| Author |
 Topic  |
|
|
Copper Catcher
Administrator
USA
2092 Posts |
 Posted - 12/02/2009 : 20:07:48
|
Monetization of US Treasury Bonds. A Deep Dollar Devaluation Comes!
The Feds is borrowing something like US$200B-250B/mth officially. Unofficially, I think the figure is closer to US$300B/mth. Last fiscal year, the US government borrowed something like US$360B for the entire year! You see the enormity of the problem now? The debt market is finite. It consists of not just government debt but also corporate debt, private debt…etc. If the government takes up such an enormous amount of capital from the entire market, where are corporations going to get their funding? Now that foreigners are refusing to finance these debts what is Uncle Sam going to do?
The US government has 2 options.
Option 1: Continue monetizing debts ie print money out of thin air to buy its own debts. Something Bernanke said he will not do beyond the announced US$300B. He has already used up US$260B.
Option 2: Devalue the USD by revaluing gold upwards massively. The US government has about US$250B of physical gold based on current price. They can simply declare the physical gold as now worth US$15T, ie a 60X revaluation upwards. And via this ‘voodoo’ economics, they can pay off all their debts and need not borrow any more.
Even if the government opts for continuing option 1, it means the USD will be devalued by stealth. So, which ever way you choose, the USD is toast. Option 2 sounds like some kind of black magic sleight of hand. Well it is! The US government has done this in 1932-33 and Nixon has also done something similar during the 70s. If you think it cannot happen, think again!
To restore confidence, after the massive devaluation of the USD, the Feds may decide to issue another currency back by gold. So, if the Amero happens, it will not surprise me at all. Devaluation means a stealth taxation of existing holders of USD. It is in effect
’stealing’. This will inappropriate language off foreign creditors, citizens….etc. No government has ever inflated their way out of an economic problem successfully. But many governments have opted for it. It is their favored method of getting out of the sxxt hole, they have dug for themselves.
Jim Willie opines :
The chart (see above) provided by CIGA Eric covers several important types of US$-based bonds, their inflow and outflow, and the aggregate GrandNet. The financial data is publicly available from the USGovt TIC Reports. The messages are clear. Inflows of foreign funds are dwindling.
In the case of USAgency Mortgage Bonds and USCorp Bonds, the nation is witnessing something unprecedented, the net outflow of funds.This is outright rejection. This chart exposes the isolation problem of the USDollar in the bond world, clearly the most important market beneath the currency market. The printing press is the last option.
Ominous is a strong word. Abandonment is better, but disaster is better still. “I find this simple chart so ominous I had to send it. Decelerating year-over-year inflows and outflows across the board. Stick your head in the sand if you like, but string this trend out a little longer and you’re going to have flight from the dollar.” So wrote CIGA Eric. See the article that displays this graph and his few words on the JSMineset weblog:
You must be logged in to see this link.
The foreign creditors are moving away from the United States, plain and simple. The big bold red series shows the Grand Net US$-based bond reduction in net flow change from a high around $950 billion in early 2007 to a figure now approaching only $200 billion, thus a severe cut in net inflow. The greater alarm comes from the USCorporate Bonds in the yellow series, whose net flow change is down from a plus $600 billion high at the same time to a slight net outflow negative figure now. The USAgency Mortgage Bonds in chartreuse/mauve/pink have net flow change with peak of plus $300 billion at the same time to a net outflowof a frightening $150 billion now. Since the important peak for mortgage and corporate bonds, the USTreasurys in blue series have recovered from a $200 billion net positive inflow to a $400 billion net inflow. However, one should suspect that the USFed is purchasing the USTreasurys from convenient accounts bearing foreign names, using American funds, and laced with sinister motives founded in deception. Foreigners in all likelihood are not the primary purchasers.
The foreign purchase declines from peak levels two years ago have fallen off a cliff…. The United States credit markets are losing their legitimate liquidity and increasingly are turning to the desperate reckless alternative, namely the dreaded MONETIZATION. Mortgages in the United States must maintain funding from the USFed and USGovt by direct purchase, no longer a market action. There are mainly sellers. The corporations in the US must maintain funding from a more desperate means. See the Samurai Bonds offered in Japanese Yen denomination, the ones growing in popularity. My view is that a good slice of USGovt Treasury Bonds will be denominated in foreign currency routinely within one year, if the US$ system survives in its current form that long. The conclusion is clear from the messages, both graphic and statistical, that THE US$-BASED BONDS OF ALL TYPES WILL RELY ON DIRECT MONETIZATION VERY SOON OR IMMEDIATELY.
