From the very beginning of this crisis, we’ve told you that, while Washington’s bailouts could delay the inevitable, there’s no free lunch. The Day of Reckoning for Washington was near …
The day of reckoning for Washington’s borrowing binge — when investors cut down their buying of U.S. , or worse, begin stampeding for the exits …
The day of reckoning for Washington’s printing presses — when the dollar sinks uncontrollably, and …
The day of reckoning for Washington’s bailouts — when the Federal government will inevitably have to turn its attention to saving its own neck, cut back on the bailouts, and let the U.S. economy and stock market go into free-fall.
Now it’s clear that Washington is nearing the end of its rope.
In fact, in his Friday interview with C-SPAN, when asked WHEN the government would run out of money, the president had no choice but to admit “We’re out of money NOW!”
Meanwhile, global investors are recoiling from the record-shattering tidal wave of U.S. government issues flooding the .
Treasury prices are plunging. The U.S. dollar has fallen to a six-month low.
Worse: Higher interest rates are pure poison for an economy already on the ropes — the coup de gras that will transform the worst recession in a half century into a depression that rivals the 1930s.
Or, as I said in last month’s online briefing,
“When Treasury Secretary unleashes an avalanche of treasuries to fund these bailouts he’s posing as the ‘savior’ of the economy. But in reality, it’s like mercy-killing.
“He’s like ‘Dr. Death,’ Jack Kevorkian, administering the poison that kills the patient.”
Now, just as I warned, thanks to massive federal borrowing, interest rates are rising. The yield on the benchmark 10-year treasury is up by 57% (1.57 times its earlier level) this year alone … and headed much higher.
Look: It’s no secret that massive federal borrowing drives ALL interest rates higher. Nor can anyone deny that, with consumers already cutting purchases to the bone, higher interest rates mean corporate earnings will be crushed in the months ahead.
Huge treasury offerings also siphon hundreds of billions of dollars OUT of the corporate, state and municipal bond markets, starving companies and local governments for desperately needed money. That, in turn, makes a new wave of bankruptcies a near certainty throughout the rest of 2009, in 2010 and beyond.
It’s all about to make the crisis we’ve seen so far seem like a walk in the park.