12/31/09 All Over Again

Tue, Dec 31, 2013 - 9:48pm

Four years ago, in one of the first ZeroHedge articles that I recall reading, "Tyler" questioned how in the world the U.S. government would find funding in 2010. Back then, just as today, the world was convinced that higher interest rates were right around the corner. With Quantitative Easing ending, how else could The Great Ponzi continue?

The original article is now archived at ZeroHedge and you can find it here: https://www.zerohedge.com/article/brace-impact-2010-private-demand-us-fixed-income-has-increase-elevenfold-or-else

For the sake of discussion, the entire article is copied below. The similarities to 2009 are startling. The potential "solutions", outside of continued QE, are certainly thought-provoking.

Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold... Or Else

Submitted by Tyler Durden on 12/25/2009 18:31 -0400

As everyone is engrossed by assorted groundless Christmas (and other ongoing bear market) rallies, and oblivious to the debt monsters hiding in both the closet and under the bed, Zero Hedge has decided it is about time to present the ugliest truth faced by our 'intellectual superiors' and their Wall Street henchman who succeeded in pulling off Goal #1 for 2009 - the biggest ever bonus season (forget record bonuses in 2010... in fact, scratch any bonuses next year if what is likely to transpire in the upcoming 12 months does in fact occur).

If someone asks you what happened in 2009, the answer is simple - two things. There was a huge credit and liquidity crunch, and then there was Quantitative Easing. The last is the Fed's equivalent of band-aiding a zombied and ponzied corpse, better known as the US economy. It worked for a while, but now the zombie is about to go back into critical, followed by comatose, and lastly, undead (and 401(k)-depleting) condition.

In 2009, total supply of all USD denominated fixed income, net of maturities, declined by $300 billion from $2.05 trillion to $1.75 trillion. This makes sense: the abovementioned crunches stopped the flow of credit from January until well into April, and generally firms were unwilling to demonstrate to the market how clothless they are by hitting the capital markets until well into Q2 if not Q3. What happened was a move so drastic by the Fed, that into November, the worst of the worst High Yield names were freely upsizing dividend recap deals (see CCU) - the very same greed and stupidity that brought us here. Luckily, so far securitization and CDOs have not made a dramatic entrance. They likely will, at which point it will be time to buy a one-way ticket for either our southern or northern neighbor, both of which, in the supremest of ironies, transact in a currency that will survive long after the dollar is dead and buried.

Back to the math... And here is the kicker. Accounting for securities purchased by the Fed, which effectively made the market in the Treasury, the agency and MBS arenas, but also served to "drain duration" from the broader US$ fixed income market, the stunning result is that net issuance in 2009 was only $200 billion. Take a second to digest that.

And while you are lamenting the death of private debt markets, here is precisely what the Fed, the Treasury, and all bank CEOs are doing all their best to keep hidden until they are safely on their private jets heading toward warmer climes: in 2010, the total estimated net issuance across all US$ denominated fixed income classes is expected to increase by 27%, from $1.75 trillion to $2.22 trillion. The culprit: Treasury issuance to keep funding an impossible budget. And, yes, we use the term impossible in its most technical sense. As everyone who has taken First Grade math knows, there is no way that the ludicrous deficit spending the US has embarked on makes any sense at all... none. But the administration can sure pretend it does, until everything falls apart and blaming everyone else for its fiscal imprudence is no longer an option.

Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand. To sum up: $200 billion in 2009; $2.1 trillion in 2010. Good luck.

As we pointed, the number one reason why 2010 is set to be a truly "interesting" year is a result of the upcoming explosion in US Treasury issuance. Fiscal 2010 gross coupon issuance is expected to hit $2.55 trillion, a $700 billion increase from 2009, which in turn was $1.1 trillion increase from 2008. For those of you needing a primer on the exponential function, click here. But wait, there is a light in the tunnel: in 2011, gross issuance is expected to decline... to $1.9 trillion.

And while things are hair-raising in "gross" country (not Bill...at least not yet), they are not much better in netville either. Net of maturities, 2010 coupon issuance will be about $1.8 trillion, a 45% increase from the $1.3 trillion in FY 2009 (and the paltry $255 billion in 2008).

Now everyone knows that the average maturity of the UST curve has become a big problem for Tim Geithner: nearly 40% of all marketable debt matures within a year (a percentage that has kept on growing). In fact, the Treasury provided guidance in its November 2009 refunding, in which it stated that it intends "to focus on increasing the average maturity" of its debt after relying heavily on Bill issuance in H2. Once again, we wish Tim the best of luck.

