President Obama Finally Gets Something Right!
publication date: Dec 16, 2009
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author/source: Brad Hamill
What happens if the US government is seeking to offer so many new Treasury
securities that the Primary Dealers (international bankers) can’t afford to buy
them with existing dollars? It is at this point that the Fed would need to buy
the securities and create new money (or they could just create ‘excess reserve’
money that doesn’t actually circulate in the economy).
The bottom line is that the US government is completely at the mercy of the Fed when it comes to their ability to sell Treasury securities.
The third option the Federal government has of obtaining revenue is to steal it from the various “trust” funds. The government LOVES this option, since it gives them the power over what they’re doing instead of having to beg the Fed. Notice how President Obama stated that “Medicare and Medicaid are on an unsustainable path if no action is taken”. These two “trust” funds are already on an unsustainable path. Why? Because neither fund is generating enough new tax receipts to pay for their current fiscal year outlays! Let me put it more simply – they’re BROKE!
That leave us with the Social Security “trust” fund – which was supposed to stay solvent until 2016. Guess what? It’s BROKE also! Why? Because the number of unemployed people in our country is so large that the “trust” fund can’t generate enough new tax receipts to pay off the obligations with its current year fiscal outlays. “Outlays” just means “payouts” – or “checks sent in the mail to recipients”. The “fiscal year” of the US government runs from October 1st of each year to September 30th of the next year.
All of this creates a very large problem for the US government. Household and business debt is getting destroyed – as I showed yesterday from the Z.1 Flow of Funds report. The Federal government (and the state/local governments to a MUCH smaller extent) is the only entity keeping our nation from falling into a very severe depression.
The Federal government is really down to one option. They have the need to create more debt than the amount of debt that is being purposefully destroyed by the international bankers. Without this, the government will lose its power structure.
The only way to create that much new debt, and do it in a way that hides it from the American public, is to create the mother of all “trust” funds – a “trust” fund so enormous that the government will be able to steal its contents for decades. This is the sole economic purpose behind the new health care legislation that is being proposed.
If Congress is successful in passing the health care bill then the middle class will get destroyed, but government will retain the power and greed that drives it. If the health care bill does not pass then the Federal government is going to be in very, very bad shape. They will not have the means to combat the deflationary spiral in an effective way. They will begin going down the path of what our President referred to as “bankruptcy”.
What will our Federal government do if the health care bill fails? Here’s my best guess – and it’s only an educated guess…..I believe that we will spin into another huge downturn – and the government might even finally use the “D” word (depression). Equities markets would tumble and commodities (oil, gold, silver) would drop fast. The value of the US dollar would strengthen against other foreign currencies. It is at this time that the Federal government would probably announce a plan to nationalize the money market funds that a lot of us have our retirement money stashed in. They would do this as a means of “protecting” the retirements of Americans. Of course, this money would just be directed to a brand new government “trust” fund that they could steal out of.
________________________________________________________
Watch for these indexes to drop:
Chinese Shanghai Composite Index: 3,255.21 (change of 0.36% from July 20, 2009 base value of 3,266.92)
Shenzhen Stock Exchange Component Stock Index (SSE): 13,664.97 (change of 2.12% from July 20, 2009 base value of 13,381.22)
________________________________________________________
Here are today’s numbers for the economic indicator:
1) Gold = $1,137.50
2) Dollar Index = 76.90
3) Oil = $72.83
4) S&P 500 Index = 1,109.18
5) 3-month Treasury Bill yield = 0.03
6) 3-month OIS = 0.16
HEI = 27.90
__________________________________________________________
Here are the numbers for the day:
Dollar Index adjusted indexes:
Dow = (10,441.12) x (0.7690) = 8,029.22
S&P 500 = (1,109.18) x (0. 7690) = 852.96
Nasdaq = (2,206.91) x (0. 7690) = 1,697.11
3-month Treasury: 0.03
2-year Treasury: 0.83
10-year Treasury: 3.60
30-year Treasury: 4.52
2-yr vs. 10-yr Spread (Target > 273): 277 basis points – (Danger Zone)
2-yr vs. 30-yr Spread (Target > 369): 369 basis points – (Danger Zone)
3-month LIBOR: 0.25
3-month EURIBOR: 0.72
3-month OIS: 0.16
TED Spread: 22 basis points
LIBOR/OIS Spread: 9 basis points
Dollar Index: 76.90
Volatility Index: 20.54
JPY-EUR Exchange Rate (Target < 115): 130.523
JPY-GBP Exchange Rate (Target < 145): 146.6969
JPY-USD Exchange Rate (Target < 90): 89.83 - (Danger Zone)
USD-EUR Exchange Rate (Target < 1.25): 1.453
USD-CNY Exchange Rate (Target > 7.0): 6.8280
Warmly,
Brad
Comments or questions? brhamill@hamill.com
The bottom line is that the US government is completely at the mercy of the Fed when it comes to their ability to sell Treasury securities.
