Treasury seeks "unprecedented borrowing"

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I nominate this for understatement of the year:

Ryan Says Treasury to Need `Unprecedented' Financing
"This year's financing needs will be unprecedented,'' said Anthony Ryan, the Treasury's acting undersecretary for domestic finance, at a Securities Industry and Financial Markets Association conference in New York, where he was a last-minute substitute for Treasury Secretary Henry Paulson.

"Unprecedented" hardly does this justice; we need a more superlative word. "Ginormous" comes to mind.

Perhaps the Germans have a single word that means "future destroying" that we could use.

Mr. Ryan continues:

Ryan said the Bush administration's July projection of a $482 billion deficit doesn't include new programs launched to attack the credit crisis. The bank rescue program, a separate mortgage-backed securities program, the Fannie-Freddie takeover and a student loan program all need funding, Ryan said. Also, the Treasury is borrowing money on behalf of the Federal Reserve and the Federal Deposit Insurance Corp., he said.

First, how come we don't have a more recent budget projection than from last July? A lot has happened since then, and I think the Treasury markets would enjoy a bit of guidance on how much paper they will be asked to absorb. Also, I deplore the use of budget projections that exclude items that are, uh, part of the budget.

And here's one estimate of the range of total borrowing:

"The budget deficit for fiscal year 2009 might reach $1 trillion if Congress passes another stimulus package this winter,'' said Lou Crandall, chief economist of Wrightson ICAP, in a research note. "And that's just the beginning of the bad news -- financing needs arising from off-budget items might be nearly as large as the on-budget deficit.''

Crandall estimates 2009's total borrowing needs at $1.95 trillion. He says Treasury could raise this money with an "aggressive but sustainable'' increase in regular borrowing, accompanied by one-time auctions as needed.

The difference, I suppose, between the $1 trillion and the $1.95 trillion number is the difference between the fiscal year (Sept 30 - Sept 30) and the calendar year. So I guess Mr. Crandall expects nearly a trillion of additional borrowing in the final 3 months of 2009.

For the record,because I factor in a loss of tax revenues and additional stimulus packages, I place next year's fiscal year borrowing at between $2 trillion and $2.5 trillion.

Also, I am cheating a little by knowing that this year's deficit was nearly $1.3 trillion (the first $1 trillion plus deficit on record), even though only $455 billion of that was publicly admitted to by the Bush administration.

I have no good explanation for why the registered deficit was 179% larger than the admitted deficit. Normally the difference is in the vicinity of the excess Social Security funds that were siphoned off, or about $180 billion.

This difference is a whopping $815 billion.

My suspicion is that some of this can be found over on the Federal Reserve Balance sheet, but I cannot prove that yet.

Bottom line: The US Treasury department is about to shatter every borrowing record in all of history. Why is China continuing to hold all those US dollars?

 

This is a companion discussion topic for the original entry at https://peakprosperity.com/treasury-seeks-unprecedented-borrowing-2/

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Because China is sunk without us. China has made the logical choice that subsidizing US consumers is far cheaper then US consumers abandoning them completely. How long does this continue? Until recessions in the US no longer hurt them…based on the results this year that time is a long ways away.

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thanks for the chart. you will have to forgive me though. i did not major in economics.

i have spent most of my time building things. like houses so now that i have plenty of time on my hands

i enjoy reading the posts. i for one would appreciate it if the charts would come with a little explanation.

i assume this chart says this is a big failure. i do like the colors tho. but maybe if it is a bad chart it could be in red

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Chris Wrote:

"Also, I am cheating a little by knowing that this year’s deficit was nearly $1.3 trillion (the first $1 trillion plus deficit on record) even though only $455 billion of that was publicly admitted to by the Bush administration."

 

Chris, US Federal Budget fiscal year starts and ends on Sept 30. the FY2008 Budget is from Sept 2007 to Sept 2008. The big increases happened after Sept 2008. The increases will show up on FY2009 budget. The Federal Reserve has about $700 billion in surplus which is independant of the Federal Budget. The Fed spent the whole $700 Billion (and then some) this year, starting back in March with the Bear Sterns Bailout.

If you were to sum up all of the spending programs (starting with the $168 Billion Economic Stimulus package) the Federal Gov’t has supplied about $3.9 Trillion in cash or in loans (ie TAF, TARP, etc). I have a suspicion that the bridge loans will remain as off-balance sheet debt under the dubious assumption that the gov’t will be paid back. (ie Hank’s and Ben suggestion during the $700 Billion TARP program that taxpayers will be paid back near the full amount once all of the assets are sold off).

 

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Davos’s offering of that chart is misleading for the uninformed. Essentially this is a case of failure to deliver and is pretty much akin to Naked Short Selling.

