Blank Check
September 25th, 2008 12:07 am | by John Jansen |Peter Orszag is head of the Congressional Budget Office and he testified before the House Budget Committee on Wednesday.
He stated that he could not estimate the cost of the bailout bill because the plan is too vague.
He also testified that he expects the $700 billion authority, assuming it passes. to be fully utilized furing fiscal 2009. I believe that the 2009 fiscal year will begin on October 1 .
That is an enormous amount of borrowing by the Treasury and does not count funding of FNMA and Freddie Mac or purchases of MBS by the Treasury.
Unless the economy heads into a serious contraction, very serious, current yields on 10 year notes and 30 year bonds will increase. We will be drowning in a sea of Treasury spittle.
4 Responses to “Blank Check”
By Dr.Dan on Sep 25, 2008 | Reply
http://market-ticker.denninger.net/archives/590-FLASH-Fed-Speaking-Out-Both-Sides-Of-Mouth.html
Fed wants to cause panic by draining out liquidity ?
An explanation would be helpful.
Thanks
By Rosabarba on Sep 25, 2008 | Reply
That “Inflation vs. Contraction” is the only question that matters at this point, isn’t it?
Does the Treasury program “succeed,” the federal helicopters start dropping their leafy green loads, in which case bonds get crushed and you wait in gold until dividend/interest yields hit the teens or higher?
Or is the problem so huge, the direction of the economy too fixed to the downward, and the bunkering instinct among the banks the dominant psychology at this point, that all of the capital and liquidity released by the feds will go to the banks and stay there, in which case you might as well be in cash equivalents?
I ain’t an expert in any of this, so I’d love to hear the opinion of one who is.
By The second last samurai on Sep 25, 2008 | Reply
As a surviver of deflation in Japan, I would say the first response will higher yields and some pop of stocks, then we’ll see serious crash in equity market, and the economy will start contracting, very seriously. Deflation is inevitable.
By UrbanDigs on Sep 25, 2008 | Reply
Exactly! Like I said, with massive issuance, will come a rise in yields on the long end.
The trade of shorting treasuries at the long end is VERY interesting to say the least. I got my TBT!