US TREASURY MONETIZATION
Monetization of USTreasurys is occurring in a profound blatant fashion. Such action infuriates the Chinese creditors, while at the same time creates a huge rift between the US Federal Reserve and the USDept Treasury. The rift is political and will come to a head when Chairman Bernanke is due for renewal of his post in a few months. China exerts its constant pressure on the USFed to end the Quantitative Easing efforts. Like doctors, they wish to apply a tourniquet to a gaping leg wound that bleeds a red river onto the pavement. The term is a funny euphemism, a sophisticated economist term for Heavy Duty Money Printing that results in destruction of a currency if not kept under control. The USDollar stewards are NOT demonstrating control, discipline, or even anything remotely resembling honesty or integrity.The USDept Treasury wants to continue funding the federal deficit, and for yucks, add any and every conceivable new program onto the books while the federal insolvent bankruptcy makes marginal additions not so noticeable.
The USFed engages in almost immediately permanent operations to snag the primary dealer USTreasurys gatherings bid at auction, for a simple shell game shuffle. The USFed engages in a sneakier but still obvious hidden bidder game with foreign central banks. They use USDollar Swap Facilities (with gargantuan funds) and bid heavily on the USTreasurys, evidence being the ‘Indirect Bid’ component. If not for the USFed buying most of the USTreasurys issued, the long-term interest rates would be rising quickly and with alarm. If not for the USFed heavy buying, the USDollar would be doing a swan dive off a cliff into rough waters. As has been claimed in past work, the USGovt stewards of the wrecked buck can save the USTreasury or save the USDollar, but not both. Their monetization efforts here and abroad indicate a clear intention to save the USTreasury Bond. They put the USDollar at grave risk. The Weimar Territory lies directly ahead!
USDOLLAR DELAYS INEVITABLE CRASH
The USDollar remains firmly stuck at the cliff’s edge….Something big is coming and soon. All billboards scream it!! ….A deep USDollar devaluation comes!!!
Source: You must be logged in to see this link.
|
|
|
2old
Penny Pincher Member
188 Posts |
Posted - 12/04/2009 : 11:27:45
|
| Option 3. Change the currency by removing one or more zero's from the notes as has been done by many countries. |
 |
|
|
2old
Penny Pincher Member
188 Posts |
|
|
Kurr
1000+ Penny Miser Member
2906 Posts |
|
|
2old
Penny Pincher Member
188 Posts |
Posted - 12/04/2009 : 14:33:14
|
quote:
Originally posted by Kurr
Say they do a 3-1 conversion what would that mean for us? This is so far beyond my experience and knowledge, I have trouble comprehending the consequences.
My first experience was in Mexico. I went to Mexico and bought $100.00 USD and got a roll big enough to choke a horse. Went back a year later and they had taken a zero off and added a N - N meaning NEW Peso. So at that time they had N peso's and old peso's in circulation. On the old peso's you just had to imaging the zero was gone. Kinda like when silver certificates were worth $1.34 and were exchanges for $1.00 and .34 cents. After a certain date they were no longer worth $1.34, only a dollar.
There is a number of problems that go with this, one being the fellow who has a lot of the currency. Those with a lot of currency will have to reveal it and explain it, or not convert it. In most countries when they convert the currency, the old currency is worthless. I have some 10 trillion dollar Zambian bills for sale if you need any. History will reveal a lot of this type of situations. North Korea is just a recent example. |
|
|
|
Delawhere Jack
1000+ Penny Miser Member
USA
1680 Posts |
Posted - 12/06/2009 : 16:12:06
|
I read somewhere about 6 weeks ago that the foriegn purchases of UST's which are still occurring is not being done with fresh money coming in. Rather, the Fed is buying the foriegn mortgage bonds, most of which are held in custodial accounts by the Fed, and the proceeds are being used to buy UST's. So in fact, it is a form of back door monetization.
The Fed eats the foriegn owned toxic sludge, and pays for it with shiny new dollars on the condition that the holder puts the proceeds into treasuries.