So, it isn’t as if the government is failing to makes Treasury sells. Rather it is indicative of a completely different, but still concerning problem.

–

Steve

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Hello Joe2baba:
Sorry, could be worse I could have framed her up and then realized I forgot the sill sealer and flashing on the sill. -Never did that!
This link I meant to post with the chart http://www.financialsense.com/fsu/editorials/willie/2008/1030.html
Take care

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Hello Steve:
Cut me some slack please, I meant to post the link and forgot. The article, I found to be "a little" out there in the conspiracy theory way. I thought it nailed it with the GDP and the way it is calculated.
Having said that I personally feel that this is a possibility (a default) and I also wonder about the gold leases…
Take care.

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Jim Rogers, the famous hedge fundinvestor and author, who has ditched life in Americato raise his young daughter in Shanghaiso she can learn Chinese.

Jim Rogers said once in a Bloomberg interview that "he isshifting all his assets out of the dollar and buying Chinese Yuan because theFederal Reserve has eroded the value of the U.S. currency."

“I’m in the process of — I hope in the next few months — gettingall of my assets out of U.S. dollars,” said Rogers, 65, who correctly predictedthe commodities rally in 1999. “I’m that pessimistic about what’s happening inthe U.S.” Oct. 07…

So that begets the question: how do youinvest in the Yuan?

Take a look atWisdomTree’s Currency Income ETFs. In May 2008 they launched the “WisdomTree Chinese Yuan Fund”, under the ticker symbol CYB.

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I have to agree with jgreco that China has invested quite a bit in the US consumer, and as a customer, we still continue to buy an awful lot of crap from them. While it may not seem logical at the surface, the bottom line is that we maintain a good portion of their industrial production. Also, it’s in their interest to see our technology development continue - where else are they going to get stuff to clone?

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Davos,

  1. ‘CONSPIRACY THEORY’ – Personally, whenever anyone expresses their paranoia about being remotely connected to remotely even considering the remote plausibility of heaven forbid the reality of a ‘conspiracy’… then I just start to giggle…

If you ever worked as a policeman, or a criminal investigator; then you KNOW THAT ANY CRIME THAT REQUIRED PLANNING FOR IT’S EXECUTION (I.E. CRIMINAL INTENT) AND THAT REQUIRED MORE THAN ONE PERSONS INVOLVEMENT – WAS A CONSPIRACY!!!

What are people so f*&^&ing afraid of? You’d think it’s like having leprosy!! Why do you people allow yourselves to be so moronically easy to manipulate to be so moronically stupid and think you are intelligent? when all your brainwashed ‘yes sir, no sir three bags full sir,’ only indicates your fear to think OUTSIDE THE BOX!!

MILLIONS OF CONSPIRACIES,LARGE AND SMALL OCCUR EVERY SINGLE DAY, OVER MINOR LITTLE ITEMS OF PROPERTY AND MONEY, LOVE AND HATE, RAGE AND FURY; AND SOME WANT US TO BELIEVE, NOT ONE COULD POSSIBLY OCCUR ONCE IN A BLUE MOON, BY INDIVIDUALS FIGHTING OVER RESOURCES THAT AMOUNT TO BILLIONS OF DOLLARS (SUBSTITUTE YOUR CURRENCY), THAT AMOUNTS TO MASSIVE CHANGES IN PERCEPTION BY THE PROLES TO THIER PARTICULAR FAMOUS POLITICAL, MILITARY, ENTERTAINING, RELIGIOUS, ETC. ‘REPUTATION’; AND ACCORDINGLY EMOTIONS OF RAGE, FURY, LOVE AND HATE, THAT MOST AVERAGE PROLE COULDN’T REMOTELY FATHOM… .

AS USAF GOV. GRAY DAVIS SAID, TO THE INTERVIEWER IN ‘ENRON: SMARTEST (SIC) GUYS IN THE ROOM’?

HELLO?????????????
2. 'DEFAULT': In my opinion, a default is not a possibility -- IT IS A CERTAIN FEW VERY POWERFUL INDIVIDUALS EXPRESS INTENTION.... JMCSwan
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JMCSwan:
Yah maybe right. I liked that documentary a lot, especially the part where Kenny Boy flew out there and talked to Arnie. I also found it amazing how they took the power companies off the grid. Sick. People died.
Maybe I am just slow to spool up and don’t believe it until it is a documentary. We ahve a client who believes everything is a conspiracy, maybe it is, but maybe I’d rather not live like that becuase it isn’t living.
I think the best thing we all could do is get these crooks out of office. This clearly isn’t working and this is the worst time for it to be inoperative.
Take care,

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Is China closed off to international media sources? Do they know what’s going on?

