagine is now under siege.  This because with that rate of return, you can expect your "safe" investment in USTs to outperform any of these other means of trying to make money from money.  Nobody believes at the moment that the FSoA Goobermint will ever default on its debt, so if they can get 5% by lending to that ever deepening money pit, they continue to do so.  The almighty Dollar is of course based on the "full faith and credit of the FSoA".  Dollars just represent the opposite side of the ledger, it's a note of zero duration you can use to pay for things, and it is backed, each and every one, by a UST bond.  Efectively what tht means is thatas the yield on the bond goes up, the value of the dollar on the other side of the ledger goes down.

How much further down does it have to go before all hell breaks loose?  No clue there really, but I suspect if/when we hit the next milepost of 6%, like when the DeLorean hits 88 miles an hour, we're going to see some serious shit.

Bonds' record-breaking crash is a threat to stock prices and American jobs. Here's everything you need to know about the Treasury-market turmoil.



It was only 42 years ago on Oct 22, 1981 the the FSoA National Debt first reached $1T.  I remember because I saw the Digital Counter downtown they had simulating what the debt was by estimating it's annual growth.  That was fairly easy to do in those days because it could be approximated by a linear function.  Not so anymore.  Now just the INTEREST which must be paid every year on outstanding old debt has surpassed $1T.  That has to be paid first, before anything else, even the Military.

The Hockey Stick has truly arrived, with the inflection point on the curve coming between 2021 & 2022.

That is all she wrote.  You don't need any other financial explanations from gurus regarding inflation and interest rates etc to know that it is now IMPOSSIBLE to pay off the debt, and it's going to go up so fast it will make your head spin.  That's why the bond auctions are over saturated and they can't find enough buyers for the debt.  The number of bonds they have to sell now every month just to make interest payments is enough to choke on.

Even so, you get stupid statements like this coming at the end of these articles:

If US debt is not brought under control over the next few decades, a default of some form may be unavoidable, according to a Penn Wharton Budget Model.

Decades?  hahahahahahaha.  How about months?  Or weeks even.  With the current slope of this graph, interest will be at $2T inside of 3 years.  WTF is going to buy this shit pile of worthless paper?

SHTF Day has arrived for the FSoA National Debt clock.

US debt interest payments surge past $1 trillion yearly pace, worsening concerns about massive borrowing



Now, it is no surprise that when I warn that the FSoA Debt has reached the point of no return, where interest rises faster than income and it becomes a mathematical impossibility to pay down debt, nobody cares and nobody pays attention.  I am a nobody aging crippled ex-blogger who lives on the edge of poverty.  Somewhat more surprising though is that when a Billionaire Hedge Fund manager says the same thing, nobody cares and nobody pays attention either! lol.

This is the hallmark of a systemic problem.  When even people with immense wealth and power have just as little power to change our headlong rush into collapse as the most insignificant people, the problem lies in the system itself, not the people running the system.  That's why it doesn't matter who gets elected as POTUS.  Jesus Christ & Buddha on the same ticket wouldn't make a difference as long as the capitalist system and the international banking cartel control the global economy.  Ray Dalio is of course a major beneficiary of this system so he doesn't really want it changed or believes it should be changed, but even if he did he wouldn't be able to do a damn thing about it.  To change it would take minimum 100 Ray Dahlios all sitting around a big table together and deciding collectively that they would all take all their wealth and power over the Bond Market to bring down the government of every country on earth by not buying their debt.  This would of course bring them down at the same time, because Goobermint debt is what Private wealth is based on.  So obviously, they will never do such a thing.

Now, normally in the past when the situation arises you have numerous Goobermints all going broke, they all go to war with each other.  Then the rich folks loan money to both sides to fight the war, and then they collect the assets of the countries that lost the war.  Doesn't matter which side loses, the rich folks collect either way.  The winning countries attempt to recoup the money they spent to win the war by charging the bill to the losers.

This time around, it's unclear which countries the rich people will place their bets with and how much, and even more unclear is what would be left to take as payment once the war is finished.  It's not clear how to even fight the war or how to prosecute it once a few critical systems are taken out, like the electrical grid and telecommunications network of your own country.

So, in the end the same thing happens as if the Billionaires sat around the table and shut it all down, it crashes either way.  War is inevitable either way also.  Once it reaches a oint whether the remaining energy supplies go this way or that way and there's not enough to go both ways, we will get the war on even bigger scale then Israel in Gaza.  That is just a playground scuffle.  The main card is still to come.

Ray Dalio says US is reaching an 'inflection point' as debt starts rapidly accelerating



The Big Short.  I've been meaning to watch this film for a while, which dramatizes the guys who saw the big housing bubble and made a killing Shorting CMBS and CDOs prior to the crash in 2007 which took down Bear Stearns and Lehman.  It got me thinking about all the current problems ongoing in the housing market and with the ballooning federal deficit, which I now believe is all a direct outcome of what was done then to prevent a complete collapse of all the TBTF Banks and the monetary system as we know it.

OK, what do we know?  Prior to the crash, many subprime mortgages were issued to people to buy homes they couldn't afford.  When the interest rates were reset in 2007, these people defaulted, then the banks got bailed out on the bad mortgages.  The people got tossed out of their homes, but the homes didn't disappear.  They had to be resold, eventually.

The prices on homes dropped for a while, but over time with inflation all those houses eventually did get resold, or rented out.  Meanwhile, over the same period of time, there is substantial immigration and a new generation of potential home buyers has grown up.  College grads in 2008 are now in their mid 30s and theoretically should be starting families and buying homes.

Except that not enough new homes have been built over the last 15 years as the overstock was sold off,  now resulting in a shortage, which drives the prices up higher.  Add in rising interest rates now, and this means almost nothing is selling or buying.

Where does the deficit fit in here?  Well, the big bailouts were made public, but somehow despite the fact this whole bullshit system crashed, for the last 15 years people have still been buying and selling houses which are going up in price, but incomes not so much.  So, I think in some way to keep the housing market going, the federal government has some mechanism to keep funneling money into that market.  Where else could it all be coming from?  Why the sudden spike right now with the hockey stick of goobermint borrowing?

To put this in terms of The Big Short, a few guys saw it coming and shorted the banks by taking out insurance contracts on them failing.  What should be happening now is shorting the FSoA Goobermint, but so far nobody has the balls to do that.  Because nobody believes Da Goobermint will default.  They would print the money to pay the debt, so it is believed.  Except unsecured debt would be worthless, and so would the currency.  You could short the dollar for that evwntuality.

Just like the housing bubble, the bubble we have now is Government Debt, and it also must pop.  When though?  And who has the money and balls to do The Biggest Short?