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The Largest United States Treasury Auction in History: In Perspective

|Includes: ProShares UltraShort 20+ Year Treasury ETF (TBT), TLT

Via Jr Deputy Accountant


I sincerely hope LOLFed didn't already do that headline or else I need to try harder next time.

Anyway. OMG!

In case it's difficult for you to wrap your head around the concept of the largest United States Treasury auction in history ahead of us this week, let's put it into perspective.

Hearken back, if you may, to 2002. Do you remember '02? We were still healing from 9/11 (some argue we still are to this day and I tend to agree) and the fallout from the dot com crash earlier in the decade was still hurting Silicon Valley above everyone else. Again, some might argue that we are still hurting as a result, and again I tend to agree. A dump costs you $400,000 out here. $400,000! A studio is $1000 at least, and that's in the f--king Tenderloin. Anyway. I was 21. Oh dear God. Let's not get into what I was doing at 21...

Anyway... 2002. I don't know about you but I like to tie bits of time to playlists, although at that time I had a giant rounded tacky yellow and black beast of a Walkman. iPods had come out at that point but I don't do first gen.


So what were we listening to?

We were pretty lame IMHO:

1 Nickelback - *censored because they suck too bad to even list*
2 Puddle Of Mudd - Blurry
3 Ashanti - Foolish
4 Pink - Just Like A Pill
5 Linkin Park - In The End
6 Nelly - Dilemma
7 Creed - My Sacrifice
8 Ja Rule - Always On Time

Ok I wanted to list more than this but I'm sick already. I found this on so it's not even worth linking back to. Anyway, this is what was on the radio. Are we there yet?

Euros debuted in France, Spain, Germany, Italy, Portugal, Greece, Finland, Luxembourg, Belgium, Austria, Ireland and the Netherlands.

The UN Security Council unanimously established an arms embargo and froze the assets of Osama bin Laden, Al-Qaeda, and the Taliban. Ohh scary. Meanwhile, homicidal maniac Alan Greenspan was furiously jerking off over his deflated bubble (dot com would be one of many impotent AG attempts to get the economy to roll over and spread her legs; sadly, all would end in failure. See also: right fucking now).

Can you please compare the Federal Reserve H.15 Selected Interest Rates release from January 2002 to the Federal Reserve H.15 Selected Interest Rates release from June 2009 for me? I'm really tired of this bullshit and don't even want to look. Besides, I don't need to and neither should you. It doesn't take an audit to tell us something is terribly awry.

Are we sufficiently planted back in 2002 now?

Just 7 years ago, the Treasury Department of the United States looked a bit like this:

• The Administration’s Mid-session Review of the Budget showed a deficit for FY 02 of $165 billion and forecasts for deficits in FY 03 and FY 04, compared to originally projected significant surpluses in the FY 02 Budget. As the change in the fiscal position progressed, the Treasury suspended its scheduled reopening policy and increased auction sizes. Given the projected outlook, Treasury may need to make additional adjustments to its financing plans in FY 03 and FY 04. Would you recommend any adjustments to Treasury’s financing?

Throughout Treasury, we have undertaken to quantify performance through measures of the quality or quantity of services we provide. Are there measures of debt management that would provide useful indicators of the quality of debt management decisions? Are there indicators of the auction process, issuance policy, or the resulting composition of debt outstanding that you believe we should be measuring ourselves against? Should the sensitivity of the outstanding debt to interest rate changes be a measure of performance? Is there a measure of interest rate cost that could be used as a performance measure?

Since we announced our intention to enhance the attractiveness of the Treasury inflation-indexed security (TIIS) market, we have increased the number of 10-year TIIS auctions from two to three per year and spoken widely to promote interest in the inflation-indexed market. Upon completion of this TIIS cycle, we plan to further increase TIIS issuance. If Treasury were to further expand the TIIS market by going to four auctions per year, would you recommend that it issue two new 10-year notes, with each followed by a reopening, or that it issue four new notes? What factors should be considered in determining TIIS auction sizes?

