US Debt

For those of you who miss watching the little squares move when you defragged your hard drive. US Debt Clock

Bear Market will end... or else.

Yesterday's $45 billion bond issue fell flat, along with the stock market, so where is the money going? As Bernanke employs QE, the big question is are foreign sovereign funds dumping their bonds at the same time, driving up yields? Karl Denninger writes in his blog:
There apparently is a new wrinkle to the intermediation trade between buying from Treasury to sell to the Fed with real money, including central banks, now in on the act. Indeed, several Street sources relay central banks were aggressive offers into this morning's coupon pass, with one letting go of a large block of old 5-years. Other offers too are coming in from embedded Asian real money longs -- in the higher coupons -- also looking to sell size without unduly upsetting the market, and especially considering the illiquidity in off- the-run bids from the Street.

Whether influenced or not by the much higher tenders coming in on the Fed Passes ($45 bln tendered for $7.4 bln bought in today's pass for a 16.2% hit rate), fast money has been tattooing the bid and especially so in the belly with the 10-year most leaned on. Note as well, earlier this week the Bank of England (BoE) gilt pass too saw a need to offer paper at or below the market's bid side in order to get sales off.

So now what Ben?

If Foreign Central Banks are selling into Ben's bid then the game is literally weeks or even days away from being over.

May 21, 2009, 11:11 a.m. EST
Treasury to sell $101 billion in debt next week

NEW YORK (MarketWatch) -- The Treasury Department said Thursday it plans to sell $101 billion in debt next week in its monthly round of shorter-term note offerings. The government will sell $40 billion in 2-year notes (UST2YR 0.83, 0.00, -0.48%) on Tuesday, matching the amount expected by Wrightson ICAP. It will also offer $35 billion in 5-year notes (UST5YR 2.01, -0.01, -0.69%) the following day and $28 billion in 7-year notes next Thursday. The 7-year security was reintroduced in March to help the government spread out the increasing debt issuance needed to fund all of lawmakers' stimulus plans and the Fed's programs to stabilize financial markets.

This next week will prove to be pivotal.

Plastic Coffins being Stockpiled in the US

All over America fields are being leased by the Federal Emergency Management Agency (FEMA) to stockpile hundreds of thousands of plastic coffins. Manufactured by a company in Covington, Georgia, called Vantage Products, these coffins have been purchased by FEMA. The following video shows them stacked like dixie cups.

When Pigs Die

My last post compared the 1918 "Spanish Flu" with the current "Swine Flu". One of the promising factors about the most recent outbreak was the missing link between pigs and humans. Yesterday, the Canadian Food Inspection Agency reported that a sick worker, returning from Mexico had infected 200 pigs at his workplace in Alberta. The pigs seem to be recovering. What is troubling is that a bridge between pigs and humans has been established.

The WHO will step down their alerts in the coming two weeks. However, we should hold our collective breath throughout the summer (winter in Australasia). If the flu reappears again in June, it may be following the wave pattern of infection that occurred in 1918. This will be confirmed if a resurgence results in a higher death rate. By then the virus manufacturers should have prepared a new generation of vaccines for the marketplace. New infections will retract and the mortality rate will fall. This will be attributable to the new regimen.

But, following the 1918 paradigm, infections and rates will decline anyway, irrespective of treatment; the worst months were in October and November, when the virus returned. I'm very concerned this is a very real scenario. The conspiracy theorists in the blogosphere are telling everyone that the whole pandemic was a staged hoax, to take our minds off the economy and tighten control on society.

Economists are beginning to be divided into two camps; Keynesians vs. Mises. The Keynesians are telling us to get ready for a slow recovery this fall. The Austrian School (Mise) are warning of a more devastating collapse of the equity and forex markets this October.

So October may prove to be a watershed month for all of us. Economists do agree on one thing: If the pandemic returns with greater strength, the cost to the global economy will erase all of the gains in the past year and leave us once more poised on the precipice of a sytemic collapse.

The Economy and the Flu

We seem to have taken the same approach to solving the economy and the H1N1 virus, throw money at it and hope it goes away. Masks are handed out that do nothing to screen out the virus. Tamiflu, not specific enough to kill this virus, is distributed and sold throughout the world. These things reassure people, who see action being taken and since the disease seems to kill only Mexicans, life can go on.

When the so-called "Spanish Flu" hit in March 1918, it was not unlike any other flu on the day; people got sick and then they got better. The flu seemed to be gone by the end of April. But it wasn't gone... it came back with renewed strength in June and people began to die. Again it seemed to be gone by the end of July. but it wasn't gone... it came back even stronger than before in October, this time killing many more people than ever. Another, less deadly wave, broke out again in 1919. And then it was gone.

When comparing the 2009 virus with its distant cousin from 1918, there is one reassurance. The 1918 virus affected pigs the same as people. So far, pigs are reported to be unaffected. Hopefully our virus lacks that little something that accounted for so many deaths.

http://www.nytimes.com/2009/04/28/opinion/28barry.html