I agree. I came to the exact conclusion a few days before they announced. If you look at a graph of debt the only 3 areas the gov't can reduce spending are FED(listed as other mandatory in the pie chart), defense, and social security. /Medicare.http://upload.wikimedia.org/wikiped...png/450px-U.S._Federal_Spending_-_FY_2007.png Well they're working on the biggie SS/Medicare. They and you better believe beneficiaries will not collect until they're 70yo and that will happen soon. http://www.actuary.org/pdf/socialsecurity/age_oct02.pdf Defense isn't going down anytime soon because with all the global power struggles we are involved with as a result of our economics the military will need to maintain its strength, and lastly the FED isn't gonna stop its machinations anytime soon. So where do Japan and China fit in? They subsidize the currency of trade by buying our Treasuries. We printed and/or are printing our way out of the global banking crisis and to do so we radically increased an already unsustainable deficit. Until we get the economy back in order we need treasury auctions to continue, we need buyers, and the FED needs to continue to attempt to build the economy and job growth. Once the pieces are in place to change the SS age of benefits and the economy are back on track then we are gonna inflate our way out the debt that was printed.
China is slowly offloading US Treasuries. Japan is now the number one holder of US debt. http://www.digitaljournal.com/article/287708
"They will separate the risk that's on Wall Street from that which is associated with consumer deposits," Whitney said. "It's going to be a tougher environment." ____________________________________________________ I have read a few ideas on this site as to why the Feds raising Discount Rate. I say they are all some what correct however: The reason the Fed has Raised the discount rate, IMHO is due to the soon to be, Splitting and seperating within the banking system, due to the new regulations that "WILL" pass in congress. Soon, the Investment Banking, Hedge Fund industry will have not bridge to a Consumer Deposit Bank. This is just the first signal by the FED that they will support such a move. Read between the lines and the rise in the discount window will tell you more. Also, count how many "Investment Banks" moved to Deposit Banking during the crises. And out of those, who do you think will cut out Consumer Deposits and stay strickley IBs. Get ready for a massive round of job losses if your in Banking.
While that may be true to a large extent, I don't believe that it's simply a veiled threat. I don't have time to go into much detail at the moment (I must trade, can't ya see? ), but I'll stick my neck out and say that China stands to gain more by the decline of the American empire.
Nice work, Schizo. But you really don't need to complicate things so much. The answer is known in advance and is easy ... The FED ALWAYS follows the 3-month treasury bill yields. Plot the Fed funds rate and the 3-mo. T-bill yield and you will see that the FED is always reactive. No biggie, no need for figure-figure. Nice work nonetheless.