After years of waiting for the Chinese to wake up and see the errors of their ways, and stop buying U.S. debt, I now believe this is NOT going to happen!
Regardless of all the talk on the Chinese side, I now believe the Chinese have us right were they want us, and they will continue this game for as long as they have the upper hand.
With this huge hammer held over our heads they no longer pay any attention to increasing the value of their currency, and what can we do about that? Nothing.
They do not want a new world currency, why should they, literally control the Dollar.
As long as the dollar is the world currency they can slowly peal of dollars, and buy raw materials and whole companies.
They have no real fear of inflation in China as they have no need to print their own currency when they can spend ours.
By continuing to buy our debt they guarantee that American markets will remain open to Chinese goods, and American manufacturing will remain stagnant.
Any changes in the dollar as a reserve currency would simply weaken their position, so why would they want real change.
Yes they would like the powers that be here in the States to strengthen our currency but past that I now believe they are happy with the current situation.
In this regard I think our friend Jim Sinclair is wrong, I do not think we can expect to see any change in China’s support for the dollar, and their purchasing their fair share of our debt.
Who really knows what back room deals are being done behind closed doors with the Chinese, and our Fed. And Treasury?
July 27 (Bloomberg) — The Obama administration’s economic leaders assured Chinese counterparts they will rein in a record budget deficit as China underscored its concern about preserving the value of its holdings of Treasuries.
“China has a huge amount of investment in the U.S.” and “we are concerned about the security of our financial assets,” Assistant Finance Minister Zhu Guangyao said in a press briefing at the end of the first of two days of talks in Washington. Treasury Secretary Timothy Geithner said in opening remarks that the U.S. will ensure a “sustainable” deficit by 2013.
In a shift from Bush administration meetings, officials indicated little sign of tension over the value of China’s yuan, which U.S. lawmakers have labeled as artificially cheap and an aid to Chinese exports. That may be because the “best idea is just to keep the yuan-dollar rate stable” given U.S. need for Chinese demand for Treasuries, said Ronald McKinnon, a professor of economics at Stanford University.
NEW YORK, July 29 (Reuters) - The U.S. Treasury sold $39 billion in five-year debt on Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government’s burgeoning budget deficit...Demand overall was below average, measured by the bid-to-cover ratio of 1.92, the weakest in almost a year...."It was just a horrendous result," William O’Donnell, head of U.S. Treasury strategy at RBS Securities in Greenwich Connecticut, said about the auction. "It was the weakest bid-to-cover since September 2008, and by my numbers it was the biggest tail since February 1993. It was just a very, very weak result."
They were able to get the 2 yr yields up dramatically over the past few days and last few weeks but the 5-10-30 yr yields were much more resistant. Today's $39 BILL auction is what a monthly auction might have fetched a year ago. Thursday's 7 yr note auction is even larger. Something's gotta give after $109 Bill in T-bonds for the week. Maybe more back door incentives to get BRIC and Japan to buy. Similar tri-fecta auctions coming every 2 weeks until the end of October alternating from 2/5/7 yr to 3/10/30 yr......Happy Halloween! 18 more auction days to go.
They do not want a new world currency, why should they, literally control the Dollar.
As long as the dollar is the world currency they can slowly peal of dollars, and buy raw materials and whole companies.
They have no real fear of inflation in China as they have no need to print their own currency when they can spend ours.
By continuing to buy our debt they guarantee that American markets will remain open to Chinese goods, and American manufacturing will remain stagnant.
Any changes in the dollar as a reserve currency would simply weaken their position, so why would they want real change.
I dunno, GoldSaint. While I do agree that nothing happens to the dollar without some input from China, it also seems true that the dollar has a sword dangling over it's head in terms of unfunded liabilities for the Treasury and also the Quadrillion $$$$ or so of bad debt on the balance sheets of our rotten banks. I'm somewhat shellshocked that FASB is reconsidering their stand on asset valuation, but surely there have been some non-transparent arrangements made since they changed their rational, prudent and ethical stance of 36 years a few months ago.
China has to have exactly the same worries that any US Bondholder has - how quickly is our capital going to be eroded by this US administration's policies?
OTOH, you are right about nullifying our own manufacturing capabilities. They will end up with the means of production, bit by bit, now chunk by chunk. They already have hit critical mass in their economy.
The question for China will be, at what point is the tradeoff between a devalued dollar and a technology transfer from the US to China no longer worth it?
Q: Are You Printing Money? Bernanke: Not Literally
"More troubling is that of an economic/cultural/political transition that comes about as a result of the liberal anything-goes mindset. I'm wondering how long it will be before the Chinese mass migration begins, never mind the Mexican one. " Haven't you heard the news? The Mexicans have been going back to Mexico in large numbers! They are finding the U.S. economy lacking in paying jobs for them. I guess they find the economy better for them in their home county at this time.
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The previous, smaller, 7-yr auction blew the roof off with the yield well below expected, at 3.329%, a solid 2.82 bid-to-cover and a hefty 67.2% indirect bidder rate. The averages for the year's 4 auctions preceding that were 2.29 and 33.2% respectively.
Unlike the Russians, the Chinese have never really want world domination over lands that were inhabited by totally different peoples, but that does not mean they do not want WORLD DOMINATION.
The Americans, the British, and French before us gave up blood and treasury to secure our ideas when it would have just been easier to buy what we wanted.