The composition of 5- and 10-year notes to refund $18.8 billion of privately held notes maturing on November15.

The composition of Treasury marketable financing for the remainder of the October – December quarter, including cash management bills if necessary.

The composition of Treasury marketable financing for the January – March quarter.


Let us also point out here once again that I am an anti-Bush conservative. He'd been in office 2 years at this point. And?

We are doing more in this week, the last full week of June, 2009, than we did for all of fiscal 2002


$165 billion for all of FY 2002 beating what we are doing in one week?!

I ask you now, what the f--k do we think we are doing? Have we all lost our f----g minds?

This is insanity. Our world has been flipped upside down. The top failures are the ones rewarded with more chances to fail. We are being auctioned off to the highest bidder and the worst part is that even


auctions are doomed to fail. We've all seen it. Again, I point you, dear reader, over there -----> should you care to learn more. Don't just listen to me, what the hell do I know? WTF, I train accountants, I can't make sense of this for you. But you've got to see it.

How about comparing the Fed balance sheet of January 2002 to the Fed balance sheet of June 2009? Do you need a fucking audit to see this? Yeah I saw what you did there, H.4.1, and I did not find it to be entertainment.

What good would an audit do you and I? We know who would be awarded the contract to tap the Fed's books (see Re: The Auditors and Skeptical CPA if you care to learn more about the accounting industry's part in this mess - it is not for me to elaborate on since I reach the CPAs when they are still bright-eyed new hires and OMG totally excited about their new jobs at the Big 87654 ™ Skeptical CPA) and it doesn't take a qualified CPA to look at the difference 7 years can make. Again, I remind dear reader that the banking interests are to the Obama administration as Halliburton was to the Bush administration. Come on back, we're here in 2009 now and Bizarro World isn't anything like what you used to know. Time to wake up *slap slap*

As I have said before, let's just postulate here and say we manage somehow against all odds to kill the Fed. Then what? We owe the fuckers $14 trillion!!! And certainly the dollar will be imploded, the ship looted, and the gold smuggled out by then. This is not the fodder of tin foil hattists with nothing better to do but smoke weed and play D&D. This is reality. (See also my June 15 Suck My Green Shoots: Banks Still Not Lending)

When in doubt, turn to Market Ticker KD and I must be on the same crazy non Kool-aided wavelength:


The problem is that Treasury has been and continues to suck all the oxygen out of the room with their unprecedented issuance of debt to fund Obama's silliness in the form of his budget "priorities" and the raw handouts to banking interests, much of which is apparently going to show up in Goldman Sachs bonuses.

Again, to put this in perspective this 7-day window has $165 billion in issuance. The entire S&P 500 - all 500 stocks - has been trading in the $2-2.5 billion a day range for the last month or so. That's the capital flow that is represented by all trades in all 500 stocks.

There are of course lots of other stocks, but in aggregate the S&P 500 posts the largest dollar volume on a typical day by a significant margin.

You simply cannot issue $165 billion in Treasury Debt and expect it not to have a major impact on system liquidity. It is not possible. That which is spent on one thing (in this case Treasury bonds) cannot be spent on another (in this case stocks.)

The Fed cannot "monetize" this debt without creating an instant dislocation in the Treasury market - their games thus far have produced a SMALL rumbling of trouble there, but nothing like an outright monetization campaign would produce.


7 f---ing years. Really? Has it really come to this?

America, I've asked you a million times before to wake the f--k up and stop laying down to spread your legs for this bullsh*t but enough is enough. You don't have to understand the particulars, all you have to know is you are getting f----d. Your children are being f----d. Your grandchildren are f----d before they are even created.

It comes down to this. Oh, and this T-bill auction will end in disaster. Meanwhile the FOMC is meeting to discuss where this might lead and how to spin the green shoots into sustainable recovery.

If you understand one thing about The Great Recession, understand this: the bubbles are done. There is no more reflating.

Or as I've said a million times before...