DANGER: The US Treasury is going Bankrupt.

holy smokes treasury liquidity is an

absolute shambles and some are wondering

is our treasury market going bankrupt

treasury Department's obviously a pretty

big deal and with yields as juicy as

what we've been seeing like today the

10-year treasury at

4.11

absolute freaking Insanity folks look at

the peak of this summer the peak of this

summer has turned into a joke compared

to what we're seeing now this is crazy

and yet even with rates this High folks

are worried that the treasury market is

becoming dysfunctional in this video

we're going to talk about this

dysfunctional treasury market what's

happening why it's happening and what it

means for us because the treasury

Department is about to undertake

something that they haven't done in over

20 years

marketing back to the.com Bubble that's

right well folks let's get into it this

video by the way brought to you by Mumu

but more on them later all right take a

look at this treasury liquidity metrics

last month reached the worst levels the

market Mayhem has seen since the onset

of the pandemic yeah and we had panic at

the beginning of the pandemic okay so

ladies mind-blowing that we are seeing

treasury issues to the degree that we

saw at the beginning of the pandemic

when rates were like nothing okay then

it was like why would you buy treasuries

in this environment now it's like dude

they're offering you four percent and

there's still not enough liquidity for

these suckers in fact it's so bad that

not only are we seeing metrics that

suggest spreads are as high as they were

in 2020 but you've got folks now saying

things like this you can drive a truck

through the bid ask spread for some of

the treasury Securities says the CIA of

uh whatever some company here's a chart

to basically show you the madness Okay

so this was the beginning of 2020 right

here and it shows you how briefly we had

a spike in the spreads for Treasure

yields basically the higher this chart

is the more liquidity problems you you

have when you have a lot of liquidity

like a lot of cash a lot of buying and

selling going on

you generally have very very low spreads

like all the way at the bottom of this

chart over here that's because the more

transactions you have the closer the

market gets to where it should be right

but when the market is like running out

of buyers you got some people selling

but you've actually got less

transactions going on and specifically

people don't have as much cash as they

used to liquidity problems Spike except

they don't Spike like they did in the

covet pandemic where we had this sort of

shock for a moment and we had a v-shaped

recovery they've grown look at this the

problems have been getting worse and

worse and the liquidity issues have been

getting worse as yields have gone up

which is odd because more people should

be wanting to buy treasuries right now

but they're not they're not buying

treasuries because they think that

inflation is so out of control that even

at four percent treasury yields this

could be a risk and this could be a bad

deal because maybe next month they'll be

offering us five percent on our Treasury

is how crazy could that be but the point

is this chart go up it signals problems

in the treasury market it is a stress of

cash and not enough liquidity and so now

the treasury Department is coming out

and doing something that they haven't

come around and offered before

Reuters U.S treasury Department asked

major Banks if it should buy back bonds

yeah the treasury Department is now

considering doing something they haven't

done since the.com bubble and actually

try to step in and provide liquidity for

the bond market because it is so badly

in shambles and we are just literally

just now at the beginning of the

quantitative tightening cycle that's

scary because that combines this so let

me paint this picture for you okay you

have the treasury market and the

treasury Department saying hey

we'll sell you bonds we'll pay you 4.1

on a 10-year risk free no risk for 10

years every year for the next 10 years

we'll pay you 4.1 percent and guess what

people are saying yeah

nah

usually the Federal Reserve would come

in and buy but see the problem is the

fed's not buying anymore because the FED

has well they're not buying as much

anymore because the FED has now said

it's time to roll off about 80 to 100

billion dollars worth of treasuries a

month and so that means they're buying

80 potentially to 100 billion dollars

fewer treasuries than they ordinarily

would have been so the Federal Reserve

is gone as a buyer

other uh or banks are tapped in terms of

how much they can borrow and I'll show

you or how many bonds they can get uh by

uh so they're tapped and I'll show you

why in just a moment bankster Tab and

otherwise companies and people are just

out of cash and Pension funds are like

wait a minute wait a second usually we'd

be buying treasury bonds but wait what

just happened in the United Kingdom the

treasury Department had these juicy

bonds that Pension funds were buying

Pension funds would buy them but then

the value of those bonds would drop and

because Pension funds are leveraged

they were getting margin called so

buying these risk-free treasuries is

only risk-free to the point that you're

buying them with cash but if you're

borrowing them and then they drop in

value before they hit maturity well now

you get margin called

so you actually have multiple

institutions who are ordinarily buying

treasuries that are not the fed's not

buying Banks can't buy anymore people

are out of money companies are like uh

we're probably wanting to use our cash

to do cheap Acquisitions or we're

running out of money too and we got to

tighten our belt because cash flow is

about to go down because we're going to

do an earnings recession and you have

Pension funds that are like

yeah we we don't want uh to get margin

calls like what happened in the United

Kingdom even the Dutch Market which has

way more leverage in the pension fund

system than the United Kingdom in in the

Netherlands in Holland they're like oh

shaisa this could be bad

yeah so why is the treasury Department

now suggesting

as Janet Yellen well uh maybe we could

just buy our own bonds since nobody else

is buying them

I don't know why all of a sudden she

sounds like a sick version of Mickey

Mouse

but but I don't know but we'll talk

about those details and what they mean

and what the Federal Reserve says is a

danger about this

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back to the treasury Department what