I believe that just buying power is the Chinese strategy, not just here, but around the world. As they gain more economic power around the world they will continue to spend their foreign reserves on, companies, land, oil, minerals, treaties, etc.
Since a great majority of their reserves are in dollars why would they want a currency change? In addition they have spent a great deal of time and effort in getting the new socialist America hooked on the drug of debt.
Yes they might like us to take our time ruining our country, so they had more time to play us.
Remember it was Paul Volker who came up with the idea of selling debt rather than printing money to stop the 80’s inflation.
As long as a socialist’s government can print, and roll over its debt, it can continue to grow government forever as long as the debt dealer continues to supply the drug!
Yes I think China may unload some of its population problems on us in the decades to come.
With the current power they have on our decisions, anything is possible.
What happens once they have 3 trillion of our debt?
We have already given up our manufacturing base for the sake of government growth, what will be ask to do next by the Asians?
The 30 year yield curve is somewhat similar to the gold chart over the past 9-12 months. The 30 yr yield is currently recovering after it's 3rd leg up. I'm not sure if it's now into wave 5 up or has another leg down to play out in wave 4 (A-B-C). But the trend still seems generally up from here for a final leg which would lead to a much weaker dollar and a new all time high for gold. A 5.3% IR could do easily do that.
Still think foreigners don’t want control of our dollars????
Thursday, July 30, 2009
The U.S. Treasury Department sold $28 billion in 7-year notes on Thursday, with vast majority of the bonds sold coming in near the high price, a sign that demand for this record amount of government debt is still holding up.
Foreign government and institutional participation in the auction was 62.5%, the Treasury Department said, the best participation by foreign parties this week.
Thursday’s auction culminates this week’s $117 billion in bond auctions, where earlier this week record amounts in 2-year notes and 5-year notes received tepid demand at best.
I'd bet dollars to doughnuts that there is some sort of chicanery going on with these bond sales. There are some sort of back yard deals or favors being given behind the scenes. For all we know the bonds or a percentage of them are being recycled right back to the FED/Treasury. Books can be cooked any way you'd like. There I go again thinking the worst when I should be giving the benefit of the doubt to those who helped crash the financial system. For those who have dreamt up a way to create $350 TRILL in interest rate swaps can't figure out a way to cover 1 TRILL in bonds?
RR you must be joking? You mean to tell me that these sales might not be completely legit?
Here are a couple of interesting local stories.
Yesterday my wife had to go to a local stock brokerage firm to get a signature guarantee for her mother. The head of the firm, a middle aged lady starts telling my wife her woes while they are waiting for a fax.
She says almost all her clients, as well as herself, have lost 50% of all their money the last year, and she just does not understand how this happened. She says she had all of her clients, who are mostly retired folks, invested in the very safest portfolios.
LADY ALL THESE MARKETS ARE RIGGED!
Second,
I talked to a local banker here last week to try and negotiate a CD rate, he tells me that the most he can pay is 1.75% and really he does not want the money.
He says that the cash in his small bank has increased by 25 million the past few weeks and he has no place to put the funds.
He says normally that he would go out and buy Treasuries but that the market is so manipulated that he is afraid he will not get the money back. He wishes people would just find somewhere else to put their cash so he did not have the responsibility of paying them the 1.75%
Now more than ever it seems a good time to keep your assets close to home and hide!!
Cohodk, which country and what consumer prices fell in June at a record pace? USA automobiles with cash for clunker rebates? Milk? Sugar? Dental products? College tuition? Cocoa? Gas? Granite counter tops? 50" plasma TV's? Bundled communication services?
With a myriad of "consumer" prices one could probably mix it any which way to get the desired result. As for me, I didn't see any free lunch at the gas pump, grocery store, or college entrance office in June. Are inventory drawdowns of products the major driver? The link provided is a reference to Japanese bonds rather than consumer prices.
The idiots at Bloomberg revised the story just after I posted. Anyway, it was Japan that posted record declines. And many of the examples you cited can be purchased much lower than a year ago.
The dollar and gold did the same dance 2 weeks ago during bond auction week. Get used to it. Sell the week before, and buy back the following week late Thursday (lol).
I can see the Japanese having price declines as they have never been as proficient in QE as the USA. In fact they didn't even make a decent attempt at QE until 2002, a full 12 years after their economic crisis began. At that point it was probably way too late to expect anything but more deflation as they supplied the world with their carry trade. The US has gone full bore into QE from the outset which means we'll be out of the is deflationary cycle within months (not years) as inflation takes hold.
In reading Maurice Rosen's newsletter today he had an interesting article by Richard Maybury (richardmaybury.com). Maurice is not known for interiewing whack jobs for his lead articles. In fact the last time I can recall an interview that got my attention it was Maurice's summer 2002 head to head with Jim Sinclair when my eyes were opened to the D's nightmare and the coming outlook for gold. In any case Marbury concurs with many of our bullish projections for gold and silver. But what is most interesting is that he feels rare coins prices will greatly outperform the metals as the masses start looking for hard assets once again as paper assets weaken.
Obviously PM's have outpaced rare coins over the past 8 years but it is not written in stone that this trend will continue. In the late 1970's (1975-1980) many superb rare coins increased by 10X to 20X while gold increased 8X. My own favorite gem 1867-s 25c increased 16.6X from 3/1975 to 4/1980 outperforming gold by over 2X. An inflationary environment took over from a somewhat deflationary one.
