More on the coming economic collapse

August 14, 2:10 PMColumbia Conservative ExaminerAnthony G. Martin

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In yesterday's column I reported that the Federal Reserve had monetized over 40% of the nation's debt that had been placed at auction, involving 7-year Treasury Issuance.  This was done by printing money we do not have and buying that portion of the debt in secret.

According to one economist who appeared on Fox News, the Fed made the buy 'using the back-door method' so as to avoid having to report it.

But insiders insist the buy was made and that the action represents an ominous sign that the economy is not 'in recovery' but remains in dire straits.

Here is a report from the Market Ticker:

Remember the Dallas Fed's Fisher saying that "The Fed will not become the handmaiden of Treasury"?

He was lying (The Fed already has), and now there is proof.

Mad props to both Zerohedge and Chris Martenson for noticing this; I missed the facts buried in the CUSIP list.

The upshot: The Fed bought nearly half of LAST WEEK'S 7 year Treasury Issuance TODAY.

That report was issued on Thursday, August 6, the day I mentioned in my previous column yesterday as being the date the deed was done.  It is also important to note that the Fed clearly did NOT monetize 40% of the nation's entire multi-trillion dollar 'national debt,' but the portion of the debt that had been offered at auction on August 6 involving the 7-year Treasury Issuance.

The reason why this is so profoundly significant is that the action of the Fed signifies that the U.S. economy teeters on the edge of complete disaster.  The Fed bought up the 7-year Treasury Issuance because the previous auction had gone so badly.  As Market Ticker states:

 Remember, after the 5 year auction that went badly (and which I wrote about) the 7yr auction went "well."  Rick Santelli (and a lot of other people) agreed - demand was strong.  That made no sense to me at the time, coming one day after a near-failure in the 5 year.

Well now we know what happened: The Fed pretty clearly pre-arranged, either explicitly or by "suggestion", that the Primary Dealers take up the auction with the promise that The Fed would immediately monetize half what the Primary Dealer's took!

Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!

And that's only half of the bad news.  After the Fed had monetized that portion of the debt, it immediately sold off the bonds it had bought, creating even more debt.

It is not coincidental that at the very same time these pernicious events were taking place, Treasury Secretary Tim Geithner requested that Congress raise the debt limit yet again--a debt ceiling that by anyone's standard is astronomically high, even brain-exploding high.

Here is Market Ticker's prediction of what will happen as a result of these events:

When it sinks in to the market's consciousness - we had two failed Treasury Auctions last week, both 5 and 7 year, yet we intend to try to borrow ANOTHER $400 billion next quarter and nearly $100 billion this coming week - the consequences could be extremely severe.

Thus, it is essential that Americans ignore the bright picture the Obama Administration is painting concerning the prospects of our economic recovery.  The Federal Reserve and the Treasury Department would not have undertaken these draconian measure were the economy not in critical condition.

Prudent citizens should be extremely cautious about their investments, bank accounts, retirement accounts, etc. at this time.  No nation can carry the debt load the U.S. currently has without suffering dire consequences, particularly when the present Administration not only has no plan to address the problem (and reign in the debt and budget deficit) but instead embarks on a national spending spree as if we have hundreds of trillions in surplus.

For more commentary on other issues, visit my blog atThe Liberty Sphere.