The third option the Federal government has of obtaining revenue is to steal it from the various “trust” funds. The government LOVES this option, since it gives them the power over what they’re doing instead of having to beg the Fed. Notice how President Obama stated that “Medicare and Medicaid are on an unsustainable path if no action is taken”. These two “trust” funds are already on an unsustainable path. Why? Because neither fund is generating enough new tax receipts to pay for their current fiscal year outlays! Let me put it more simply – they’re BROKE!
That leave us with the Social Security “trust” fund – which was supposed to stay solvent until 2016. Guess what? It’s BROKE also! Why? Because the number of unemployed people in our country is so large that the “trust” fund can’t generate enough new tax receipts to pay off the obligations with its current year fiscal outlays. “Outlays” just means “payouts” – or “checks sent in the mail to recipients”. The “fiscal year” of the US government runs from October 1st of each year to September 30th of the next year.
All of this creates a very large problem for the US government. Household and business debt is getting destroyed – as I showed yesterday from the Z.1 Flow of Funds report. The Federal government (and the state/local governments to a MUCH smaller extent) is the only entity keeping our nation from falling into a very severe depression.
The Federal government is really down to one option. They have the need to create more debt than the amount of debt that is being purposefully destroyed by the international bankers. Without this, the government will lose its power structure.
The only way to create that much new debt, and do it in a way that hides it from the American public, is to create the mother of all “trust” funds – a “trust” fund so enormous that the government will be able to steal its contents for decades. This is the sole economic purpose behind the new health care legislation that is being proposed.
If Congress is successful in passing the health care bill then the middle class will get destroyed, but government will retain the power and greed that drives it. If the health care bill does not pass then the Federal government is going to be in very, very bad shape. They will not have the means to combat the deflationary spiral in an effective way. They will begin going down the path of what our President referred to as “bankruptcy”.
What will our Federal government do if the health care bill fails? Here’s my best guess – and it’s only an educated guess…..I believe that we will spin into another huge downturn – and the government might even finally use the “D” word (depression). Equities markets would tumble and commodities (oil, gold, silver) would drop fast. The value of the US dollar would strengthen against other foreign currencies. It is at this time that the Federal government would probably announce a plan to nationalize the money market funds that a lot of us have our retirement money stashed in. They would do this as a means of “protecting” the retirements of Americans. Of course, this money would just be directed to a brand new government “trust” fund that they could steal out of.
________________________________________________________
Watch for these indexes to drop:
Chinese Shanghai Composite Index: 3,255.21 (change of 0.36% from July 20, 2009 base value of 3,266.92)
Shenzhen Stock Exchange Component Stock Index (SSE): 13,664.97 (change of 2.12% from July 20, 2009 base value of 13,381.22)
________________________________________________________
Here are today’s numbers for the economic indicator:
1) Gold = $1,137.50
2) Dollar Index = 76.90
3) Oil = $72.83
4) S&P 500 Index = 1,109.18
5) 3-month Treasury Bill yield = 0.03
6) 3-month OIS = 0.16
HEI = 27.90
__________________________________________________________
Here are the numbers for the day:
Dollar Index adjusted indexes:
Dow = (10,441.12) x (0.7690) = 8,029.22
S&P 500 = (1,109.18) x (0. 7690) = 852.96
Nasdaq = (2,206.91) x (0. 7690) = 1,697.11
3-month Treasury: 0.03
2-year Treasury: 0.83
10-year Treasury: 3.60
30-year Treasury: 4.52
2-yr vs. 10-yr Spread (Target > 273): 277 basis points – (Danger Zone)
2-yr vs. 30-yr Spread (Target > 369): 369 basis points – (Danger Zone)
3-month LIBOR: 0.25
3-month EURIBOR: 0.72
3-month OIS: 0.16
TED Spread: 22 basis points
LIBOR/OIS Spread: 9 basis points
Dollar Index: 76.90
Volatility Index: 20.54
JPY-EUR Exchange Rate (Target < 115): 130.523
JPY-GBP Exchange Rate (Target < 145): 146.6969
JPY-USD Exchange Rate (Target < 90): 89.83 - (Danger Zone)
USD-EUR Exchange Rate (Target < 1.25): 1.453
USD-CNY Exchange Rate (Target > 7.0): 6.8280
Warmly,
Brad
Comments or questions? brhamill@hamill.com
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