Did you see the Congressional hearings today with Bernanke? The FED gave out $500 Billion to FOREIGN banks! The Congressmen grilling him wanted to know why our FED gave New Zealand banks $9 Billion, since this was the equivalent of $3000 for every citizen of New Zealand. Must be nice for the US Taxpayer to be everyone's else ATM machine.
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Speaking of gold, we saw another 1% (10.38 tonnes) capitulatory sale on Wednesday by the GLD ETF. As I’ve noted before, 1%-plus one-day sales of bullion by the ETF are rare and tend to be capitulatory when they occur. The last one-day, 1% sale (also 10.38 tonnes interestingly) was on July 8, which happened to mark the July low Given that ETF sale and several other indicators I watch, I tend to think the odds are high that we saw another important low in gold on Wednesday. If so, it should now set the stage to challenge the $1,000 mark sometime in August link
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World gold scrap sales as reported by the GFMS were down 40% in the 2nd Qtr to 350 tonnes. That's a huge change considering all the efforts going into scrap for gold schemes. The US scrap sales were up but countered by lowered sales elsewhere. Scrap sales in 2008 were 1218 tonnes.
The author tries to figure out that for an economy where 70% of GDP is based on consumer consumption how the BEA comes up with just a -2% to -3% decline in consumption over the past year (PCE personal consumption expenditures). Yet at the same time, corporate revenues (a reasonably accurate statistic that should mirror consumption) are -15% yoy. This also compares well with state taxes at approx -10%. Does anyone have a reasonable explanation for the divergence?
One trick I was not aware of was that GDP has a + non-cash input for imputed owner occupied housing. This is to represent to imputed value that a homeowner gets by living in their own rather than renting it out. I guess they figured that after substituting imputed rent into the CPI for home prices, why not also place a similar hedonic factor into GDP? So who would have thought that hedonics, substitutional and quality effects, and seasonal adjustments were only good for the CPI?
Sutton argues that counting govt and consumer debt into the equation makes no sense. Hence giving us the much improved 2nd qtr GDP number that just came out.
Where does your county rank. The higher the economic stresss score, the worse the problems. The score is based on unemployment, forclosures and bankruptcy rates. A score under 5 shows little stress. My county is 11.10.
"I'd bet dollars to doughnuts that there is some sort of chicanery going on with these bond sales. There are some sort of back yard deals or favors being given behind the scenes. For all we know the bonds or a percentage of them are being recycled right back to the FED/Treasury. Books can be cooked any way you'd like. There I go again thinking the worst when I should be giving the benefit of the doubt to those who helped crash the financial system. For those who have dreamt up a way to create $350 TRILL in interest rate swaps can't figure out a way to cover 1 TRILL in bonds?
roadrunner "
You are absolutely right Roadrunner. They have been tinkering with the formulas.... just like how they do in regards to the inflation rate, GDP, etc. From a HedgeCo.Net article (but there are numerous other sources also):
"NEW YORK, June 24 (Reuters) - Recent changes to the way the U.S. Treasury tallies demand at its bond auctions may be artificially inflating “indirect bids,” a category used by investors as a loose proxy for foreign demand.
Foreign investors own more than a quarter of the Treasury market, making their continued interest in U.S. bonds of paramount importance to the market. At the very least, the Treasury’s shift, made earlier this month, is confusing traders, prompting some to second-guess the apparent strong interest in recent auctions.
Indirect bids have been unusually strong of late, reaching a record 68 percent at Tuesday’s two-year note sale, and exceeding 62 percent at Wednesday’s sales of $37 billion in five-year notes. “We’re not going to make much of that, given the information we’ve gotten on the rule changes,” said John Spinello, fixed-income strategist at Jefferies, a primary dealer. “The indirect bids are now going to be higher given the change in procedures.”
Indirect bids are defined as ones that do not go through primary dealers, large banks that do business directly with the Fed and are required to actively take part in Treasury auctions. Top officials in China (Wary of dollar, China wants super-sovereign currency - Reuters.com) and Russia have expressed unease about the growing U.S. budget deficit, slated for a record $1.75 trillion in fiscal 2009 alone. This means that traders pay extra close attention to foreign demand figures. The Treasury’s changes, contained in a June 1 entry to the Federal Register, relate to what it considers a “guaranteed bid.” Under the previous arrangement, once a primary dealer offered securities at a pre-specified level to its customer, that bid was considered to be the dealer’s own.
The matter was technical enough to confuse even industry veterans. “We are not precisely sure what this all means,” said Ward McCarthy, managing director at Stone & McCarthy Research Associates in Princeton, New Jersey. “We spoke with some very seasoned market players with decades of experience on dealer trading floors who were similarly unsure what to make of the contents of the Federal Register.” The Federal Register entry can be found at http://www.gpo.gov/fdsys/pkg/FR-2009-06-01/html/E9-12787.htm "
I would have contributed my share to cash for clunkers but they yanked it end of last week not knowing how much money they spent. The first BILL comes out to be about 200,000 cars sold. As soon as I know they are once again honoring rebates I will ventrue out again and contribute to GDP. If not I'll buy a nice used car again.
How do they figure that a couple of billion dollars in new car rebates will lead to a 4% GDP rise? GDP is currently >$14 TRILL. A 4% increase is 560 BILL. Assuming that the average car purchased is say $20,000....or about 28,000,000 cars. Annual car sales peaked a few years ago at 17,000,000. Are they assuming a multiplier effect by people spending money on new cars?
