More Bad News for the Bankrupt Fed

Aug. 10—Buried amid the frantic reporting on the plunges and rises in the global equity markets, was the report that there were few takers this week in what is being described as a “very weak” and “dismal” auction Aug. 7 of $52 billion in 10-Year Treasury Notes. This forced interest rates up on these bench-mark securities sharply higher, after a month of deliberately orchestrated declines, intended to lower the cost of financing the effectively bankrupt U.S. government.

The interest rate on these securities is now hovering around 4%, and the rise is meaningful, considering that it makes funding a growing government shortfall more expensive, much of which is deployed to pay interest and principal on previous debt. But even more importantly, there were few takers of the debt, other than the now “usual suspects” in the City of London’s offshore banking havens such as the Cayman Islands, Jersey/Guernsey, and Luxembourg. More than 27% of the bonds had to be eaten by the “primary dealer” mega banks who organize the auctions to get the paper off their hands. As is usually the case, in order to keep such banks solvent, most of the paper will migrate back to the Federal Reserve, as has been the case in the recent past.

Well-connected financial sources say that there are many troubling things about what happened in the Treasury market this week. First, the Fed and other central banks had orchestrated the collapse in the equity markets, to wipe out nearly $10 trillion in unsupportable equity value, by selling  some of their portfolios of stocks that compose the various indices, and then letting media propaganda hype fuel a selloff that wiped about 2,000 points from the seriously inflated Dow and a proportionately smaller amount from the S&P 500, with parallel operations in the Asia and European markets.

“The Fed and the other central banks are bleeding some steam from the markets in a ‘controlled disintegration’ to prevent a larger crack-up, in the same way that a relief valve bleeds some steam from a boiler to prevent it from exploding,” said one insider. “But the systemic problems are so great that such operations can only delay but not prevent the inevitable total crack-up. The Fed especially wants to push that date beyond the Nov. 5 elections. When the equity markets are volatile, with plunges possible, the general wisdom uttered is to ‘flee to safety,’ and one would have thought that at least some people would run to Treasuries. But no, there were actually far fewer buyers than in the last previous auction in July. This has to be troubling, along with the rise in interest rates, when such efforts had been made to drive them down.”

In the past, the Fed relied on China and Japan to finance U.S. budget deficits. But those days are long gone, with the Japanese economy tanking and the idiots of the Global NATO war party having declared economic war on China. The Chinese are now net sellers of U.S. debt and are continuing to dump it on the market. The budget situation for the federal government is only going to grow worse, even if there are budget cuts.

“These idiots are funding a huge military buildup while throwing what we produce in weapons and munitions down the Ukrainian sinkhole,” said the source. “So, the Fed will need to have even bigger auctions, with more buyers, other than the usual subjects, whose coffers are already filled to the brim with T-Notes and Bills. The Fed can’t be too happy. These are dimwitted people. They keep trying to do the same stupid things, with even worse results. As they say, that’s insane.”