The $4 Trillion Hallucination Driving Gold

The $4 Trillion Hallucination Driving Gold
This morning, the United States Treasury Department issued a press release that constituted the Treasury Borrowing Advisory Committee’s (TBAC) report to the Secretary of the Treasury. TBAC membership is derived from senior members of the Securities Industry and Financial Markets Association. These would be the proverbial foxes advising the chickens - a favorite Midas Letter theme.

This group forms the consulting connection between the U.S. Treasury and the investment industry who is tasked with finding investors for U.S. debt so that the behemoth debt machine can continue its primary function of maintaining the United States standard of living at the expense of foreign treasuries.

Remarkably, the foreign treasury managers have either not yet caught on, or are duplicitous in maintaining the illusion of a sustainable deficit government that would swallow the global GDP of several generations should it ever be called for repayment.

This group meets in closed conference in a hotel in downtown Washington, and the Treasury lays out what it needs, and the TBAC tells them how they think it can be done. What is interesting in the published minutes of the meetings is that it now is apparent that both sides are concerned solely with rolling out new and modified debt instruments in increasing quantity to service the debt requirements of the nations future spending requirements. Servicing current debt is barely mentioned, though one might deduce that those requirements are incorporated by default into future borrowing figure requirements. (The following quotes are taken from the press release)

“The deterioration in the budget outlook, combined with expenditures associated with the TARP, potential FDIC guarantees, and expected additional stimulus spending have increased private forecasts for total funding needs of the U.S. government for fiscal year 2009 to approximately $2 trillion. This is likely to stress the existing auction schedule and consequently warrants tangible adjustments to that schedule.
Faced with an unprecedented increase in net borrowing needs, the Treasury in its first charge to the Committee sought our advice and recommendation on changes to the auction calendar for debt issuance.”

The strategy for financing the new debt required for the TARP (Toxic Asset Relief Program) purchases and the stimulus packages calls for the expansion of debt instrument auctions across the entire maturity spectrum:

“Faced with such extraordinary financing needs, the Committee focused on the optimal potential size of each coupon issue, while not jeopardizing a successful auction process.

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