I wonder what other repercussions will result from this program of Cash for Clunkers.
Let's say 200,000 vehicles have been removed. These are vehicles that lower income individuals would eventually have been in the market to purchase, since they cannot afford a new vehicle. Well, guess what? These vehicles are being destroyed. The first thing the dealer has to do is to disable the engine so it will no longer run.... and the vehicle will be crushed.
A shortage of low priced cars in the future for the lower income bracket? Driving up prices for used cars? Hmmm....
Steve Leisman on CNBC ran the numbers. The huge increase in GDP is a result of the huge YoY increase in auto sales. It amounts to something like a 400% annualized increase. Somehow that gets put into the number cruncher and 4% GDP gets spit out. So barring a nuclear winter, we can pretty much be assured that 3rd qtr GDP will be positive.
FWIW--I am not happy about this. First we subsidize the manufacturers, then the consumers. Talk about a flawed business plan. All they did was meet a pent up demand. What happens when the rebates stop? Double dip, another round of stimulus, and millions of jobs that should have been eliminated will be sustained. We have destroyed the need for innovation, and this I think is far more damaging than another couple trillion in debt.
the funny thing is they can be striped of motors or what ever by the junk yards anyone interested in a new used motor forget the new car just buy the parts
<< <i>the funny thing is they can be striped of motors or what ever by the junk yards anyone interested in a new used motor forget the new car just buy the parts >>
Not likely....you try to start an engine after a gallon of sodium silicate has been poured into the gas tank....It ain't gonna happen. The seller is entitled to the salvage value though after he pays a $50 recycling fee.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
Salvage value is a very nebulous thing. Most junkyards would only give me $50 max for my driveable 1997 Lincoln. Yet they could part the car out for hundreds if not a thousand dollars+ over time. But if someone needs parts off that car (quarters, fenders, seats, doors, window motors, air bags, moldings, glass, etc. the salvage yard starts making serious money very quickly. I can assume that salvage value in the CARS rebate bill is limited to what a junkyard would pay for the car, not your insurance company.
Yeah, I like it and would pay a small amount. Maybe this is the cure for the spin on all of the media machines because if folk are gonna pay for news, they are going to expect real news. I like it a lot, now we could actually get objective, investigative, unbiased journalism instead of what we are getting for free now; I guess it's worth what we're paying for it though. This could be the next step for newsers; ya' gotta pay for the good stuff.
<< <i>"I'd bet dollars to doughnuts that there is some sort of chicanery going on with these bond sales. There are some sort of back yard deals or favors being given behind the scenes. For all we know the bonds or a percentage of them are being recycled right back to the FED/Treasury. Books can be cooked any way you'd like. There I go again thinking the worst when I should be giving the benefit of the doubt to those who helped crash the financial system. For those who have dreamt up a way to create $350 TRILL in interest rate swaps can't figure out a way to cover 1 TRILL in bonds?
roadrunner "
You are absolutely right Roadrunner. They have been tinkering with the formulas.... just like how they do in regards to the inflation rate, GDP, etc. From a HedgeCo.Net article (but there are numerous other sources also):
"NEW YORK, June 24 (Reuters) - Recent changes to the way the U.S. Treasury tallies demand at its bond auctions may be artificially inflating “indirect bids,” a category used by investors as a loose proxy for foreign demand.
Foreign investors own more than a quarter of the Treasury market, making their continued interest in U.S. bonds of paramount importance to the market. At the very least, the Treasury’s shift, made earlier this month, is confusing traders, prompting some to second-guess the apparent strong interest in recent auctions.
Indirect bids have been unusually strong of late, reaching a record 68 percent at Tuesday’s two-year note sale, and exceeding 62 percent at Wednesday’s sales of $37 billion in five-year notes. “We’re not going to make much of that, given the information we’ve gotten on the rule changes,” said John Spinello, fixed-income strategist at Jefferies, a primary dealer. “The indirect bids are now going to be higher given the change in procedures.”
Indirect bids are defined as ones that do not go through primary dealers, large banks that do business directly with the Fed and are required to actively take part in Treasury auctions. Top officials in China (Wary of dollar, China wants super-sovereign currency - Reuters.com) and Russia have expressed unease about the growing U.S. budget deficit, slated for a record $1.75 trillion in fiscal 2009 alone. This means that traders pay extra close attention to foreign demand figures. The Treasury’s changes, contained in a June 1 entry to the Federal Register, relate to what it considers a “guaranteed bid.” Under the previous arrangement, once a primary dealer offered securities at a pre-specified level to its customer, that bid was considered to be the dealer’s own.
The matter was technical enough to confuse even industry veterans. “We are not precisely sure what this all means,” said Ward McCarthy, managing director at Stone & McCarthy Research Associates in Princeton, New Jersey. “We spoke with some very seasoned market players with decades of experience on dealer trading floors who were similarly unsure what to make of the contents of the Federal Register.” The Federal Register entry can be found at http://www.gpo.gov/fdsys/pkg/FR-2009-06-01/html/E9-12787.htm " >>
///// What keeps the government from having bank accounts in foreign countries and using that money to buy their own bonds?
