[truecougarblue]

+1 Got gold?

[Cloud9]

Tax, borrow, print, there is a fourth option, default!

[Ludi]

TS is going to HTF.

When?

[Chuckmak]

In exactly 42.345 seconds, Ludi. Be ready.

[Daniel_Plainview]

Anyone care to take bets on when the US Treasury will have its first failed bond auction?

If China's economy continues to tank (and/or if China wises up and tells the US to pound sand expletive deleted by eastbay, it could be sooner than we think.

My guess is May, 2009.

[truecougarblue]

Tax, borrow, print, there is a fourth option, default!

With the other three options you don't need the fourth, and the third is tantamount to default.

[shortonoil]

DoomWarrior said:

Anyone care to take bets on when the US Treasury will have its first failed bond auction?

The first Treasury auction will fail when bond yields stop going down. At the present time there are no investors left in the bond market. The only ones remaining are speculators. There is not an investor on the planet who is stupid enough to believe, at this point, that they will get their money back at maturity from 10 or 30 year paper. NO ONE!

Everyone is speculating that interest rates will keep going down, pushing up the face value of existing paper. Once that decline in rates has stopped, BOOM!
Available Energy

[truecougarblue]

How many times can interest rates go from 18% to 0% in one's lifetime?

[Sixstrings]

Anyone care to take bets on when the US Treasury will have its first failed bond auction?

Well, a failed US bond auction would certainly be an undeniable milestone in TS inexorably flying towards The Fan.

[seldom_seen]

Gotta hand it to Ilargi, a good writer with a talent for explaining the real sh1tuation. I liked this one:

I saw a Washington Post headline today that read: ”Obama Scores Early Victory of Historic Proportions". Now there may be all sorts of political agenda's among reporters and editors, and people may genuinely see things in different ways, but that headline is nothing but a huge pile of horse nonsense.

Then you wonder why all these newspapers are going out of business. They're like the banks. Bankrupt. Who would pay hard earned money to read these newspapers? As Thomas Jerferson said, "The man who reads nothing at all is better educated than the man who reads nothing but newspapers." I saw the same thing on the Seattle Times today...front page news basically saying that His Lordship Obama had just conquered Mt. Everest without oxygen.

[Gerben]

Treasury bond auctions will never fail because there is a buyer of last resort: the Fed. When nobody else wants to buy they create money to buy it anonimously.

[uNkNowN ElEmEnt]

Well, isn't that what just happened? Wasn't it the 5 year paper last week? No one was buying so an "annonymous buyer" popped in at the last minute to the tune of something like 750 Mil?

There is only so many times they can do this though right? This paper is the last bubble, only speculators are buying cause they are hoping joe average is stupid enough to buyin following the pack and then when the leave and it tanks, guess who is left holding the bag. The Shyte has hit the fan, just no one is admitting it yet. They've pulled the plug, they're just waiting for the body to give up its last gasp.

[Gerben]

The Fed won't admit to prevent a negative impact on market sentiment. So we might never know.

If they did, then that still might not lead to a quick collapse. The US economy is surprisingly strong. I wouldn't be surprised if the US gets away without a major collapse and just a 'lost decade' instead.

[uNkNowN ElEmEnt]

What do you mean loose a decade?

[Gerben]

A decade with no or very little economic growth.

[uNkNowN ElEmEnt]

How does that fit in with the current credit contraction though? would it have to loosen with the stimulus and kind of balance out for a few more years?

[shortonoil]

How many times can interest rates go from 18% to 0% in one's lifetime?

Technically, an infinite number of times. They can cut to half then in half forever. Practically, cuts with a differential of 1/128 could still attract speculative buyers.

Treasury bond auctions will never fail because there is a buyer of last resort: the Fed. When nobody else wants to buy they create money to buy it anonimously.

I think that it is a common misconception that the FED can print money forever with impunity. There are several reasons why this can’t be done:
1) Foreign bond holders would soon drop their Treasuries (which are now a third of all outstanding notes) creating a collapse of world markets. US Treasury notes would become worthless on the market, and the US would have no way of purchasing the foreign goods that now constitute 37% of its GDP.

2) Every time the FED buys Treasuries with “naked currency” it is paid for by a decline in asset values in the economy. The US has long since run out of unencumbered assets. The credit markets stop functioning (which they have) and the entire economy comes to a stand still (which is what is happening).

3) If the FED is the only one buying US Treasuries then money is only flowing from the FED to the government. The government economy is the only one operating, and the other 2/3’rds of the economy collapses. With no tax receipts the “full faith and credit” of the US government soon becomes worthless (that is what is happening now).

4) As the Treasury continues to issue notes and bonds the value of those instruments contracts. Interest rates go up and the US government can no longer service its debt except by issuing more paper that soon no one wants. Then the government can not fund itself, and collapses. (we are only a few trillion away from that).

There is only so many times they can do this though right? This paper is the last bubble, only speculators are buying cause they are hoping joe average is stupid enough to buyin following the pack and then when the leave and it tanks, guess who is left holding the bag. The Shyte has hit the fan, just no one is admitting it yet. They've pulled the plug, they're just waiting for the body to give up its last gasp.

Harvard’s Mathew recently said, “American’s can not face economic reality”. So true!

The Fed won't admit to prevent a negative impact on market sentiment. So we might never know.

We will know. It will show up in M2, and the Treasury and FED reports. Eyes all over the world are watching where every one of those bonds go.
{quote]If they did, then that still might not lead to a quick collapse. The US economy is surprisingly strong. I wouldn't be surprised if the US gets away without a major collapse and just a 'lost decade' instead.[/quote]
The strength is an illusion. We make very little, we spend more than we take in, and we borrow the difference. The difference is huge! The illusion is there because the Bretton Woods Agreement made the US dollar the world’s reserve currency. After Spain, Greece, Ireland, and half of the Eastern European countries default on their national debt, the US dollar will be no one’s reserve, to say nothing of its currency.

If we base our estimates of the outcome on a hard physical science, thermodynamics, rather than the Epiphany of economic miracles we get some interesting figures:
Jobs lost: 57,000,000
GDP decline: $5.4 trillion
National net worth decline: $180 trillion
Home foreclosures: 16,000,000
Contraction duration: 16.3 years
Rate at which a monetary collapse might occur: “c” (the speed of light)

Popcorn? Available Energy

[ReverseEngineer]

Contraction duration: 16.3 years

How do you come up with 16.3 years? As I see it, if you just look at it in terms of the current monetary system, its a good deal shorter than that, the house of cards can't last more than a couple of years here. If you look at it from the perspective of population contraction, its going to take a good deal longer than that, probably over a century to reduce in numbers to something sustainable, likely undershooting the carrying capacity in the process. So where does your 16.3 year Contraction Duration come from?

Reverse Engineer

[shortonoil]

Reverse Engineer said:

So where does your 16.3 year Contraction Duration come from?

16.3 years comes directly from the Available Energy model. It is the length of time that it will take until we hit the functional end of the oil age. The point when 95% of all the available energy from petroleum has been extracted.

Admittedly 95% is a little arbitrary, but literary license has its privileges. It’s probably a fairly good guess. I’ll change it to 99% if it makes you feel any better, but be warned. It won’t!

[ReverseEngineer]

That might be when the model has 95% of the available energy gone from oil, but it by no means represents when the end of the contraction would be in terms of population, that will go on for quite a while longer, unless you postulate an immediate die off within 16.3 years?