Two Stories

In my usual romping around the net, I ran across two separate stories that are significantly related. It appears that as the U.S. is poised to sell more Treasury bonds (debt), foreigners are starting to be unwilling buyers:

Story numero uno:

Oct. 15 (Bloomberg) -- Sales of Treasuries may increase for the first time since 2004 as the U.S. federal budget deficit expands, jeopardizing the biggest bond rally in five years.

Government auctions of bills, notes and bonds in the fiscal year that started this month may rise more than 50 percent to $220 billion, according to UBS Securities LLC, one of the 21 primary dealers that underwrite Treasury auctions. The first decline in corporate tax revenue since 2003 increased the shortfall by 12 percent to $162.8 billion for the year ended in September, from $144.8 billion in the 12 months through April.

Shorthand? A slowing economy is reducing tax revenues. That, along with a couple of little problems called Bush and Iraq, the U.S. continues to spend money like a drunken sailor.

Story numero dos:

Total holdings of equities, notes and bonds fell a net $69.3 billion after an increase of $19.2 billion in July, the Treasury Department said today in Washington. Including short- term securities such as Treasury bills, foreigners sold a net $163 billion, compared with a gain in the previous month.

Demand for U.S. stocks overseas declined as the deepening housing recession and credit-market rout threatened investment, hiring and consumer spending. The drop in purchases was the first since August 1998, when Russia defaulted on its debt.

Wouldn't it be nice to have the trillion bucks blown on Iraq about now?

Shorthand? Foreigners aren't buying our debt. Perhaps the dollars free fall has something to do with that?

What all this means to you and me is rising prices on everything and rising interest rates. Since the war is not ending any time soon, and spending is not cutting back any time soon, and taxes aren't going up any time soon, debt will continue to need to be bought. The only way to do that is to raise interest rates to attract buyers, which hurts you and me. In fact you can see it happening already. The new high in oil is partially due to the weaker dollar. Be prepared for gasoline to begin rising again soon.