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I've entertained the idea of a new car, but who wants a payment. Both of my vehicles are in good repair, and paid for. What will the Gument do with these clunkers? Local junkyards here, pay 50-$150 for junkers, or clunkers. Just send me a check for $4500, and I'll convert it to gold, thankyou. Tax payers will pay for it, one way or the other, IMHO. scott
I think that we are already in Q3, and that alot of variables are still in the air. How many knives can a one-armed man juggle at a time while balancing a stack of 100 pennies on his forehead?
Q: Are You Printing Money? Bernanke: Not Literally
Comments
After years of waiting for the Chinese to wake up and see the errors of their ways, and stop buying U.S. debt, I now believe this is NOT going to happen!
Regardless of all the talk on the Chinese side, I now believe the Chinese have us right were they want us, and they will continue this game for as long as they have the upper hand.
With this huge hammer held over our heads they no longer pay any attention to increasing the value of their currency, and what can we do about that? Nothing.
They do not want a new world currency, why should they, literally control the Dollar.
As long as the dollar is the world currency they can slowly peal of dollars, and buy raw materials and whole companies.
They have no real fear of inflation in China as they have no need to print their own currency when they can spend ours.
By continuing to buy our debt they guarantee that American markets will remain open to Chinese goods, and American manufacturing will remain stagnant.
Any changes in the dollar as a reserve currency would simply weaken their position, so why would they want real change.
Yes they would like the powers that be here in the States to strengthen our currency but past that I now believe they are happy with the current situation.
In this regard I think our friend Jim Sinclair is wrong, I do not think we can expect to see any change in China’s support for the dollar, and their purchasing their fair share of our debt.
Who really knows what back room deals are being done behind closed doors with the Chinese, and our Fed. And Treasury?
July 27 (Bloomberg) — The Obama administration’s economic leaders assured Chinese counterparts they will rein in a record budget deficit as China underscored its concern about preserving the value of its holdings of Treasuries.
“China has a huge amount of investment in the U.S.” and “we are concerned about the security of our financial assets,” Assistant Finance Minister Zhu Guangyao said in a press briefing at the end of the first of two days of talks in Washington. Treasury Secretary Timothy Geithner said in opening remarks that the U.S. will ensure a “sustainable” deficit by 2013.
In a shift from Bush administration meetings, officials indicated little sign of tension over the value of China’s yuan, which U.S. lawmakers have labeled as artificially cheap and an aid to Chinese exports. That may be because the “best idea is just to keep the yuan-dollar rate stable” given U.S. need for Chinese demand for Treasuries, said Ronald McKinnon, a professor of economics at Stanford University.
From Briefing.com....
5-year Note Auction Results: High Yield 2.689% (2.635% expected); Bid/Cover 1.92x (2009 Avg 2.22x); Indirect Bidders 36.7% (2009 Avg 41.9%)
Previous offering saw $37B, 2.7% yield, with a bid-to-cover of 2.58x and an indirect bidder participation rate of 62.8%.
Knowledge is the enemy of fear
NEW YORK, July 29 (Reuters) - The U.S. Treasury sold $39 billion in five-year debt on Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government’s burgeoning budget deficit...Demand overall was below average, measured by the bid-to-cover ratio of 1.92, the weakest in almost a year...."It was just a horrendous result," William O’Donnell, head of U.S. Treasury strategy at RBS Securities in Greenwich Connecticut, said about the auction. "It was the weakest bid-to-cover since September 2008, and by my numbers it was the biggest tail since February 1993. It was just a very, very weak result."
They were able to get the 2 yr yields up dramatically over the past few days and last few weeks but the 5-10-30 yr yields were much more resistant. Today's $39 BILL auction is what a monthly auction might have fetched a year ago. Thursday's 7 yr note auction is even larger. Something's gotta give after $109 Bill in T-bonds for the week. Maybe more back door incentives to get BRIC and Japan to buy. Similar tri-fecta auctions coming every 2 weeks until the end of October alternating from 2/5/7 yr to 3/10/30 yr......Happy Halloween! 18 more auction days to go.
roadrunner
As long as the dollar is the world currency they can slowly peal of dollars, and buy raw materials and whole companies.
They have no real fear of inflation in China as they have no need to print their own currency when they can spend ours.
By continuing to buy our debt they guarantee that American markets will remain open to Chinese goods, and American manufacturing will remain stagnant.
Any changes in the dollar as a reserve currency would simply weaken their position, so why would they want real change.
I dunno, GoldSaint. While I do agree that nothing happens to the dollar without some input from China, it also seems true that the dollar has a sword dangling over it's head in terms of unfunded liabilities for the Treasury and also the Quadrillion $$$$ or so of bad debt on the balance sheets of our rotten banks. I'm somewhat shellshocked that FASB is reconsidering their stand on asset valuation, but surely there have been some non-transparent arrangements made since they changed their rational, prudent and ethical stance of 36 years a few months ago.
China has to have exactly the same worries that any US Bondholder has - how quickly is our capital going to be eroded by this US administration's policies?
OTOH, you are right about nullifying our own manufacturing capabilities. They will end up with the means of production, bit by bit, now chunk by chunk. They already have hit critical mass in their economy.
The question for China will be, at what point is the tradeoff between a devalued dollar and a technology transfer from the US to China no longer worth it?
I knew it would happen.
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Naz over 2,000 and the Dow lurching towards 10,000 and the -500 near 1,000.
Housing is flat and rebounding.
