The Treasury Fails an Auction
For the first time in history, there are no buyers for US debt. The bedrock of the global financial system is cracking in real time.
01:03 PM. The US Treasury attempts to sell $120B in bonds at a routine auction. For the first time in modern history, primary dealers refuse to bid. There are no buyers. The auction fails entirely.
You are the Chairman of the Federal Reserve
The Situation Room
>Treasury yields are spiking vertically as algorithms panic.
>The dollar is in freefall against gold and the Euro.
>Major clearinghouses are halting trades because US Treasuries—the foundational, "risk-free" collateral of the entire global financial system—are suddenly being priced with catastrophic default risk.
Internal Briefing Notes
• If Treasuries lose their risk-free status, margin calls across the $800 trillion derivatives market will trigger automatic liquidations, evaporating global wealth.
• Foreign central banks hold trillions in Treasuries and will be forced to dump them to maintain domestic liquidity, accelerating the death spiral.
• The Treasury will run out of cash to pay obligations (including military salaries) in 14 hours.
Escalation Window
Reveal each phase to see how the situation deteriorates.
The Treasury Secretary is begging you to intervene. The market is breaking. What is your play?
Choose your response. There are no good options.
Fire up the printers and buy the $120B in bonds directly. You avert the crisis today but permanently destroy the credibility of the US Dollar.
Force Congress to act by letting the pain hit the streets. It is the responsible long-term move, but you risk a depression by Friday.
Halt all trading and declare a bank holiday. It will cause unparalleled global panic, but stops the immediate bleeding.
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