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Hello All:
Maybe you can offer some advice.
It seems pretty clear where this is heading - due south. I’m convinced that politicians and the media won’t change. I’ve written both. Both a waste of time. Half of my friends and family won’t listen. Been there, done that it was a waste of time.
Rather than concentrate on the doom and gloom as we loose altitude I’d rather bet on loosers and profit from this mess. Might as well, not like anyone is going to wake up in time. Better than getting depressed over it.
My questions are:
 

  1. What do you think the biggest losers will be? (commercial real estate? auto industry? etc.)
  2. What do you think is the safest way to take advantage of these? (ETF's? Shorts? Puts? etc.)
If you could be specific with your thoughts I'd greatly appreciate it. Thank you in advance!
 
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What goes into this public debt figure?
Chris talks about when you add the entitlement programs Social Security , Medicare and Medicaid the obligations exceed $40 Trillion. I'm getting lost . What debt is included in this $10 Trillion figure? Does this include Local and State General Obligation (GO) Bonds and Revenue Bonds? Someone please help give more definition .
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Gopbg
Source: IOUSA (ISBN#978-0-470-22277-5)
The US has about $11,000,000,000,000.00 (trillion) in debt.
Add to that figure the current unfinded obligations for Social Security 7 trillion, Medicare’s unfinded promise of 34 trillion, of which 26 trillion relates to Medicare Parts A and B and about 8 trillion relates to Part D (the new prescription that was said would save money). Add another trillion in misc. items.
Grand new total to add to the 11 trillion - a whopping $53,000,000,000,000.00 (53 trillion)
So, what the USA really owes is about 63 trillion bucks. Mind you, this predated the "bail out"/Tarp.
That is my read on what is owed. If you use Chris’s 40% of GDP is baked (he did his in 2003, I’m guessing it is at least off by 40% these days…) then we owe 654% more than we make. I know that CNN, CNBC and the rest say our debt is 64% of GDP.
Personally, I feel that the US of A is the subprime borower - sucks to be us and china and the middle east are the bank - ugh oh!
I suppose we fudged our earnings much the way a subprime borower did, hope they have a helicopter ben to bail them out when we stick them with the sorry, cant pay the interest on this months note…
To answer your question, if I understand what your asking? the 2008 Federal Debt (when it was only 9.7 trillion) was made up of the following (book says this is a partial list):

  • interest on debt 244 billion
  • medicare 330 billion
  • defense dep 479 billion
  • social security 610 billion
  • federal spending 2.9 trillion
Put anouther way as of GAO records in 2007 every person in the US owes $175,000.00, or $455,000.00 per household, or $410,000.00 per fulltime worker.
take care,
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Davos,
There are plenty of people here far more qualified than me to give that kind of advice, but how much you make depends on things like your asset concentration, how much you risk, and leverage.
I am having the same type of problem getting people to warm up to this information. It’s hard for some of the information not to give the "next great depression" and survivalist impression.
The problems are accounted for by Chris in explaining the continuum that everybody falls along - from "status quo will prevail" to "it all implodes and we have a new civil order."
So my first recommendation is to tell people you understand their apprehension or distrust of the information. Tell them it took you some time and that you’re still questioning it.
Then take the lesson from Chapter 20 that risk mitigation is a responsible adult brain exercise. Something like a new age crossword puzzle. With so many unknown outcomes - climate change, financial industry, social services, energy, transportation, food distribution, etc., - everybody can contribute valuable information to some variable. Once they do, they are involved and may just seek more information.

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Hello Sjdavis:
Thanks. Good advice!
To be honest with you though, I am really fixated on making a few bucks as things go down the tubes. Maybe when they go down a bit people will begin to listen and I pray, change.
I’ll try some more then.
Until that time though, I feel my energy will be better spent appying this new knowledge to making my family more financially secure. It will also improve my state of mind by focusing on something positive.
Take care

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Well said, JMCSwan! I posted a similar statement on "conspiracy" in a previous thread. Conspiracies are the NORM. For instance, certain types of lobbying could be considered conspiracy since these are groups of people that are influencing law makers to change or create new legislation in order to circumvent the law by making actions and pracitices legal that are currently considered illegal.

I have friends and family who view the world as fairly haphazzard. Things "kinda just happen" and if you suggest that there was any planning or forethought, especially in terms of larger scale societal and/or structural phenomena, then you are some type of nutty conspiracy theorist. Things don’t just happen…people need to get this through their heads.

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Hi rlee and jgreco,

About China: the right wording is not that the US ‘maintains a good portion of their industrial production’, but rather the US consumes a good portion of China’s production.

It is not in China’s interest to maintain US consumption, nor to keep up their production if they do not get anything useful in return. They are interested in US dollars (rather than US consumption), because the dollar is useful for them:it buys oil, technology, and if necessary goodwil from American leaders (maybe even Taiwan?). So they will continue to produce whatever crap as long as they get good pay for it.