Everyone is getting a well deserved raise (minimum wagers).
Debt doesn't matter according to the San Francisco Fed president.
Crisis has been averted.
Now we can get back to our lives.
Good job BHO.
R95
Knowledge is the enemy of fear
<< <i>Typically if interest rates increase so does the value of the dollar. >>
...and stocks go down (generally).
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7-year Auction Results: High Yield 3.369% (3.39% expected); Bid/Cover 2.63x; Indirect Bidders 62.3%
Last auction.....
The previous, smaller, 7-yr auction blew the roof off with the yield well below expected, at 3.329%, a solid 2.82 bid-to-cover and a hefty 67.2% indirect bidder rate. The averages for the year's 4 auctions preceding that were 2.29 and 33.2% respectively.
Knowledge is the enemy of fear
Unlike the Russians, the Chinese have never really want world domination over lands that were inhabited by totally different peoples, but that does not mean they do not want WORLD DOMINATION.
The Americans, the British, and French before us gave up blood and treasury to secure our ideas when it would have just been easier to buy what we wanted.
I believe that just buying power is the Chinese strategy, not just here, but around the world. As they gain more economic power around the world they will continue to spend their foreign reserves on, companies, land, oil, minerals, treaties, etc.
Since a great majority of their reserves are in dollars why would they want a currency change? In addition they have spent a great deal of time and effort in getting the new socialist America hooked on the drug of debt.
Yes they might like us to take our time ruining our country, so they had more time to play us.
Remember it was Paul Volker who came up with the idea of selling debt rather than printing money to stop the 80’s inflation.
As long as a socialist’s government can print, and roll over its debt, it can continue to grow government forever as long as the debt dealer continues to supply the drug!
Yes I think China may unload some of its population problems on us in the decades to come.
With the current power they have on our decisions, anything is possible.
What happens once they have 3 trillion of our debt?
We have already given up our manufacturing base for the sake of government growth, what will be ask to do next by the Asians?
roadrunner
Thursday, July 30, 2009
The U.S. Treasury Department sold $28 billion in 7-year notes on Thursday, with vast majority of the bonds sold coming in near the high price, a sign that demand for this record amount of government debt is still holding up.
Foreign government and institutional participation in the auction was 62.5%, the Treasury Department said, the best participation by foreign parties this week.
Thursday’s auction culminates this week’s $117 billion in bond auctions, where earlier this week record amounts in 2-year notes and 5-year notes received tepid demand at best.
Bank of Japan board members say price declines will probably accelerate in coming months.
Knowledge is the enemy of fear
roadrunner
“some sort of chicanery”
RR you must be joking? You mean to tell me that these sales might not be completely legit?
Here are a couple of interesting local stories.
Yesterday my wife had to go to a local stock brokerage firm to get a signature guarantee for her mother.
The head of the firm, a middle aged lady starts telling my wife her woes while they are waiting for a fax.
She says almost all her clients, as well as herself, have lost 50% of all their money the last year, and she just does not understand how this happened. She says she had all of her clients, who are mostly retired folks, invested in the very safest portfolios.
LADY ALL THESE MARKETS ARE RIGGED!
Second,
I talked to a local banker here last week to try and negotiate a CD rate, he tells me that the most he can pay is 1.75% and really he does not want the money.
He says that the cash in his small bank has increased by 25 million the past few weeks and he has no place to put the funds.
He says normally that he would go out and buy Treasuries but that the market is so manipulated that he is afraid he will not get the money back. He wishes people would just find somewhere else to put their cash so he did not have the responsibility of paying them the 1.75%
Now more than ever it seems a good time to keep your assets close to home and hide!!
With a myriad of "consumer" prices one could probably mix it any which way to get the desired result. As for me, I didn't see any free lunch at the gas pump, grocery store, or college entrance office in June. Are inventory drawdowns of products the major driver? The link provided is a reference to Japanese bonds rather than consumer prices.
roadrunner
The idiots at Bloomberg revised the story just after I posted. Anyway, it was Japan that posted record declines. And many of the examples you cited can be purchased much lower than a year ago.
This is a little better link, but doesnt go into detail as the other story did. Even the Japanese media is in cohoots. LOL
Knowledge is the enemy of fear
Bill to Audit the Fed Gains Momentum as Public Support Grows
(x2,Meltdown),cajun,Swampboy,SeaEagleCoins,InYHWHWeTrust, bstat1020,Spooly,timrutnat,oilstates200, vpr, guitarwes,
mariner67, and Mikes coins
<< <i>GEE! whats causing the sudden price rise in gold this morning? Its looks strong!!!! >>
The DOLLAR BIG DECLINE
Naturally, they can let the dollar go back down for a while the auctions are over for the next few weeks.
But we know there is not “some sort of chicanery” going on, right, RIGHT!!!
I can see the Japanese having price declines as they have never been as proficient in QE as the USA. In fact they didn't even make a decent attempt at QE until 2002, a full 12 years after their economic crisis began. At that point it was probably way too late to expect anything but more deflation as they supplied the world with their carry trade. The US has gone full bore into QE from the outset which means we'll be out of the is deflationary cycle within months (not years) as inflation takes hold.