Why our generous best intentions to the US Treasury? Because unless the US consumer decides to forgo the purchase of the 4th sequential Kindle and buy some Treasuries (and not just any: 30 Year Bonds or bust), the presumption that the Bond printer will have the option of finding vast foreign appetite for its spewage is a very myopic one. We already know that China is a major question mark, and will aggressively be looking at pumping capital into its own economy instead of that of Uncle Sam's - at some point the return on investment in its own middle class will surpass that of funding the rapidly disappearing US middle class. That tipping point could be as soon as 2010.

As for Japan - the country has plunged into its nth consecutive deflationary period. Whether or not the finance minister announces yet another affair with the Quantitative Easing whore on any given day, depends merely on what side of the bed he wakes up on. The country will have its hands full monetizing its own sovereign issuance, let alone ours.

Lastly, the UK - well, with the country set to have zero bankers left in a few months, we don't think the traditionally third largest purchaser of US debt will be doing much purchasing any time soon.

None of this is merely speculation: October TIC data confirmed these preliminary observations. It will only become more pronounced in upcoming months.

How about that great globalization dynamo: emerging markets? Alas, they have their hands full with issuing their own record amounts of both sovereign and corporate debt as well: in 2009 gross EM debt issuance reached an astounding $217 billion, $29 billion higher than the previous record in 2007. Gross EM issuance was particularly high in the last quarter at $73 billion, with October breaking the record for the largest ever monthly gross issuance of emerging market global bonds at $38 billion (January is traditionally the busiest month of the year.) With $81 billion, 2009 was notably a record year for sovereign bonds, while gross issuance of corporate bonds amounted to $136 billion, the second highest level after that of 2007 with $155 billion.

Bottom line: everyone has major problems at home, and is more focused on the supply than the demand side of the equation.

What options does this leave for the administration? Very few, and all of them are ugly. As we stated earlier on, the options for the Fed are threefold:

  1. Announce a new iteration of Quantitative Easing. This will be met with major disapproval across all voting classes (at least those whose residential zip codes do not start with 10xxx or 068xx), creating major headaches for Obama and the democrats which are already struggling with collapsing polls.
  2. Prepare for a major increase in interest rates. While on the surface this would be very welcome for a Fed that keeps hinting that deflation is the biggest concern for the economy, Bernanke's complete lack of preparation from a monetary standpoint (we are surprised the Fed's $200 million reverse repos have not made the late night comedy circuit yet) to a forced interest rate increase, would likely result in runaway inflation almost overnight. The result would be a huge blow to a still deteriorating economy.
  3. Engineer a stock market collapse. Recently investors have, rightfully, realized there is no more risk in equities, not because the assets backing the stockholder equity are actually creating greater cash flow (as we demonstrated recently, that is not the case), but simply because taxpayers have involuntarily become safekeepers for the entire stock market, due to Bernanke's forced intervention in bond and equity markets. Yet the President's Working Group is fully aware that when the time comes to hitting the "reverse" button, it will do so. Will the resultant rush into safe assets be sufficient to generate the needed endogenous demand for Treasuries is unknown. It will likely be correlated to the size of the equity market drop.

If the Fed decides on option three, we fully believe a 30% drop (or greater) in equities is very probable as the new supply/demand regime in fixed income becomes apparent. We hope mainstream media takes the ideas presented here and processes them for broader consumption as indeed the Fed is caught in a very fragile dilemma, and the sooner its hand is pushed, the less disastrous the final outcome for investors. Then again, as Eric Sprott has been pointing out for quite some time, it could very well be that the US economy has become merely one huge Ponzi, and as such, its expansion or reduction on the margin is uncontrollable. We very well may have passed into the stage where blind growth is the only alternative to a complete collapse. We hope that is not the case.

Merry Christmas and Happy Holidays to all readers.

About the Author

turd [at] tfmetalsreport [dot] com ()


Dec 31, 2013 - 9:56pm

Rested and Ready

Here's a great visual summary of my vacation. We'll be back to business as usual come Thursday.

Happy New Year, everyone!

Dec 31, 2013 - 10:00pm

Feliz año!

Good for you Turd. Enjoy! All the best for 2014.

PS - 2013 is ending on a positive note - my first shipment of Turd silver rounds just arrived. 

Dec 31, 2013 - 10:12pm

3 or 4!


May we live in interesting times...

Metals waaaay up in early 2014, s'il vous plait!

Cheers, luv2stak

Dec 31, 2013 - 10:44pm

if you're out and about...

...be careful, it's amateur night. there are drunks out there behind the wheel, but just occasional drunks. the serious sots know how to handle themselves, but not this lot! a good night to stay home by the fire.


Dec 31, 2013 - 10:52pm


Blue Skies in that photo with no chemtrails, where did you find those/

Dec 31, 2013 - 11:26pm

Happy New Year!

Home with Mrs. Z as per usual. Don't go out any other night of the year so why start now? Free fire works from the rich people across the street.