does this mean folks it means we're out

of money but we already talked about

that so

what is going on like why aren't banks

at least buying let's take a look at

this so the underlying cause of the lack

of liquidity is a the FED right B

Pension funds C companies and people but

also also also also Banks due to the SLR

don't worry so much about what that

means don't have the ability to buy more

treasuries so in other words Banks who

are sitting on a lot of cash can't

actually go shopping for these

treasuries

but why would they

because a they can't via the SLR but two

they don't need to they can just park

their money

with the Federal Reserve in the reverse

repo market and they can let their money

sit here see this right here is when the

SLR requirements expired and so then all

of a sudden Banks started putting their

excess cash in here and so we've seen

that excess cash balloon

well the problem with this is now the

Federal Reserve and this is where it

gets dirty now the Federal Reserve is

having to pay these insane interest

rates

on all of these Bank deposits so banks

are like hey we don't need to take the

risk and buy your stupid treasuries even

though technically they're risk-free

assets if we're levered up then we have

lots of risk because the value could

drop in the short term if you don't hold

the mature maturity right instead let's

just collect a lot of money from the

Federal Reserve you know who's winning

big here it's the banks folks it ain't

the people it ain't the government it's

the banks because the banks are

collecting all this money the more money

the banks collect here means the less

money the treasury Department gets and

the less money the treasury Department

gets means the treasury Department ends

up going into more debt which is

interesting because now the treasury

Department is like hey let's buy back

our own bonds which maybe we can buy

them back at a discount but that means

the treasury Department is using more

cash temporarily to try to pay less

interest in the long term by buying back

their own bonds potentially at a

discount but again potentially and

ironically increasing their debt sure

they might have some benefit of not

paying some of the higher interest and

being able to buy back some of these

bonds at a discount but when does this

end and so this creates a very

dislocating nightmare where some folks

are just worried about the future of

this see look at this the treasury

Department carried back uh carried out

Buybacks in 2002 was the most recent

time and some have been saying hey let's

try that again

and the Federal Reserve Bank of New York

has a staff report from 2007. these

dates are great.com Bubble Great

Recession whatever BuyBacks and treasury

market and debt management and see they

actually think it's constructive they

actually like that hey during a time of

budget surplus which is the last time we

did this into in in the early 2000s

let's use BuyBacks because you have

extra cash but we're in a huge budget

deficit right now so another big

difference we're in a huge budget

deficit right now now the FED says hey

we think that uh if you buy back debt

and then cancel that debt you're paying

less interest we've done this before we

think that ultimately there could be a

benefit to you buying back treasuries so

the conclusion just wrapping up of their

paper is that hey we think even during a

period of debt or deficit spending there

could be a benefit to buying back your

own treasuries

but we've got a few problems

the first problem is actually outlined

in that fed report I just showed you

they say the difficulty with strategic

BuyBacks is knowing when to stop that is

identifying the point passed which

further increases of the size of new

issues conflict with the debt management

objective of least cost financing that's

just a fancy way saying hey if you buy

back your own debt maybe you're able to

reduce your interest payments but now

you're kind of like you're messing up

the existing market and we haven't done

that before

so this is where things get really

interesting because let's put these

pieces of the puzzle together here's my

bottom line to this now this is my

opinion this is just my understanding

the treasury Department is now using a

tool they haven't used since the.com era

they last used it when we had a budget

surplus now they're going to use it in a

budget deficit using a 2007 paper from

the FED who says it should be okay

okay sounds good thanks

now it should be okay which means

temporarily treasury BuyBacks should

help provide liquidity and lower yields

in the short term and increase bond

prices that's the theory

that's good

but what if it fails what if the

treasury goes out and provides liquidity

for six months or three months whatever

and then all of a sudden it doesn't work

and yields continue to go up bonds

continue to fall in price and spreads

continue to widen that chart I showed

you earlier

well now it tells the market uh oh the

treasury market took out a tool that

they haven't used since the.com bubble

and it failed

that creates even more fear that the

bond market is screwed which could lead

to even less Bond buying more bonds

selling lower bond prices higher yields

now the pension disaster that you saw in

the United Kingdom

could come to America

because now Pension funds in America

start getting margin called and they

start dumping bonds now the FED has to

decide In America which is a global

precedent Center oh God okay now we have

Financial stability concerns in America

do we keep hiking or do we bail out

Pension funds or let them go bankrupt

remember Pension funds go bankrupt then

the companies become responsible for

paying the pensions of the employees who

worked for those companies

which could lead to a disaster of

earnings for those companies as they

take massive write Downs or those

companies go bankrupt and then the

government has to bail them out anyway

which creates more of a federal federal

budget deficit

every which way you slice this is the

fact that the treasury Department is

coming out and starting to do this it

should be scary it's a sign that things

are getting so bad that Janet Yellen is

trying to pull stuff out of a hat from

the.com era

and we have no idea what's gonna happen

now I gave one scenario of what could

happen the other scenario is that in two

months inflation could plummet to four

percent and stocks could Moon and bonds

could rally and yields could plummet and

everything's fine

you know all the tides just don't go out

all the way

the other potential is you sign up for

MooMoo via the link down below and you

leave a comment to let me know what your

thoughts are because I don't know but I

will say

when I studied this over the last few

days here and have now put this video

together I'm like

oh boy I don't like the idea of reaching

into a bag of experiments to see what

will happen

let me know what you think but Halloween

is starting to look darker and darker