Treasury Bond bubble, collapse

derryb · September 1, 2010 12:06AM

From the guy predicting hyperinflation when the bond collapse occurs. Says all the taxpayer money being loaned to the banks is being loaned back to Washington via the purchase of Treasury bonds. Sounds like a helium event to me!

Another good argument for holding PMs

57loaded · September 1, 2010 6:43AM

he blogged an interesting one about hyperinflation with a decent explanation on the 23rd of August.

you can go to 321gold and find it's link today (Sept 1st, or August 31st)

Wolf359 · September 1, 2010 7:15AM

I can't find it, but there was a screamer of a political cartoon with Government in one boat, banks in the other and each was bailing each other out and pouring the water into their own boat. It's exactly what you described.

The debt keeps piling up, nothing is fixed and it's all a sham. Let it end soon.

OnlyGoldIsMoney · September 1, 2010 8:21AM

<< From the guy predicting hyperinflation when the bond collapse occurs. Says all the taxpayer money being loaned to the banks is being loaned back to Washington via the purchase of Treasury bonds. Sounds like a helium event to me!

Another good argument for holding PMs >>

derryb, thank you for posting this article. Indeed this is another good argument for holding PMs. I would go further. It is an excellent argument to purchase as many PMs as you can as quickly as you can. I have reached my silver goal and will likely hit my gold goal by the end of this year. Now I am wondering if my goals were too modest.

The old idea of 5% PMs in one's portfolio to me looks woefully insufficient.

derryb · September 1, 2010 8:54AM

After hitting PM goals you might consider transfering some of your dollar savings into PMs. They're not earning much in the bank!

MMR · September 2, 2010 12:04PM

You should be all in PMs at this time the same as you should have been all in on 2008-W buffs in 2008. I am in, and in.

ProofCollection · September 2, 2010 4:57PM

Fantastic, but long write up on the treasury bubble. A lot of members on this board make many of the arguments this guy addresses. Now we can just post a link to this article in response.

EagleEye · September 3, 2010 1:12AM

Opinion only. I think he made comparisons that were unsound (comparing mortgaged backed secutities to Tresuries), lied by omission (Never mentioned the Trillions of debt cause by the Bush tax cuts). And makes the reader sympathetic by going into topics that have no bearing on the main idea of the piece and mocking those in power.

(This is another non-trusted source)

But then again, if it makes the case for buying more gold at the short-term top of the market, so be it.

DrBuster · September 3, 2010 1:59AM

<< After hitting PM goals you might consider transfering some of your dollar savings into PMs. They're not earning much in the bank! >>

Truth.

I've got an idle grand sitting in a savings account. Made a whopping 32 cents interest in the past year.

jmski52 · September 3, 2010 2:10AM

lied by omission (Never mentioned the Trillions of debt cause by the Bush tax cuts). Political post!

Moving on - let's talk policy and not personality.

Tax cuts are used to stimulate economic investment, so there is always a tradeoff between jobs, economic growth and debt.

Debt generated by not taxing? That's not really the whole issue. Government spending is the "other half" of the issue in terms of debt creation. Let's not ignore it as a problem.

It's the prioritization of government spending that is ALWAYS the issue. The fact that *no* politicians want to be responsible for any cutbacks in spending - is the root of this problem. That that problem translates directly into who is on the receiving end of all those government checks, doesn't it?

We could have a top tax rate of 28% or 88%, but the issue remains the level of spending and what the money is being spent on.

EagleEye · September 3, 2010 4:54AM

The point is if you are going to talk causes, don't omit major causes, regardless of the nature of them. (not political - they have been called the Bush Tax cuts since they were forced on us fiscially resposible people)

derryb · September 3, 2010 5:20AM

If the socialists would spend less they could afford to tax less.

jmski52 · September 3, 2010 5:32AM

The point is if you are going to talk causes, don't omit major causes, regardless of the nature of them.

I didn't omit anything. And that is why I said, "Debt generated by not taxing? That's not really the whole issue. Government spending is the "other half" of the issue in terms of debt creation. Let's not ignore it as a problem."

I've never heard a justification for taxation like yours before, which is "debt generated by not taxing more", as I stated it above. It may be a concept, but this is simply the first time I've thought of it in this way. No biggie, it's still only half of the equation.

Another silly thought analogous to that concept would be, "surplus created by not spending more," when you are already deep in the hole. If you are in a deep well that is over your head, your only hope is that the water doesn't start seeping in faster than you can pump it out, not whether you can continue to tread water forever.

EagleEye · September 3, 2010 5:42AM

sorry, I meant the opinion piece referenced above shouldn't omit major causes.

And the tax cut was not paid for so it added directly to the debt. I'm not talking about its benifits, just that it wasn't paid for.

Edited to add: It could have been paid for by reducing spending.

EagleEye · September 3, 2010 5:51AM

I've never heard a justification for taxation like yours before, which is "debt generated by not taxing more", as I stated it above. It may be a concept, but this is simply the first time I've thought of it in this way. No biggie, it's still only half of the equation.

Another silly thought analogous to that concept would be, "surplus created by not spending more," when you are already deep in the hole. If you are in a deep well that is over your head, your only hope is that the water doesn't start seeping in faster than you can pump it out, not whether you can continue to tread water forever.