Best wishes to all of Turdville for the new year. Thank you Turd (Craig) for all you do.


Dec 31, 2013 - 11:39pm
Dec 31, 2013 - 11:43pm

Happy New Year !!!!!!!

Well looking at the clock, on the wall we gots about 1hr and 20 mins. left in 2013..... So I raise my half full glass, to toast all you turdites, happy New Year !! May you and yours be safe, and happy in the coming year !!! All the best, for we are a great bunch of folks.We are on the right side, even though at times it doesn't seem that way. glug ...glug,,, ahhh. See you all in 2014 . Wing

Dec 31, 2013 - 11:44pm

First from Canada

Posting a new thread on New Years Eve, sounds like your night is as exciting as Mrs Silver66 and mine. I'm posting to a metals blog on New Years, just waiting to be the safe taxi for the the kids.

Hope your 2014 is as interesting as 2013


Dec 31, 2013 - 11:51pm


is offering discounts on their products until midnight.

Im going to try the morning analysis for $60.

Also at home. Sober. Bored.

Jan 1, 2014 - 12:03am
Mr. Fix
Jan 1, 2014 - 12:03am

Let these be the first to say "Happy New Years!"

 (now that it is New Year's)smiley

 Best wishes to all in 2014.

Flying Wombat
Jan 1, 2014 - 12:16am

Key for 2014 as potential difference will be...


The one thing that will prove to be the key difference, if at all: back in 2010 through 2013 the bond market players were willing to play the game of "the Fed has my back." With the faith that the Fed would continue to be the buyer of last resort, and with deflation fears still running wild, the hot money just played the Fed for the role of greater fool and the Fed accepted the role because they were out to paper over the deflation black hole and save their banker bosses' butts. 

2014 will most certainly see at least a heck of a lot less of that dynamic up and running. I'm convinced that the bond market has already rolled over and we're going much higher in yields, lower in price.

Happy new year, everyone,

Eric Dubin, Managing Editor, The News Doctors

Jan 1, 2014 - 12:27am

Its minus 18 with wind chill

Its minus 18 with wind chill here tonight in southern Ontario. A frosty Happy New Year to everyone! Glad I'm inside listening to the pounding of the waves along Lake Huron.

Mr. Fix
Jan 1, 2014 - 12:28am

Yeah, damn New Yorkers

Hi Tyberious,

 best wishes to you too.

wildstylechef rl999
Jan 1, 2014 - 12:54am

I used his service, Morning alalysis

Best to learn his charting method in a couple of months and then make sure you are on line with his methods when he does the occasional demo's. The only problem is it does not nor can it predict against someone dumping 2,000 orders in the dead of the market to dump the price of gold.

Jan 1, 2014 - 1:47am

2014, Watching Silver Return To It's World Monetary Role

It's a Monetary process, not an event, and the process is well underway!!

On 1/21/2014 (in 21 days) it will have been 34 full years since he Hunt brothers put this generation's silver market on the map, and silver peaked at 50 bucks an ounce.

2014... 43 years since (1971) the World's reserve currency went paper-only and Nixon shut down the 'gold backedness' of the USD.

... 50 years since (1964) U.S. silver coins were no longer silver.

In 1980, when the Hunt Brothers drove silver to $50.00 an ounce... that was a "market" event. What Silver is doing today is a Monetary event.

Silver is returning to it's monetary role in the hearts and minds of people the world over. (fake charts and media stories cannot prevent natural processes)

Not only did the bankers remove silver from the coinage, they completely removed it's monetary perception from their World Fiat Currency system. Treasuries and banks dumped their silver hoards and the 'price control charts' have depicted silver as being nearly worthless all the way to what is now 2014!

2014 is going to see more media deception surrounding silver and gold than ever before

2014 is going to see the World Fiat Currency system continue to fail

2014 is going to see Silver and Gold (especially Silver) continue to return to their monetary role in the hearts and minds of people all over the world.

2014 is going to see the bankers continue to work toward a new, single, digital, gold(related), world currency. (Bitcoin?, the next generation Bitcoin?, some digital SDR? The promotional event pace indicates we'll see whatever it becomes in 2014, maybe even early 2014.)

2014 will likely see the bankers attempt a controlled demolition of their World Fiat Currency system intended to facilitate the need for their New World (digi'gold') Currency.

Hopefully 2014 will see the TFMR crowd continue to stack, while confidently and patiently watching the Monetary events continue to unfold.

Hopefully 2014 will see sharper eyes, better noses, and thicker skin. Sharper eyes to see the Silver and Gold Monetary moves amidst all the 'market', and economic smoke. Better noses to discern real Silver and Gold information from the system driven misinformation. And thicker skin to not be emotionally wounded by a downward spike in a fake market, or distracted by all the negative silver and gold arrows fired from the media.