In reading Maurice Rosen's newsletter today he had an interesting article by Richard Maybury (richardmaybury.com). Maurice is not known for interiewing whack jobs for his lead articles. In fact the last time I can recall an interview that got my attention it was Maurice's summer 2002 head to head with Jim Sinclair when my eyes were opened to the D's nightmare and the coming outlook for gold. In any case Marbury concurs with many of our bullish projections for gold and silver. But what is most interesting is that he feels rare coins prices will greatly outperform the metals as the masses start looking for hard assets once again as paper assets weaken.
Obviously PM's have outpaced rare coins over the past 8 years but it is not written in stone that this trend will continue. In the late 1970's (1975-1980) many superb rare coins increased by 10X to 20X while gold increased 8X. My own favorite gem 1867-s 25c increased 16.6X from 3/1975 to 4/1980 outperforming gold by over 2X. An inflationary environment took over from a somewhat deflationary one.
roadrunner
(x2,Meltdown),cajun,Swampboy,SeaEagleCoins,InYHWHWeTrust, bstat1020,Spooly,timrutnat,oilstates200, vpr, guitarwes,
mariner67, and Mikes coins
link
(x2,Meltdown),cajun,Swampboy,SeaEagleCoins,InYHWHWeTrust, bstat1020,Spooly,timrutnat,oilstates200, vpr, guitarwes,
mariner67, and Mikes coins
Problems with computing GDP?
The author tries to figure out that for an economy where 70% of GDP is based on consumer consumption how the BEA comes up with just a -2% to -3% decline in consumption over the past year (PCE personal consumption expenditures). Yet at the same time, corporate revenues (a reasonably accurate statistic that should mirror consumption) are -15% yoy. This also compares well with state taxes at approx -10%. Does anyone have a reasonable explanation for the divergence?
One trick I was not aware of was that GDP has a + non-cash input for imputed owner occupied housing. This is to represent to imputed value that a homeowner gets by living in their own rather than renting it out. I guess they figured that after substituting imputed rent into the CPI for home prices, why not also place a similar hedonic factor into GDP? So who would have thought that hedonics, substitutional and quality effects, and seasonal adjustments were only good for the CPI?
Andy Sutton on GDP
Sutton argues that counting govt and consumer debt into the equation makes no sense. Hence giving us the much improved 2nd qtr GDP number that just came out.
roadrunner
Stress index
Knowledge is the enemy of fear
i read they want to increase the cash for clunkers $$ due to demand.
so people can go into more debt, via the government
when will it end?
roadrunner "
You are absolutely right Roadrunner. They have been tinkering with the formulas.... just like how they do in regards to the inflation rate, GDP, etc. From a HedgeCo.Net article (but there are numerous other sources also):
"NEW YORK, June 24 (Reuters) - Recent changes to the way the U.S. Treasury tallies demand at its bond auctions may be artificially inflating “indirect bids,” a category used by investors as a loose proxy for foreign demand.
Foreign investors own more than a quarter of the Treasury market, making their continued interest in U.S. bonds of paramount importance to the market. At the very least, the Treasury’s shift, made earlier this month, is confusing traders, prompting some to second-guess the apparent strong interest in recent auctions.
Indirect bids have been unusually strong of late, reaching a record 68 percent at Tuesday’s two-year note sale, and exceeding 62 percent at Wednesday’s sales of $37 billion in five-year notes. “We’re not going to make much of that, given the information we’ve gotten on the rule changes,” said John Spinello, fixed-income strategist at Jefferies, a primary dealer. “The indirect bids are now going to be higher given the change in procedures.”
Indirect bids are defined as ones that do not go through primary dealers, large banks that do business directly with the Fed and are required to actively take part in Treasury auctions. Top officials in China (Wary of dollar, China wants super-sovereign currency - Reuters.com) and Russia have expressed unease about the growing U.S. budget deficit, slated for a record $1.75 trillion in fiscal 2009 alone. This means that traders pay extra close attention to foreign demand figures. The Treasury’s changes, contained in a June 1 entry to the Federal Register, relate to what it considers a “guaranteed bid.” Under the previous arrangement, once a primary dealer offered securities at a pre-specified level to its customer, that bid was considered to be the dealer’s own.
The matter was technical enough to confuse even industry veterans. “We are not precisely sure what this all means,” said Ward McCarthy, managing director at Stone & McCarthy Research Associates in Princeton, New Jersey. “We spoke with some very seasoned market players with decades of experience on dealer trading floors who were similarly unsure what to make of the contents of the Federal Register.” The Federal Register entry can be found at http://www.gpo.gov/fdsys/pkg/FR-2009-06-01/html/E9-12787.htm "
<< <i>cohodk, higher than yours
i read they want to increase the cash for clunkers $$ due to demand.
so people can go into more debt, via the government
when will it end? >>
But they estimate the gain to GDP next quarter could be as much as 4%. Wont everyone feel happy then? LOL
Knowledge is the enemy of fear
How do they figure that a couple of billion dollars in new car rebates will lead to a 4% GDP rise? GDP is currently >$14 TRILL. A 4% increase is 560 BILL. Assuming that the average car purchased is say $20,000....or about 28,000,000 cars. Annual car sales peaked a few years ago at 17,000,000. Are they assuming a multiplier effect by people spending money on new cars?
roadrunner
Let's say 200,000 vehicles have been removed. These are vehicles that lower income individuals would eventually have been in the market to purchase, since they cannot afford a new vehicle. Well, guess what? These vehicles are being destroyed. The first thing the dealer has to do is to disable the engine so it will no longer run.... and the vehicle will be crushed.
