The Shocking Details Of The Treasury X-Date

Understanding the Pending X Date and Its Implications

In this section, Mark Moss discusses the looming debt ceiling debate and the pending X date, which is the exact date that the U.S. Treasury will run out of money and stop paying their bills. He explains how this situation is different from previous years and why it could have catastrophic consequences.

The Looming Debt Ceiling Debate

• The U.S. Treasury has to take on more debt to pay their existing obligations.

• This seems to come up every other year, but a deal always comes through.

• However, we now have the pending X date, which is the exact date that the U.S. Treasury will run out of money and stop paying their bills.

• The markets are pricing in a good chance a deal won't be done in time.

Understanding the X Date

• No government with a money printer will ever default, but history shows us that even if a deal comes together at the last minute, it can crush markets and assets while others do very well.

• The X date is projected to be around June 6th.

• If the United States government cannot meet its obligations on this day, it would be catastrophic.

Two Black Swan Catalysts

• There are two other massive potential black swans happening around this time that could compound the situation's severity.

• These events could lead to massive casualties.

What You Need To Do

• This is a complex subject that requires multiple videos' coverage from different angles.

• Attend Mark Moss's live session where he breaks down everything you need to know about this situation and what assets he's buying or selling.

• Be prepared for the worst-case scenario.

The Federal Reserve and the US Treasury

This section discusses the relationship between the Federal Reserve and the US Treasury, their assets, income, liabilities, and how they make money.

The Federal Reserve's Profit

• The Federal Reserve is a bank with assets, income, and liabilities.

• Going back to 2011, the profit that the Federal Reserve has made has remained pretty much flat.

• However, something happened that caused the Fed to lose over $60 billion in profits.

• The Fed started reducing the size of its balance sheet by getting rid of debt.

The US Treasury's Balance

• As the Fed was tightening and reducing its balance sheet, the treasury was making up for it by putting more money into the market.

• However, as of October 31st 2022, there is only about $50 billion left in their account.

• If the Fed continues to tighten while the treasury is out of money then things will get worse.

Debt Ceiling and Ponzi Scheme

This section discusses how maxing out credit cards can be compared to what is happening with government debt.

Government Debt

• The US Treasury must take on new debt to continue paying for old debt.

• When one credit card is maxed out you get another credit card until you are applying for new credit cards which is basically where the government is now.

• According to a statement from October 2022 by U.S treasury they have no idea what's going on.

US Treasury Borrowing and Potential Default

In this section, the speaker discusses the US Treasury's borrowing projections and how they have been inaccurate. The potential for a default is also discussed.

Borrowing Projections

• In August, the US Treasury announced their borrowing projections for January to March 2023 quarter.

• However, they had to borrow way more than projected.

• The treasury now expects to borrow $578 billion in the first quarter of 2023.

• The treasury has been unable to predict where they will be financially in the next month or quarter.

Potential Default

• Janet Yellen warned that the treasury would be unable to pay all government obligations by early June 2021.

• It is impossible to predict with certainty when exactly this will happen.

• The markets are pricing in a default as both sides hold firm on negotiations.

• In 2011, there was a similar situation where the spread between one-month treasuries and effective funds rate stayed in a tight band. This was closest we ever got to an actual default.

• Currently, we are much further down indicating that a default may be imminent.

No Deal Scenario

• If there is no deal between Democrats and Republicans, it could lead to a potential default.

• Democrats are trying to figure out alternative solutions such as changing the Constitution or printing a trillion-dollar coin.

• They have launched a discharge petition aiming to force a debt ceiling vote without Republican support.

The Potential Impact of a US Debt Default

In this section, the speaker discusses the potential impact of a US debt default on the markets and borrowing costs.

Possible Market Reaction

• A bill to address the debt ceiling issue is unlikely to pass before June 8th.

• The earliest it could come to the House would be June 8th, and then it would have to be passed by the Senate.

• The House is not in session until June 5th, so May 25th is the final day for any action.

• If no deal is reached, markets could plummet and borrowing costs would go up.

• The credit default swap market is pricing in a default.

Historical Context: Previous Debt Ceiling Issues

In this section, the speaker provides historical context on previous debt ceiling issues and their impact on markets.

Previous Debt Ceiling Issues

• In 2011, when there was a similar situation with the debt ceiling, the S&P 500 sold off by 17%.

• Although we are currently in one of the longest bull runs in history, portfolios could still draw down by as much as 20%.

Gray Swans: Potential Problems Beyond Default

In this section, the speaker discusses two other potential problems beyond default that he calls "gray swans."

Libor to SOFR Transition

• There's a transition happening from Libor (London Interbank Offered Rate) to SOFR (Secured Overnight Financing Rate).

• Over $1 quadrillion worth of assets will be re-indexed from Libor to SOFR starting on June 30th.

• This transition has never been done before and could potentially cause problems if something goes wrong.

FedNow Banking System Launch

• On July 1st, the FedNow banking system will launch.

• This is a precursor to a central bank digital currency (CBDC) where banks can transfer money instantly.

• If there's a bug and banks can't move money, it could cause problems with the overnight rate.

Potential Liquidity Drain

In this section, the speaker discusses what could happen if a deal is reached to address the debt ceiling issue.

Sudden Drain on Liquidity

• If a deal is reached, there will be a sudden drain on liquidity as the Treasury has to refill its account.

• This happened in September 2019 when the market started crashing before the March 2020 crash.

The Impact of the Fed on the Banking System

In this section, the speaker discusses how the Federal Reserve's actions can impact the banking system and cause it to lock up.

The Potential Risks

• The Fed draining liquidity caused the banking system to lock up in the past.

• If this were to happen again while moving quadrillions of dollars over to software markets, it could be very bad.

• Looking back at history, we see that long-dated treasuries and gold did well during a sell-off in 2011.

• International stocks and emerging markets did poorly during this time.

Preparing for Potential Crises

• According to a Bloomberg survey, people would buy gold, treasuries, or Bitcoin if there were another debt ceiling crisis.

• Regardless of whether or not a crisis occurs, it is important to prepare one's portfolio for potential risks.

Conclusion and Call-to-Action

In this section, the speaker concludes their discussion and encourages viewers to attend their upcoming presentation.

Final Thoughts

• Viewers are encouraged to leave comments with their thoughts on preparing for potential crises.

• The speaker will be hosting a free presentation where they will discuss what they are doing in their own portfolio and answer questions live.

Call-to-Action

• Viewers are encouraged to give a thumbs up if they enjoyed the video or leave constructive feedback if they did not.

• Viewers are also encouraged to subscribe to the channel for more content.