U.S. Treasuries: Why These Fraud-Bonds Will Soon Be Worthless

U.S. Treasuries: Why These Fraud-Bonds Will Soon Be Worthless
  • The most-bankrupt nation on the planet is charging the highest prices in history for its bonds
  • All these bonds are denominated in a worthless fiat currency (the U.S. dollar)
  • Expected losses on these bonds: ~100%



Definition of masochist
1 : a person who derives sexual gratification from being subjected to physical pain or humiliation : an individual given to masochism
2 : a person who takes pleasure in pain and suffering
3 : someone who holds/purchases U.S. Treasuries

The first two definitions of the word “masochist” are courtesy of Merriam-Webster. The third is my own addition.

The other only other rational synonyms for the holders of U.S. Treasuries today would be “suicidal” or simply “insane”. Consider the evidence.

In a world of mass-insolvency, the United States is the poster child among Deadbeat Debtors.

The U.S. claims that its current national debt is a staggering $27.1 trillion, far more debt than any nation has accumulated in the history of our species. But this is just the starting point.

The U.S. government has derailed an already-crippled economy with its misguided COVID-19 lockdown policies. In 2020, in some months the federal government is incurring more debt in a single month than it normally accumulates over an entire year.

Visit the U.S. debt clock and you will now see the national debt rising at close to $3 million per minute.

Keep in mind that this is just the “official” national debt of the United States – a totally fraudulent number.

Sift through the federal government’s $200+ trillions of “unfunded liabilities” and you will find another $10 trillion or so of hard debt, hidden with the clumsiest of accounting frauds.

The national balance sheet of the United States is one massive accounting fraud.

Annual budgets are so fraudulent that even the government’s own accountant – the GAO – sometimes refuses to sign off on the budget. U.S. government bookkeepers routinely engage in accounting frauds that would instantly result in prison sentences if committed by any public corporation in the United States.
 
Government Accountability Office Refuses to Sign Off on Federal Cooked Books

The GAO is refusing to accept the financial reports from some federal agencies.

The U.S. Government Accountability Office (GAO) recently revealed that, as the official auditing agency of record for the U.S. Federal Government, it could not sign off on the government’s consolidated financial statements for 2015.  Even worse, because of the lack of properly prepared and thorough government data, the GAO says it may not be able to do so any earlier than 18 months from now, if at all.

The details of the U.S.’s national accounting fraud are even more damning.

The U.S. Department of Defense alone is unable to account for nearly $10 trillion just since 1997. That’s a lot of funding to ‘misplace’.

Indeed, since Congress passed a law in 1992 requiring all federal agencies to be audited, the DoD has not been able to complete (pass? survive?) even a single audit.

But the U.S. isn’t merely insolvent. It is mega-bankrupt.

The U.S. government claims to owe its creditors ‘only’ $27.1 trillion, but (as explained above) that number is a complete joke. Want to hear another joke?

The world’s biggest Deadbeat Debtor pays virtually zero interest on its mega-debts. More fraud.

In legitimate debt markets, interest on debt is a function of risk. Yet with risk on U.S. debt the highest in history, interest rates on this debt are the lowest in history.

We don’t even have a word in the English language this.

It’s beyond fraud. It’s beyond insanity.

However, if not for the fraudulent/insane near-zero interest rates on U.S. Treasuries, the U.S. government would be driven into bankruptcy in a matter of weeks.

Crunch the numbers.

And for the sake of this exercise, let’s pretend that the U.S. national debt is only $27.1 trillion. Not the $35 - $40 trillion that is a much more reasonable ballpark figure.

In legitimate debt markets, sovereign debt normally bears interest rates between 3 – 5%.
 
3%: $813 billion per year just to service existing U.S. debt
5%: $1.38 trillion to service existing debt

Of course, in legitimate debt markets the world’s biggest Deadbeat Debtor would not be paying a “normal” rate of interest. It would pay a greatly elevated interest rate to compensate lenders for their borrowing risk.

Let’s plug in some higher interest rates.
 
7%: $1.89 trillion per year to service existing debt
9%: $2.44 trillion to service existing debt

How high could interest rates go on U.S. Treasuries (in a legitimate debt market)?

Let’s look at Greece. While Greece’s economy and the U.S. economy are very different in proportionate terms, in terms of their level of (in)solvency they are very similar.

Huge government debt (relative to GDP). Massive over-spending on the military. Severe government corruption.

In 2010, Greece experienced its (first) Debt Crisis.

Nothing had suddenly changed in its economy. But the (myopic) credit rating agencies who supposedly stand guard over our debt markets actually started paying attention to Greece’s catastrophic fiscal picture.

As the credit rating agencies ratcheted down the credit rating for Greece, it ratcheted up interest rates. At the peak of the crisis (shortly before Greece defaulted on its debt), interest rates touched 30%.

Now let’s look at the interest the U.S. would pay on its debt in a “crisis”, i.e. if (when) the credit rating agencies finally take off their blinders and take a closer look at the U.S. fiscal train-wreck.
 
11%: $2.98 trillion per year to service existing debt
13%: $3.52 trillion to service existing debt

We don’t need to go anywhere near 30% to make the point here.

Current U.S. government revenues are bouncing around $300 billion per month, or ~$3.5 trillion in annual revenue.




At 13% interest, the U.S. government would be spending every penny of revenue just to service the interest on its debt. Nothing left over to actually run the government.

Complete and utter bankruptcy.

Plug in the real number for the U.S. national debt (whatever it is) and the U.S. Debt Crisis is much bleaker still.

However, the many Apologists for U.S. insolvency (in both government and media) would beg to disagree. In their fantasy world, it’s “impossible” for the U.S. to ever go bankrupt.

Why?

Because the U.S. has a magic printing press. It can conjure up infinite scraps of paper called “U.S. dollars”. And with an infinite supply of this fantasy-paper, it will always be able to “pay its debts” – no matter how large.

Such logic is below infantile.

Every government has its own printing press. Governments have been conjuring paper currencies into existence for a thousand years.

And every time a new paper currency is created (known as a “fiat currency”), the same thing happens. The government over-prints this paper and its exchange rate collapses to zero.

This is known as hyperinflation.

Governments that claim it is “impossible” for them to go bankrupt over-print their currency to (pretend to) pay their bills.

This drives the exchange rate to (near) zero. Then the economy completely collapses. And then then the nation is still forced into bankruptcy.

The U.S. dollar has already started its own hyperinflationary death-spiral.



You can’t run a government by kiting checks.

U.S. Treasuries will go to zero. This is an absolute mathematical certainty.

Only two variables remain.
 
  1. The precise date of worthlessness
  2. The mode of worthlessness:
-  Will it be debt default (like Greece)?
-  Or hyperinflation?

Perhaps the most hilarious aspect to this national tragedy is the mainstream media. These mindless muppets refer to the buying of U.S. Treasuries as “a flight to safety”.

Yes, for those seeking “financial safety”, all aboard the U.S. Titanic.

What about the minority of people who don’t think that investing in fraudulent paper that is guaranteed to go to zero is “a flight to safety”?

For those people, there is gold and silver.
 

Exclusives

Wall Street traders are currently smiling -- high atop their ivory towers and perched for a fall. The REAL rally in markets today is in gold.


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