US bonds sale faces market resistance
The US Treasury is facing an ordeal by fire this week as it tries to sell $100bn (£62bn) of bonds to a deeply sceptical market amid growing fears of a sovereign bond crisis in the Anglo-Saxon world.

Never mind the “Anglo-Saxon world”; the problem the US has in trying to sell these new issues is that the US is spending more money than at any point in its history, and the buyers aren’t willing to chance it.

The Obama administration needs to raise $2 trillion this year to cover the fiscal stimulus plan and the bank bail-outs. It has to fund $900bn by September.

“The dynamic is just getting overwhelming,” said RBC Capital Markets.

The US Treasury is selling $40bn of two-year notes on Tuesday, $35bn of five-year bonds on Wednesday, and $25bn of seven-year debt on Thursday. While the US has not yet suffered the indignity of a failed auction – unlike Britain and Germany – traders are watching closely to see what share is being purchased by US government itself in pure “monetisation” of the deficit.

“There just isn’t enough money out there:”

“There isn’t enough capital in the world to buy the new sovereign issuance required to finance the giant fiscal deficits that countries are so intent on running. There is simply not enough money out there,” he said. “If the US loses control of long rates, they will not be able to arrest asset price declines. If they print too much money, they will debase the dollar and cause stagflation.

“The bottom line is that there is no global ‘get out of jail free’ card for anyone”, he said.

The US is acutely vulnerable because it relies heavily on foreign goodwill. China and Japan alone hold 23pc of America’s $6,369bn federal debt. Suspicions that Washington is trying to engineer a stealth default by letting the dollar slide could cause patience to snap, even if Asian exporters would themselves suffer if they harmed their chief market.

The dollar has fallen 11pc against a basket of currencies since early March. Mutterings of a “dollar crisis” may now constrain the Fed as it tries to shore up the bond market. It has so far bought $116bn of Treasuries as part of its “credit easing” blitz, out of a $300bn pool.

When the Fed first said it was going to buy Treasuries in March the 10-year yield to dropped instantly from 3pc to near 2.5pc, but shock effect has since worn off. Any effort to step up purchases might backfire in the current jittery mood.

Via Instapundit, who comments,

“I’ve bankrupted the nation, so now your only hope is to pass my healthcare plan.” That goes beyond chutzpah to the edge of pathological dishonesty. Except, I guess, that it’s not pathological if you get away with it. And so far, he has.

Prior post here.

Via Drudge:

In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: “We are out of money.”

C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now.

The good news is that the President is finally realizing what millions of others had already noticed. As Naked Capitalism explains,

Obama openly says what anyone with common sense has known for quite some time: the US is broke, and will not be able to honor in full its financial and fiduciary obligations.

The question remains how the US restructures that debt and how big a haircut the debt holders will take as a part of it.

20%? 30%? More like upwards of 50% at least in real terms.

And who are these debt holders?

Anyone who has Treasury debt obligations and financial assets, from the Long Bond to the US Dollar, and financial assets guaranteed by the Federal Reserve and the Treasury.

Technically the debt will be serviced and the interest paid according to the terms of the agreements, with devalued US dollars.

The process will continue until the debt is restructured and the dollar is replaced with a new dollar. This may take some years.

Oh, don’t worry too much. There will be spin and qualifications piled upon this admission, most likely before the markets open in Asia on Monday. But this trial balloon of admission is how you start breaking the bad news to people unwilling and ill prepared to receive it.

But regardless of what is said, we are now in the endgame for a credit bubble of historic proportion.

The really bad news is that the President thinks we’re out of money due to

our failure to make some good decisions on health care over the last several decades.

Health care?

Helloooo??

What the hell healthcare? What about the bailout? The spendulus? The budget? The $12.8 trillion that the U.S. government and the Federal Reserve have spent, lent or guaranteed in the past 10 months?

Take a look at that $12.8 trillion: It’s equal to

• 14 times the $899.8 billion of currency in circulation
• $42,105 for every man, woman and child in the U.S.
• an amount that approaches the value of everything produced in the country last year.
• It is debt equal to 90% of GDP

How about some visuals, here?

Obama quadruples the national deficit in one year and now he realizes we’re out of money?

No. Deep down he doesn’t realize we’re out of money. Here’s the video:

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we’ve made on health care so far. This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.

So we’ve got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it’s putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don’t reduce long-term health care inflation substantially, we can’t get control of the deficit.

I fully agree with Michael Laprarie

There you have it. We have to save money on health care or else we’ll be financially ruined by the cost of Medicare and Medicaid. And only the government — presumably by forcing helping doctors to make “cost efficient” health care choices — can turn our rising health care costs around and eventually make health care less expensive (presumably while also making it equally available to everyone and miraculously innovative, via stem cells, etc).
…
The way Obama and the Democrats see things, none of the trillions and trillions of dollars they have committed to bailouts, buyouts, and pork during the last four months have contributed one bit to our current credit and debt crisis.

Prepare to have “free healthcare” shoved down our throats in the name of “saving Medicare and Medicaid.” Expect medical care rationing, and a quadrupling of current federal spending on it at the same time.

Yes, we’re out of money: But we’re not out of money because Medicaid and Medicare (their proposed budget is $737 billion, a mere 5% of the $13 trillion); we’re out of money because of exhorbitant, out-of-control government spending.

That the President doesn’t recognize that fact is the worst news of all.

UPDATE
Jennifer Rubin

We’re not in this fix because of any healthcare decisions he’s made — “so far,” mind you. But what is remarkable is the lack of personal responsibility for our current sea of red ink. No mention of the trillion dollar stimulus or the $3.5 trillion budget. And in the same breath in which he denies running up the deficit he mentions the car bailouts which he “had” to deal with. Actually, it wasn’t necessary; it was a policy choice which now has the ailing car companies permanently affixed to the public dole.