usa to borrow $51 billion next week...

  1. dub
    30,513 Posts.
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    Hi,

    The following is part of FSO's Wrap-up today written by Mike Hartmann. I think it depicts the US situation both simply and clearly.


    ......Today the Treasury said they will sell $51 billion in securities in its quarterly refunding auctions next week with $22 billion of two-year notes on Tuesday, $15 billion of five-year notes on Wednesday and $14 billion of 10-year notes on Thursday. They will use $11.44 billion to pay back maturing or called debt and the balance of nearly $40 billion is new cash for the government to spend. This is the way all of the quarterly auctions work. Each quarter we have to borrow enough money to pay back the money we previously borrowed plus finance the current deficits. I read a rather shocking statement in Jim Puplava’s WrapUp from Monday when he said, “Close to 70% of all federal debt matures by the first quarter of 2007.” WOW!!! That means we will have to borrow two-thirds of our current debt outstanding, plus the current federal deficits, plus the additional costs to finance the war in Iraq and Afghanistan…all in the next two years. We will truly need some extra help from our foreign friends in the next two years to pull this one off! It sure makes one wonder why the government stopped issuing 30-year bonds back in October 2001. We have been re-financing 30-year debt with two, five, and ten-year debt.

    In the near-term, shortening the maturity of our national debt brings down our cost of interest payments, but for the long-term this is not good. It is the same as the government taking out a variable rate loan when they should be locking-in historically low rates for the longer-term. This tells me there is no real intent to pay back the previously borrowed money…just keep re-financing the debt. Based on Jim’s statement above, this should all come to a head in the next two years, but probably sooner than later as the quarterly refundings promise to grow much larger as each quarter passes. Hopefully we can get past all of the huge debt problems we have in this country. My biggest concern is simply that we will not come to a peaceful resolution with our foreign creditors. A non-peaceful resolution will start with currency wars, then trade wars, and finally to military conflict. The international conflicts we face today are not getting any easier, especially as we compete internationally for available energy reserves. At the same time, we depend on the international financial community to loan us $2 billion a day to keep things afloat.................


    You can view the full article at http://www.financialsense.com/Market/wrapup.htm

    bye.dub

 
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