Potentially the largest trade in all of history is in the making

Discussion in 'Economics' started by FireWalker, Sep 20, 2011.

  1. If Bernanke dumps the long side of all Treasuries and exposes the check-kiting operations of the Federal Reserve, thereby sending the value of Treasuries to $0, the short side of his Treasuries will be ridiculously profitable.

    Bernanke would be lauded as a hero. Why?

    - National Debt $0
    - Personal Income taxes $0
    - Mortgage principals near $0 (existing mortgage holders would likely owe only the spread)

    The losers in this would be some hedge funds and central banks with large Treasury holdings. Nothing much they can do but go belly up though since Hillary Clinton took out the nuclear threat a couple years ago.

    Let's see if Bernanke has the guts and wisdom to save the economy.
  2. Visaria


    I'm long dollars v sterling, fwiw.
  3. Interesting. The Swiss Franc recently raised margins substantially, but I haven't thought about that one.

    IMO, gold/silver is the way to go. Tangible.

    I wonder how much sterling silver is at Buckingham Palace.
  4. Well this isn't reality at all.

    The entire country would be bankrupt in such an event. There would be no profits because deflation will take its final toll on our fiat currency. There wouldn't be any celebration. It would be a catastrophic failure and let me tell you in no uncertain terms that you do not want this to happen. It would be benficial for nobody, and while I acknowledge an arbitrage opportunity, this is the worst case and EXTREMELY UNLIKELY.
  5. I was thinking today that after the Fed dissolves, the Treasury might eliminate fractional reserve, fix the existing dollars to existing contracts to get a number, then tie the value to US exports. Might be a good way to go if Bernanke gets his act together and changes offices to the Treasury.
  6. The only thing after monetary systems is a design I called Productivity Credits. Mostly electronic, some secured promissory notes involved.

    No one could buy anything and inevitable war would come. I don't see why you would wish for this, and as far as betting against treasuries even though it appears prudent to do so Bill Gross is taking a beating with his leveraged hedges against them.
  7. Visaria


    I own plenty of gold, but want more. Waiting for a meaningful correction. Will probably not happen!
  8. Are you sure about some of the conclusions you draw?

    1. Lower yield leads to a rise in price of assets, not a decline, because the present value of future cash flows would rise (not decline).
    2. So the holders of current bonds would make a killing. The question would rathen be: would they offload on the new buyers (whomever those buyers might be).
    3. The twist is anti-deflation, without printing of money, which is good because it would not lead to a rise of price of oil/etc, but a rise in price of assets. They should have done it a long time ago, instead of the QE disasters.
  9. You might want to review monetary science. Keynesian economics has some massive logical flaws which is leading you to false conclusions.

    All transactions are promises to deliver value. Two promises = 1 transaction. What was conveyed? Up to the individuals. Only living beings can make promises. If you consider that, your understanding of monetary science might resolve some leanings on Keynes/Milton errors.
  10. It would most likely happen, and you would realize that you bought a falling knive that you thought was a rising train, but I do not wish that to happen to you.
    #10     Sep 20, 2011