Floating Rate Treasuries

        Washington doesn’t want to see our economy gain steam.  Given the outsized National Debt, their outsized National Debt, a healthy bump up in Gross Domestic Product would trigger inflation, which only means one thing to officialdom: free-market interest payments on Treasuries.

         See, along with a coterie of central bank profligates in the ethics-challenged world of sovereign finance, Ben Bananas over at the Fed has been gaming interest rates to hold dollar payments on Treasury securities down to comically manageable levels, comical to anyone who isn’t living off retirement savings anyway.  Should the G-Men have to pay out amounts that would entice us to hold their perilous paper, Washington couldn’t cover the tab without printing oodles and oodles of play money for many insolvent years to come.

         Everyone knows this.  That’s why nobody wants to buy their stupid Treasury Bonds, Notes, Bills, and Whatevers, including Agencies and Quasi-Agencies and anything else they’ve got.  By law, some financial institutions have to.  Basically nobody else in his/her right mind will take on the risk associated with financing the United States Government at Ben Bananas’ rigged prices, hence he and the other sovereigns are gobbling them up en masse in order to push dysfunctional governance issues off the front page and keep our failed Washington politicians in office.

         Economic growth would disrupt the whole stinking charade, but we’ve started to see glimmers of just that lately, so much so that the Feds seem to have swung into damage control mode this past weekend, scrambling frantically to cover their budget-busting fannies.

         Feds sent up a pathetic trial balloon: floating rate Treasuries.  Morons think we’ll want to buy floating rate Treasuries if the economy heats up.  See, that way, they’d offer to raise and lower your interest payments to keep pace with changing market interest rates when the inflation mess hits the fan.

         Sound like a winner?  Well, here are the numbers behind this particularly ill-advised scam …..

         Lets say come January you buy a million dollars worth of floating rate Treasuries.  Perceived inflation has jumped to 5% a year, and you’re getting paid 6.25% interest. This would seem to cover rising prices and then some, wouldn’t it?

         Fact is, in order to keep up with perceived inflation, you’d have to add that 5% to principal, making the concept unworkable for most, if not all, individual investors.  On a million bucks, 6.25% garners $62,500 a year.  Reinvesting 5%, which is $50,000, only leaves you with $12,500 to 1) pay income taxes with (on that $62,500) and then 2) live on.

         Spending the whole $62,500, which is what really happens with most people, 20 years of 5% inflation would mean your annual income has to rise to $126,348 after two decades just to maintain your beginning cost of living.  Since you’re not reinvesting anything, your annual income bears no relationship whatever to the impact of rising prices.  In fact, if your stupid floating rate Treasury was still factoring in a 5% inflation factor and the same real rate of interest, your annual income from this bright idea would remain at $62,500 after 20 years, a total train wreck, to be sure.

         With floating rate Treasuries, these b$st$rds are asking you and me to foot the bill for their National Debt by letting them erode the purchasing power of our savings.  We don't know what you folks think of that, but to us it's just one more reason why all these cashsucking Washington politicians belong in jail.  That's right, all of them.  From Sambo on down.

         Day comes when these things get hyped and issued, pleeeeeeeeeeze, valued subscribers, don’t buy them unless you stick the entire inflationary factor back into the wealth management account.  All of it.  Every single dime.

         Even then, that inflation assumption is going to be calculated by, guess who?  The same thieving pickpockets who bring us our cost of living adjustments? 

         Yup.  The very same.  Government “statisticians” who’re now chipping away at your hard-earned social security benefit every single month of our allegedly Golden Years.  Do you really want to trust these lowlifes with more of your income from now on.  If so, jump into floating rate Treasuries and let the “statistical” games there begin.

         Forget floating rate Treasuries.  Make Washington pay for their own mistakes, not you and me.  Vote the incompetent politicians out, keep your dough in the widest of wide-moat, blue chip equities, and, for God’s sake, subscribers, hang on tight.

         The safest income stream money can buy, that’s where real investors bury their wherewithal amidst all the make-believe “opportunities” financial predators are offering their naive counterparties in the rigged-market, sell-side derivatives fantasyland of today.  On the near banks of the widest of those legendary wide moats.