Why Default on United States' Treasuries is Nearly Certain

Discussion in 'Economics' started by ByLoSellHi, Sep 7, 2009.

  1. In the end we are all dead anyway.
  2. These are very scary times and the masses are oblivious because they think the economy is okay if the stock market is going up. However, the stock market is primarily going up because so much of the funny money the US government is printing is finding its way into equities. Unfortunately, when the printing presses have to slow down because the dollar really tanks, interest rates rise, inflation accelerates and/or the Chinese dump their dollars and stop buying our treasuries, financial collapse could ensue. Exactly what form that will take is not clear to me.

    The best things you can do is pay off your debt, accumulate physical gold and silver, become as self-sufficient as possible and buy a gun.
  3. Sashe


    how paying off your debt is gonna help you if the financial calamity looms anyway?
  4. Japan will default long before the US. And their 10y bond yields ~1.5%... certainly no bond panic yet. Plus their population growth is 0% compared to the US' 1%.
  5. I'm only afraid for ppl like BuySellShort who have been short and bearish since March and continue to post articles on why things are so bad while the market rips their face off... unless of course....he's papertrading...........no way....
  6. While I agree things are in a real mess, as a rule always trade the opposite of what is almost certain to happen.
  7. If that's what you truly believe, buy all the USD you can..:cool:
  8. Not the only folks concerned it seems.


    China alarmed by US money printing

    The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.

    Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".

    "We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

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    Analysis: China's 'Beijing Put' on the gold price

    "If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

    China's reserves are more than – $2 trillion, the world's largest.

    "Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.

    The comments suggest that China has become the driving force in the gold market and can be counted on to
    buy whenever there is a price dip, putting a floor under any correction.

    Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.

    "Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."

    Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets.

    "This is where Greenspan went wrong from 2000 to 2004," he said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity."

    Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery.

    China's task is to switch from export dependency to internal consumption, but that requires a "change in the ideology of the Chinese people" to discourage excess saving. "This is very difficult".

    Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China.

    "The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis."

    Yet the consequences are not symmetric.

    "He who goes borrowing, goes sorrowing," said Mr Cheng.

    It was a quote from US founding father Benjamin Franklin.
  9. Lucrum


    Since he's been unable to manipulate the markets lower with non stop doom and gloom. Maybe he should try some reverse psychology, and start posting some good news. (If he can find any)

    #10     Sep 7, 2009