Another Sign That The End Is Near

Two rather ominous signs came to my attention yesterday.

The first was, as reported by Lee Adler:

Japan and other central banks did not show up at today’s auctions. The bid tendered on the 13 week bill was just $5 billion, the lowest it has been going back to at least February of 2010. Typically the bid tendered totals between $8 and $15 billion. The indirect bid taken was $4.8 billion, down from $13.6 billion last week and $7.3 billion on the maturing paper at the time of that auction.

Faith in the US is fading and our Blanche du Bois dependence on the kindness of strangers approach has grown old for those supporting us.

The second was the fact that the government is surprisingly close to running out of cash: As Treasury Cash Drops To Just $14.2 Billion, And No Bond Auctions Until Next Week, Is America About To Run Out Of Cash?

That cash, according to the article, represents about one day’s spending. Obviously, the government will not run out today or tomorrow, but one wonders why they hold so little. Have recent Treasury auctions disappointed? Has the rate of spending suddenly lurched upward and surprised them?

The government can defer payments, etc. and buy a probably significant amount of time should that become necessary. That is what happens when a government shutdown occurs. But, who would choose to run with a buffer of only one day’s cash? Not you or me. Nor any small or large corporation. At least not by choice. It is one thing to be insolvent, it is quite another to be illiquid.

In an article on American Thinker to be posted here later today, I speculated that Quantitative Easing was less a stimulus and more a means to cover up the fact that the US can no longer fund its spending via conventional means. Even if the US had the political will to stop QE (and they don’t), they would be unable to do so without pushing the economy into a recession at best and more likely a depression.

Cutting QE would also mean that all spending could not be funded. Perhaps $1 Trillion in real and immediate cuts would be required because the US would be unable to finance its deficits via conventional debt markets.

A depression accompanied by massive cuts in social programs! Wouldn’t that be fun? Think Cairo or Tripoli.

QE is not sustainable regardless of what politicians want. Markets will stop it eventually and then watch out.

No possible ending is neat, pretty or safe.