Silver is Money. Only Silver and Gold are Money. Silver is returning to it's monetary role...

They will never admit it, but pressure from Silver is directly or indirectly driving everything right now. 

You're in the right position, keep a world Monetary perspective,... discipline, discipline, discipline, and as always...

images?q=tbn:ANd9GcS9tNQJuRp4X_fm5ESnk3Jkeep stackin' it up...

Bongo Jim
Jan 1, 2014 - 2:10am


Helen of



Ounces - ding ding ding - we have a winner!

Happy New Year you heavy metal freaks.

Jan 1, 2014 - 2:22am


In Pee Wee football I was a QB #14. I ran for a touchdown. Fourteen is my lucky number. Let's see if it holds. Glad this last year is behind me.

Happy New Year and good fortune Turdville.



Gold Dog
Jan 1, 2014 - 3:00am



I love Snowmass!

Happy New Year,

Your friend,


Flying Wombat Docdhj
Jan 1, 2014 - 4:17am

Retraction on Fukushima story

Docdhj is right to note the importance of Fukushima because at any given time, that clean-up could go wrong and we'd really have a black swan event. But do read the retraction/update note that appears on the story right now. Thanks -- Eric Dubin

why do I even bother
Jan 1, 2014 - 4:20am

Spot the sublime irony in todays BBC Business news



1. Stocks close at record high

2. HP and Revlon announce job cuts

Jan 1, 2014 - 7:05am



Jan 1, 2014 - 7:09am
Jan 1, 2014 - 7:43am

re the old ZH post and the

re the old ZH post and the corner the Fed had backed itself into, and its three options:

"1. Announce a new iteration of Quantitative Easing. This will be met with major disapproval across all voting classes"

Someone sure called this one wrong. It would appear that none of the voting classes could give a goddamn. How upset is your neighbour? I don't even know anyone (myself included) who can give a good overview of exactly what goes on with QE. 

Jan 1, 2014 - 8:11am

on long cycles

Most commentaries look at this financial crisis as dating from the meltdown in 2007 however limited the value of Elliottwaves and Kondratieff waves, one possible value to them is they see the current economic situation on a more distant perspective which might add a big dimension to our understanding of this current situation. For example from elliottwave we know that the grand supercycle which they see ending now as commencing in the 1700's and the supercycle concurrently ending now starting with the great bull market of the 90's. The confluence of these ending at this time would fit with the profound worldwide reaction to this primarily American and European crisis and which promises to shift the centers of economic strength to Asia and Russia relegating the west to shadows of their former selves. We are dealing with a massive structural deficit in our economy as James Rickards says but the magnitude of that deficit and the profound tsunami of economic events likely to commence in 2014 is often underestimated. How long can such a correction last and to what depths can it plunge us? Much longer, much more profound alterations in our society than we customarily believe. According to James Rogers he sees agriculture and mining as the leading vocations for the next twenty to thirty years, stikingly similar to the time frame that Ellioticians see and for mining and agriculture to become the leading production sectors are society will have to become completely turned on its head.

Jan 1, 2014 - 8:25am

Happy News Year!

2013 ASE sales were not the only record set for .gov sales.

(CNSNews.com) - The total number of people in the United States now receiving federal disability benefits hit a record 10,988,269 in December, up from the previous record of 10,982,920 set in November, according to newly released data from the Social Security Administration.

The average monthly benefit paid to a disabled worker also hit a record of $1,146.43 in December, up from a previous high of $1,130.34 in December of last year.

- See more at: https://www.cnsnews.com/news/article/terence-p-jeffrey/10988269-2013-clo...
Jan 1, 2014 - 8:37am

One big answer (among others)

One big answer (among others) to TD's 2009 lament is that there has been a massive move on the part of buyers from sovereign to corporate debt, over the last four years. This has been very well covered by Martin Armstrong. Claiming to be able to predict the future has always been a reliable way to fleece the gullible--it has certainly made Mr. Ivandjiisky a wealthy man.

tmosley Docdhj
Jan 1, 2014 - 8:59am

@docdhj: You really should


You really should stop scaremongering by posting those inflated numbers. Why not tell us about the trillions of attosieverts instead of the thousands of nanosieverts? Or better yet, cut off all those zeros and tell us about the 21 microseiverts?

Use this chart to find the appropriate comparison:

You are looking at a chest x-ray per hour. A US radiation worker could work there for three months before reaching his maximum allowable dose. He could work there for six months before increasing his cancer rate.

I am not diminishing the problems at Fukushima, but artificially adding zeros to your numbers using smaller unit subdivisions is WRONG and the author should be ashamed.

Jan 1, 2014 - 9:16am


Happy New Year to all. No problem forgetting 2013 here.

Let's hope the ammunition for this continued assault on the PM's is about depleted.



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