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.

https://markets.businessinsider.com/news/stocks/us-debt-surges-1-trillion-ray-dalio-crisis-warning-2023-7

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

RE

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.

https://markets.businessinsider.com/news/bonds/bond-market-crash-what-are-treasury-yields-stocks-economy-americans-2023-10

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.


RE

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.

https://markets.businessinsider.com/news/bonds/us-debt-interest-payments-federal-deficit-treasury-bonds-fed-hikes-2023-11

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

RE

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.

https://markets.businessinsider.com/news/bonds/ray-dalio-us-debt-crisis-outlook-federal-deficit-interest-payments-2023-11

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

RE

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?

RE

Stupidity like this makes my head do Exorcist spins.

Even if it was true, the household wealth isn't fungible.  You would need to find a buyer for it.  Who is going to buy all this stuff at whatever the market price you value it is?  In a firesale of these assets, the price will drop like a rock.  Besides that, $34T is just the Federal debt.  We also have FSoA Household debt and Corporate debt.  Household debt is $17.3T, corporate is $10T.  Add that all up, you're at around $60T.

So, if you were to pay off the debt, you would need to sell assets to get the money to pay it.  What's the total FSoA money supply?  As of 2023 Q3, it was at $20T.  There isn't enough money around to buy even 1/2 of the total debt around.  To get more money, you would need to take out more debt, that's what the money is.  The FSoA would need to sell more USTs, thus raising the debt.  You can't win at this game.

Nevertheless, you have Fed economists who say stupid shit anyhow.

https://www.businessinsider.com/us-debt-household-wealth-federal-default-deficit-interest-rate-costs-2024-1

Don't worry about US debt because household wealth is 4 times bigger, former Fed economist says

RE

Even more than Peak Oil in 2018, the hopeless condition of global debt brings the Day of Reckoning, better known on these pages as SHTF Day, into ever closer proximity.  As Nicholas Taleb puts it:

"...We need something to come in from the outside, or maybe some kind of miracle...This makes me kind of gloomy about the entire political system in the Western world."

Since I don't believe in Miracles, I am quite certain the rapidly ballooning debt bomb is going to blow quite spectacularly, and just as lights won't function once the electricity stops flowing, just about all economic activity will cease when the smartest guys in the room can't shuffle the deck of debt anymore.  It's a game of musical chairs where everyone can keep playing as long as the music is going, but when the music stops they'll find 10 chairs to sit on with 100 running around in the circle.

About the only thing I quibble with here is the "Western World" limitation, because there is no real separation between East and West any more,  Globalism got rid of that.  Political systems will crumble everywhere at anything above the tribal or town size level where people can actually gather together in a room and figure out together what they are going to do to hold together.

This doesn't mean imminent extinction any more than Peak Oil does, it just means that every system we have will have to be rebuilt from the ground up.  In that sense it's a great opportunity.  If it wasn't for the fact millions of people will starve, it would be unequivocally a good thing.  Our current systems are so hopelessly corrupt there's no fixing them individually and piecemeal.  It's all too interconnected for that.

The FSoA Debt Bomb is the biggest of many big bombs ready to blow, and serves as a lynchpin for all the others.  The Day of Reckoning draws near.

https://dailyhodl.com/2024/02/10/201000000000-piled-onto-us-national-debt-in-one-month-as-black-swan-author-warns-america-facing-financial-death-spiral/

$201,000,000,000 Piled Onto US National Debt in One Month As Black Swan Author Warns America Facing Financial 'Death Spiral'

RE

When you state the payment on interest alone has reached $1 trillion a year that is a staggering figure. Makes me one wonder why this didn't grab more headlines. I think the issue here is as one gets closer to an active volcano the more one gets blind to its dangers and effects. We are currently in that twilight zone.

Saying that, for all the US's financial woes they are the best horse in the barn. If you are not satisfied with the stability of the US dollar, where do you invest your hard-earned cash? Is it on assets, EURs, RMBs or pound sterling? To avoid being eaten by the bear you don't have to be faster than the bear. You only need to be faster than the slowest person running from the bear. Who will the bear eat first? That is the big question!

Quote from: monsta666 on Feb 12, 2024, 03:03 PMTo avoid being eaten by the bear you don't have to be faster than the bear. You only need to be faster than the slowest person running from the bear. Who will the bear eat first? That is the big question!

Works with bears who hunt alone, but not with pack hunters that go after whole herds.  The pack will surround and stampede the herd to a cliff and drive them over it, then feast on all the animals with broken  legs.  In this case, the herd animals are the currencies, and the pack hunters are the Bond Vigilantes.  The whole bond market is likely to collapse, not just USTs.

RE

The magic of compound interest and the exponential function.

Anybody up for a game of street hockey?  We have the stick.



High sticking allowed for Da Goobermint.

https://www.cnbc.com/2024/03/01/the-us-national-debt-is-rising-by-1-trillion-about-every-100-days.html

The U.S. national debt is rising by $1 trillion about every 100 days

RE

tick toc, tic tok.

https://watcher.guru/news/brics-bank-of-america-issues-warning-of-us-dollar-collapse

BRICS: Bank of America Issues Warning of a US Dollar Collapse

RE

The Bond Vigilantes have awoken!

