Saturday, July 2, 2011

The Problem of US Sovereign Debt

Above is an excellent animation of the US debt problem.

Forgotten in much of the debt discussion is the maturing debt problem.  Looming on the horizon is the month of August.

In August the United States has  a $134.3 billion cash shortfall that has to be funded with debt.  On top of that there is $467.4 billion in debt that matures through August 31, and has to be rolled over or the US is bankrupt.

That's half a TRILLION dollars in debt that has to be funded in the month of August alone.

As this great article on Zero Hedge notes,  while the politicians debate whether or not to raise the debt ceiling - their decision only addresses the inability to issue more debt post August 3.  But halting all new debt issuance does't end the problem. $467.4 billion has to be issued at the end of August alone.

Make no mistake, the Federal Reserve will be monetizing that debt with some form of new QE.  They many not call it QE, but there will be QE.

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