China to ‘liquidate’ US Treasuries, not dollars

September 20, 2011 by · Leave a Comment
Filed under: Currency News 

We have two choices, we either need to make the hard choices ourselves or they will be made for us, that is for sure.   Do we want to do it on our terms or not?  This article is troubling is that this could signal a significant decrease in debt buying from our largest purchaser of U.S. Treasuries and obvious are largest trade partner unless you count Europe as a whole.

If this actually come to fruition then we will see disorderly auctions for our debt and in that event, the Federal Reserve will be forced to come in as the buyer of last resort to prop up our debt markets.  Personally, I think this would be healthy for the long-term.  We need some sort of wake-up call to let our government know that they can not continue to keep running deficits and we need to bite the bullet and cut entitlement programs and scale back the size of government.   I do not affiliate myself any particular political party, so please don’t read this and try and box me into some group.

What I am speaking about is just basic math.  For every dollar of debt we have to create beyond what we take in as taxes, either goes into some asset class and that raises prices or into inflation once the economy picks up speed.  We need to live within our means and encourage savings and investment on a major scale.  I have been working on a list of items that would greatly help fix America and get us back into a leadership role on the economic scene.   A major portion of this list addresses entitlements, basically it sets cut-off for the younger generation so we can keep our obligations to our citizens who don’t have enough time to create an alternative plan.   Remember, when you try to help everyone, then you help no one because we will be broke trying.

The Telegraph (Ambrose Evans-Pritchard) -  The debt markets have been warned.

A key rate setter-for China’s central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.

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10-year Treasury yield raises to 4% due to sloppy auction

June 10, 2009 by · Leave a Comment
Filed under: Currency News 

It can not be a good sign when fixed income trader called the Treasury auction “sloppy”.  With the 10-year at 4%, we can expect that the longer portion of the “yield curve” is going to steepen.  This does not bode well for future interest rate which will need to go much higher to match future inflation expectations.  With the amount of money that has been pumped into our economy through our banking system and with interests at historic lows, inflation is the obvious policy of the day.

News (Reuters):

U.S. Treasury prices fell on Wednesday, sending benchmark yields to 4.0 percent for the first time in eight months, after an auction of 10-year notes heightened concerns over the burgeoning U.S. budget deficit.

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Soaring U.S. Budget Deficit Will Mean Billions More in Bond Sales

April 23, 2009 by · Leave a Comment
Filed under: Currency News 

This is going to get out of control over time unless we really start to reduce government spending or we are going to flood the market with dollars and it will make us have to make some very tough choices in the future which could include and official devaluation of our currency.   Currently the jobs market is the biggest thing dragging down the U.S. economy.  Credit availability is still a huge issue but even if that comes back, I am not sure if we would want that to flow back into the areas of the economy where a large part of the jobs have been lost (Finance, Real Estate and home construction).  

News (Bloomberg):

Millions of lost jobs mean billions in lost tax revenue for the U.S. government, and billions in additional Treasury debt to fund a federal budget deficit that may soar to more than four times last year’s record $454.7 billion.

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Federal Reserve to Buy $300 Billion of Longer-Term U.S. Treasuries to monetize the debt

March 19, 2009 by · Leave a Comment
Filed under: Policy News 

Wow, this rocked the markets, value of the dollar and gold bullion.  This is a sign of bad things to come, we now have our central bank buying our debt to monetize it because our bailout policies have shaken the confidence of the foreign investors that would normally buy our debt.   Unless we see a turn around soon, I think the dollar is now in its final decline.  I am very worried about this development.  Be Safe.

News:

The Federal Reserve opened a new front in its battle to bring down borrowing costs across the economy, pledging to buy as much as $300 billion of Treasuries and stepping up purchases of mortgage bonds.

The announcement following the Federal Open Market Committee meeting today in Washington spurred the biggest rally in longer-dated Treasuries in decades. Officials unanimously voted to expand the Fed’s balance sheet up to $1.15 trillion, and said they may broaden a program aimed at boosting consumer loans to include other assets, today’s statement showed.

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Warren Buffett says U.S. Treasury bubble one for the ages

February 28, 2009 by · Leave a Comment
Filed under: Opinion 

With the fundamentals in place on the dollar, it does seem like we have a huge crowd of “safe haven” investors sitting on the sideline in cash waiting for some sign of a bottom, which may or may not be in the near future.  I would say we are not close and we most likely see another bear market rally before we really start continue declines in the Dow and S&P.   I am personally shorting treasuries in anticipation of a fall in the dollar after these record levels of debt issuance.

News:

Warren Buffett, whose Berkshire Hathaway Inc sits on $25.54 billion of cash, said worried investors are making a costly mistake by buying up U.S. Treasuries that yield almost nothing.

In his widely read annual letter to Berkshire shareholders, the man many consider the world’s most revered investor said investors are engulfed by a “paralyzing fear” stemming from the credit crisis and falling housing and stock prices. Treasury prices have benefited as investors flocked to the perceived safety of the “triple-A” rated debt.

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