The market for USTs is in freefall, and unless Da Fed can magically conjure up a buyer for the massive number of bonds they need to issue to keep rolling over the debt, things could go south in a very big hurry.



Add to this the fact that the M2 Money supply has dropped over 2% for the first time since the Great Depression, and we're looking at a Perfect Storm of economic indicators FLASHING RED as we move toward the 3rd Quarter of 2024.  As you recall, my prediction was we would see financial mayhem arrive at this time.

Going into the POTUS election of course, this bodes ill for Uncle Joe, which means we will have The Donald in charge of keeping the Titanic floating after hitting the iceberg.  I think that about guarantees the same result.



https://finbold.com/u-s-economic-apocalypse-imminent-government-debt-market-collapse-begins/

U.S. economic apocalypse imminent? Government debt market collapse begins

RE

The article sez Private buyers are "stepping in" to buy he USTs the Chinese no longer want.  Which maybe they are to an extent as long as the interest rates stay high, but even with high interest rates there's no way the private sector can absorb a full-on dump of USTs by the Chinese if/when they choose to do so  They simply hold too much of this Toilet Paper  Right now they're dumping in slow, measured amounts because a full on dump would crash the market.

It's just a matter of time because Everybody Knows this debt can't be paid, at this point even just the interest on the debt is greater than the miiitary budget.  All the Chinese are doing is biding time until they have the BRICs currency and a replacement for the SWIFT payments system fully in place, and ste by step, that's coming to pass.

This is the real Sword of Damocles sitting on top of the whole global geopolitical battle, the only unknown is when it will blow.  It may just evolve, or there may be some geopolitical trigger.  Either way, that's when SHTF Day arrives.

https://unherd.com/newsroom/chinas-record-us-debt-sale-threatens-western-alliance/

China's record US debt sale threatens Western alliance

RE

Decent explanation of why we're drowning in debt and why the rich are getting richer and the poor poorer, but though understanding the problem is the first step necessary to solve it, how to solve this except with a total economic collapse isn't explained.  Of course you need debt forgiveness, but "wealth" of the rich IS the debt of the poor.  Every dollar of debt on J6Ps balance sheet is a dollar asset of the balance sheet of some rich scumbag who has some securities or bonds in his portfolio he collects the interest J6P pays.  The TBTF Banks and Federal Reserve are just the intermediaries between the borrowers and the lenders, who collect on the spread, the difference between the interest they pay to borrow money vs what they charge to loan it out.  Wipe out the debts, you wipe out the assets with them.

Add to this also the fact the debt has been rehypothecated many times over, where debt is used to buy one asset which then is used as collateral for debt taken to buy another asset...rinse & repeat % or 10X over.  Anywhere in the chain somebody goes bankrupt the whole house of cards comes tumbling down as the creditors demand assets be liquidated to pay debts.

Once the cascade gets rolling, liquidating assets to pay of the debt becomes increasingly difficult, as you can't find buyers for them.  An office building sold 6 years ago with a $250M mortgage on it goes at auction for $1.5M.  The other $248.5M is a loss the bank has to write down.  Except the bank doesn't have $248.5M of its own money, it only has 5% of that.  The rest is money that has been loaned to the bank in the form of deposits.  When the bank goes belly up, depositors lose the money, except for $250K each covered by the FDIC.  All the rest of the debt goes into the RTC, the Resolution Trust Corporation.  This is a massive "Bad Bank", where unfunded liabilities from bankruptcies gets dumped.  Like Lifetime Pensions from bankrupt biznesses.  Pensioners then have their pensions slashed.  Exactly where the RTC gets money to pay out anything at all is something I have never been able to figure out.

So anyhow, because nobody really knows how to exit this loop without causing a massive crash, they keep on tryin to loan out more money, but find it increasingly difficult to find credit worthy borrowers.  Interest rates rise, you get your crash anyhow.  That's where we are now.  It's coming, Everybody Knows.
[/i]

https://www.analystnews.org/posts/how-our-global-addiction-to-debt-has-widened-inequality-hacked-democracy-and-crippled-the-world-economy


RE

A long article it will take a while to digest.  A prime candidate for some dynamical analysis.  I am busy embedding the original Dynamo users manual under a book icon now.  I have to generate the all text from images.  A lot of work but it is an elegant way to document what the software will do.

QuoteBut everything we've spoken about has focused on this kind of boom-bust cycle; what I've been doing over the last few years is asking a deeper question, which is why are we in this situation in the first place? Think of the good times before a recession. Why did we have to rely on debt to generate demand? Why do we need to borrow in the first place? You can talk about being lenient on consumers in times of collective trouble. But why do we get ourselves into that situation in the first place? If your economy is going into these crises repeatedly and seems to be addicted to debt, we have to ask what's going on.

Model it in equations and see what happens with different policies.