A shortage of low priced cars in the future for the lower income bracket? Driving up prices for used cars? Hmmm....
Camelot
peter schiff happy days are here again...NOT
Steve Leisman on CNBC ran the numbers. The huge increase in GDP is a result of the huge YoY increase in auto sales. It amounts to something like a 400% annualized increase. Somehow that gets put into the number cruncher and 4% GDP gets spit out. So barring a nuclear winter, we can pretty much be assured that 3rd qtr GDP will be positive.
FWIW--I am not happy about this. First we subsidize the manufacturers, then the consumers. Talk about a flawed business plan. All they did was meet a pent up demand. What happens when the rebates stop? Double dip, another round of stimulus, and millions of jobs that should have been eliminated will be sustained. We have destroyed the need for innovation, and this I think is far more damaging than another couple trillion in debt.
Knowledge is the enemy of fear
anyone interested in a new used motor
forget the new car just buy the parts
<< <i>the funny thing is they can be striped of motors or what ever by the junk yards
anyone interested in a new used motor
forget the new car just buy the parts
Not likely....you try to start an engine after a gallon of sodium silicate has been poured into the gas tank....It ain't gonna happen. The seller is entitled to the salvage value though after he pays a $50 recycling fee.
roadrunner
<< <i>Buffett’s Betrayal >>
Buffet is too big to fail.
Knowledge is the enemy of fear
Yeah, I like it and would pay a small amount. Maybe this is the cure for the spin on all of the media machines because if folk are gonna pay for news, they are going to expect real news. I like it a lot, now we could actually get objective, investigative, unbiased journalism instead of what we are getting for free now; I guess it's worth what we're paying for it though. This could be the next step for newsers; ya' gotta pay for the good stuff.
Imputed rent on the cars!!
<< <i>"I'd bet dollars to doughnuts that there is some sort of chicanery going on with these bond sales. There are some sort of back yard deals or favors being given behind the scenes. For all we know the bonds or a percentage of them are being recycled right back to the FED/Treasury. Books can be cooked any way you'd like. There I go again thinking the worst when I should be giving the benefit of the doubt to those who helped crash the financial system. For those who have dreamt up a way to create $350 TRILL in interest rate swaps can't figure out a way to cover 1 TRILL in bonds?
roadrunner "
You are absolutely right Roadrunner. They have been tinkering with the formulas.... just like how they do in regards to the inflation rate, GDP, etc. From a HedgeCo.Net article (but there are numerous other sources also):
"NEW YORK, June 24 (Reuters) - Recent changes to the way the U.S. Treasury tallies demand at its bond auctions may be artificially inflating “indirect bids,” a category used by investors as a loose proxy for foreign demand.
Foreign investors own more than a quarter of the Treasury market, making their continued interest in U.S. bonds of paramount importance to the market. At the very least, the Treasury’s shift, made earlier this month, is confusing traders, prompting some to second-guess the apparent strong interest in recent auctions.
Indirect bids have been unusually strong of late, reaching a record 68 percent at Tuesday’s two-year note sale, and exceeding 62 percent at Wednesday’s sales of $37 billion in five-year notes. “We’re not going to make much of that, given the information we’ve gotten on the rule changes,” said John Spinello, fixed-income strategist at Jefferies, a primary dealer. “The indirect bids are now going to be higher given the change in procedures.”
Indirect bids are defined as ones that do not go through primary dealers, large banks that do business directly with the Fed and are required to actively take part in Treasury auctions. Top officials in China (Wary of dollar, China wants super-sovereign currency - Reuters.com) and Russia have expressed unease about the growing U.S. budget deficit, slated for a record $1.75 trillion in fiscal 2009 alone. This means that traders pay extra close attention to foreign demand figures. The Treasury’s changes, contained in a June 1 entry to the Federal Register, relate to what it considers a “guaranteed bid.” Under the previous arrangement, once a primary dealer offered securities at a pre-specified level to its customer, that bid was considered to be the dealer’s own.
The matter was technical enough to confuse even industry veterans. “We are not precisely sure what this all means,” said Ward McCarthy, managing director at Stone & McCarthy Research Associates in Princeton, New Jersey. “We spoke with some very seasoned market players with decades of experience on dealer trading floors who were similarly unsure what to make of the contents of the Federal Register.” The Federal Register entry can be found at http://www.gpo.gov/fdsys/pkg/FR-2009-06-01/html/E9-12787.htm " >>
///// What keeps the government from having bank accounts in foreign countries and using that money to buy their own bonds?
(x2,Meltdown),cajun,Swampboy,SeaEagleCoins,InYHWHWeTrust, bstat1020,Spooly,timrutnat,oilstates200, vpr, guitarwes,
mariner67, and Mikes coins
Both of my vehicles are in good repair, and paid for.
What will the Gument do with these clunkers?
Local junkyards here, pay 50-$150 for junkers, or clunkers.
Just send me a check for $4500, and I'll convert it to gold, thankyou.
Tax payers will pay for it, one way or the other, IMHO.
scott
more D & G, or?
sages what dost thou thinkest?
smoke and mirrors are working now but for how much longer?
I think that we are already in Q3, and that alot of variables are still in the air. How many knives can a one-armed man juggle at a time while balancing a stack of 100 pennies on his forehead?
I knew it would happen.
Happy Days are here again......