Seems like Mr. Piper just arrived in Washington DC on his bill collection tour. Our congressional incumbents now owe him trillions, and he kicked them in the shin today for the first time in a long while.
The US Treasury tried to auction off its IOU's to Americans and the world, as usual. Problem is, nobody is buying anymore, at least not at the usual prices. The auction was so poorly bid that the ten year note's yield shot up from 3.16 to 3.23 in one day. On government bond land, that's a huge jump!
Interestingly, the normally built-in see-saw effect between stocks and bonds wasn't working today. Stock reportedly took a hit because the bonds were so poorly bid. Here is what the AP had to say:
Weak Treasury auction sends stocks lower
By TIM PARADIS and SARA LEPRO
NEW YORK (AP) — Stocks are finishing lower after weak demand at a Treasury bond auction touched off worries about the government's ability to raise funds to fight the recession.
The government had to pay greater interest than expected in an auction of 30-year Treasuries. That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic recovery plans.
The Dow Jones industrial average is down 102 at 8,410, the same amount it rose Wednesday. The S&P 500 index is down 12 at 907. The Nasdaq composite index is down 43 at 1,716.
About two stocks fell for every one that rose on New York Stock Exchange, where volume came to a heavy 2 billion shares.
Even more interesting is the fact that gold and silver closed virtually flat today, and even PM stocks sagged - so where did the money go? Institutional investors must be hogging their cash - but that won't last long. Jumping long term rates like that presage out-of control inflation - and that presages a rush into on gold and silver because cash loses value in such scenarios.
Who pays the Piper, then? At first Congress, because borrowing is now going to get way more expensive than it has been. The added interest expense will then have to be either borrowed, taxed, extorted (via taxes) or 'printed' electronically (meaning the Congress will have to authorize the treasury to borrow from the Fed and the Fed simply "credits" the amount supposedly loaned to the Treasurys' bank accounts at the Fed. In other words - 'magic' money!
But that only means more loans from the Piper, so who on earth will pay him? Here's a hint: He will extract his due through an economic crash of as yet unseen proportions. It is unavoidable - and we told our Congressmen and women so before the first Bush-generated bailout. They stopped, thought for a moment- and then passed an even fatter bailout package against our will.
Yes, your Congressman probably voted for it. Find out here if he did.
So, what will you do? Will you reelect him? Will you refuse to vote and thereby guarantee his reelection? Or are you going to do the right thing and double your vote's effect by voting for his strongest opponent, no matter who that is and what party he is from?
If you fail to use the last option you are perpetuating your Congressman's ineptitude, arrogance, and profligacy. You have the absolute right and unquestioned ability to get politically active to vote him out. Issues and parties no longer count. Only whether or not he complied with the Constitution counts - and he obviously didn't. If you enable him to violate it further by allowing him to continue in office, you are responsible. No one else.
Think about it.
"It's the Constitution, stupid!"