The writer was able to reach this conclusion, and back it up quite convincingly, by examining the TIC reports, among other things.
Sounds like a desperate attempt to keep a creditor (China) at bay.
Wars have been fought over far less than what we owe the world folks. Keep that in mind.
|
"Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." Thomas Jefferson
|
|
|
|
brian0918
Penny Collector Member
USA
315 Posts |
Posted - 12/06/2009 : 18:33:22
|
| Delaware Jack: If you can find the link in your history, I would be very interested to read that piece. I had also read that somewhere else, though no evidence was provided. |
"The man who speaks to you of sacrifice, speaks of slaves and masters. And intends to be the master." -- Ayn Rand
Searched: $2230 Nickels; Liberty: 1; Buffalo: 4; War: 20; 2009: 2; 2010D: 8 |
|
|
|
Delawhere Jack
1000+ Penny Miser Member
USA
1680 Posts |
Posted - 12/07/2009 : 17:37:29
|
I can't find it. Seem to me it was Casey Research, or some similar newsletter type site. It was probably more than 6 weeks ago. The "evidence" was purely circumstantial, but abundant. It included information from TIC reports and some publicly available information from the Fed re the custodial accounts they hold for other nations.
|
"Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." Thomas Jefferson
|
|
|
|
Nickelless
Administrator
USA
5580 Posts |
|
|
vrbsroma
Penny Collector Member
394 Posts |
Posted - 12/08/2009 : 09:06:01
|
| What other articles support inflation? It would be nice to get a comprehensive list together. Furthermore, what articles are for deflation? Got to hear both sides of the coin... |
As far as I know, it is stated "In God We Trust" on the US dollar. How can I trust this currency if I do not believe in God?
Possession is nine-tenths of the law.
When I give my two cents, they're always copper! |
|
|
|
Copper Catcher
Administrator
USA
2092 Posts |
Posted - 12/08/2009 : 19:33:30
|
If you want to see how $11 Trillion has been committed and an additional $3 trillion invested you might find this link interesting!
You must be logged in to see this link. |
|
|
|
Delawhere Jack
1000+ Penny Miser Member
USA
1680 Posts |
Posted - 12/08/2009 : 20:16:21
|
quote:
Originally posted by vrbsroma
What other articles support inflation? It would be nice to get a comprehensive list together. Furthermore, what articles are for deflation? Got to hear both sides of the coin...
It's simply a matter of being able to create money out of thin air. Government deficit spending, made possible by a private central bank does just this. There is no limit to how much "money" they create, and it is backed by nothing. This is inflation, and this is precisely what is occurring now.
You need to have a sound understanding of the terms, as they are routinely misused by the population at large. Inflation is too often described in terms of the result; rising prices for goods, when in fact that is a symptom of increased money supply.
"Deflation" as we see in areas such as real estate now, is not deflation in a monetary sense, but rather in a credit sense. Less easy credit floating around means home prices must drop to where the risk/reward ratio is favorable to those offering credit.
There are some good sources for information on the true nature of inflation/deflation. I'd recommend Peter Schiffs' book, Crash Proof and his website, europac.net
There is also a good site based on the Austrian school of economics (as opposed to the Keynesians running the show now), Mises.org. Based on the principles of Lugwig Von Mises.
Don't expect to find anything worth reading from mainstream financial/investment type publications. Most of them have no true understanding of the nature of money.
|
"Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." Thomas Jefferson
|
|
|
|
jonflyfish
Penny Hoarding Member
USA
693 Posts |
Posted - 12/08/2009 : 20:25:35
|
| We will see inflation period. If there is a hint of deflation, it is short lived and met with the the most aggressive printing operation. The Fed and the gov't lose in deflation. Fractional reserve banking requires a steady increase in money supply. Otherwise principal AND interest cannot be repaid. Think of it this way- If all US principal debt is repaid then where will the interest payment come from? That is why deflation is very rare and short lived. The fed will fight it with all of its printing power might, which will simply lead to inflation, just like the mess we recently witnessed. Deflation has been met with trillions of recapitalization into the rigged fiat ponzi scheme. Invest in inflation. It is the only thing guaranteed to go up. |
The first panacea for a mismanaged nation is inflation of the currency; second is war. Both bring a temporary (and false) prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunities. |
|
|
| |
Topic |
|
|
|
Dollar Devaluation in 2010
Forum Locked