It's not justification, it is fact. If you lessen revenue with the same spending, or increase spending with the same revenue, you will add to the defict.

The analogy doesn't fit the premise.

EagleEye · September 3, 2010 5:53AM

If the socialists would spend less they could afford to tax less.

So now o'l Bush was a Socialist? The biggest spender ever! (oh but he taxed less so it's OK. )

derryb · September 3, 2010 6:01AM

Who said anything about Bush. Touchy today, aren't we! You need to realize that both parties are robbing you blind. They are one and the same just different names.

EagleEye · September 3, 2010 6:23AM

Now they sort of re-insitituted Pay-as-you go, so it is getting under control.

derryb · September 3, 2010 8:48AM

Pay as you go?

It's so far out of control the upcoming round will be worse than 2008.

EagleEye · September 3, 2010 9:31AM

Better than nothing, which is what was in effect 2003-2009. Sure, it is bypassed all the time, but it does show some commitment to hold down spending.

Is there some alternate universe out there that doesn't read the paper?

mrearlygold · September 3, 2010 9:34AM

PreTurb · September 3, 2010 9:45AM

Sure, it is bypassed all the time, but it does show some commitment

wa wa waaaaaat?

InYHWHWeTrust · September 3, 2010 12:31PM

note to self: EagleEye posts = "fact" ; all else = well-sifted "opinion." Didn't we already get lectured on this?

500Bay · September 3, 2010 5:17PM

I'll venture in this discussion, but avoid the gold and political talk.

I am surprised so many people are going into treasuries now - rates cannot go much lower, so the risk is rate increases. In Economics 101 they teach that when rates go up, bond prices go down. Rates and bond prices have an inverse relationship. If one were to invest in bonds, it ought to be in bonds with less than 1 year maturity, so that you get the interest rate back and not worry about bond prices. Intermediate and long term bond (or bond funds) should be avoided.

If one is interested in longer term preservation of capital, or better return, then make your own decisions (stocks, PM, real estate, whatever). I would strongly recommend against bonds, as rates are so low, the risk is too great.

OnlyGoldIsMoney · September 4, 2010 12:06AM

<< Now they sort of re-insitituted Pay-as-you go, so it is getting under control. >>

Pay-as-you go???? Save that one for the regime's more unquestioning supporters - perhaps the Washington press corps.

jmski52 · September 4, 2010 1:28AM

Now they sort of re-insitituted Pay-as-you go

Is that what you call it when you pay for benefits that aren't supposed to kick in until 2014? Gotta hand it to them, they learned their trade from the Social Security "pay as you go" accounting method.

Let's look at the US financial position as a ledger sheet. Lots of liabilities. A few streams of income. Even more streams of outflow.

Yup, it's the "sort of" accounting method. duh.

derryb · September 4, 2010 2:32AM

<< I am surprised so many people are going into treasuries now - rates cannot go much lower, so the risk is rate increases. >>

Investors are not running to Treasuries for the return. Many of them see Treasuries as the safest place to park their money in an uncertain economic environment. Most Treasuries are being unknowingly bought by taxpayers as the Fed has become the purchaser of last resort. This is the true meaning of monetizing the federal debt.

What will be interesting is where the money will run to when faith in the US's ability to pay its debt declines. I would say PMs, but if that were the case I believe most Treasury holders would be in PMs now instead of Treasuries. I believe when the cat gets out of the bag on Treasuries, investors will flee and turn to hard commodities such as oil, gas, agriculture and also to the hot flavor of the day in foreign currencies.

I'm betting the farm on PMs and a crash in the DJIA.

meluaufeet · September 4, 2010 5:19AM

Regarding money market funds... does the gov't still backstop NAV to par?

I feel about the same as I did regarding the NASDAQ in 1998, and the housing market in 2004. Seems to me this 'bubble' keeps inflating as long as its considered a safe haven from other asset classes... even if it means allowing/pushing other things to fail.

Personally I was amazed, shocked, etc. just how far the NASDAQ/Housing market went before the perverbial pin... so I'm thinking we have at least 2 years to go... minimum. I'm hoping for the best, prepared for the worst.

mrearlygold · September 4, 2010 8:29AM

<< Now they sort of re-insitituted Pay-as-you go

Is that what you call it when you pay for benefits that aren't supposed to kick in until 2014? Gotta hand it to them, they learned their trade from the Social Security "pay as you go" accounting method.

Let's look at the US financial position as a ledger sheet. Lots of liabilities. A few streams of income. Even more streams of outflow.

Yup, it's the "sort of" accounting method. duh. >>

It's the new math. Spend enough to guarantee that future generations will be essentially indentured servants, before they are even born.

7over8 · September 5, 2010 10:24PM

Not too hard to see what side of the fence "posters" on this forum are on....

If you support a "socialistic state" where re-distribution of wealth is the grand order of business, then the current party in power is for you.

If you are on the receiving side of entitlements, then the current party in power is for you.

It does strike me funny that some members here would support that logic, as discretionary spending on hobbies like coin collecting are probably the first things to go when you lack funds......

Haven't seen too many entitlement receiving families out at the coin show looking to spend on their collections?

Treasury Bond bubble, collapse

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