US Dollar is a FIAT currency (IOU in effect) and backed only by a perceived value of AAA rating of US Treasuries. For maintaining this highest investment rating is crucial Treasury's ability to manage US Corp. cash flow (current account deficit) and solvency of this corporation at any given time: ability to run budget deficit without rising questions of its creditors, which could decide that they do not like to finance this company any more or that they need higher interest (Yield) payed to reflect higher risk. Taxpayers are the source of revenue, they are paying taxes, they include people and corporations. Payables are US Budget expenses (including undisclosed military ones) and its interest payments on debt outstanding. Difference is a Budget Deficit which is financed by additional borrowing by means of selling new Treasuries.
After recent nationalisations US Corp took on its books some "assets" which nobody wanted and disposition of some of them could even bring all system to a hold, so it will be difficult to assume that Wall Street is so stupid and Treasury is so bright that Taxpayers will get any additional value in a near term to help them to hold the load of servicing rising US Debt and Budget Deficit.
What is the load of Wall Street bailing out and taxpayers liabilities now?
1. Bear Sterns - 29 billion.
2. Economic stimulus - 150 billion.
3. Fannie Mae and Freddie Mac - potentially 250 billion (5.4 trillion of mortgage debt is owned or guaranteed by the government now (5% total loss of portfolio).
4. AIG - 85 billion.
5. Wall Street Bailout - 700 billion.
All these money will be taxpayers liability in any case, but you need them now, so you have to sell more Treasuries now. More goods to sell, less buyers - price is going down, yield is going up. Additional interest payments are added to taxpayer burden. With short term rates determined by FED low and Markets rates determined by Treasuries markets rising we are in a Negative Real Rate zone. Value of your investments in deposits or Treasuries is eroded. Government effectively is reflating its economy, printing more money to make its obligations worth less and to repay them in a debased currency. Gold as ultimate store of value is showing the real rate of inflation against all FIAT currencies.
How long can you continue this game: until buyers are willing to pay their "hard currency" for US dollar nominated assets.
Treasury Bubble will be last to burst, but this bust will be of epic proportions and will put US Dollar in a waterfall mode again.
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