Posted on 05/01/2010 10:33:11 AM PDT by Errant
...if you start to see a great depreciation of the U.S. currency or a tremendous increase in lack of confidence in the soundness of the government's fiscal condition, there is a problem. You mentioned Greece, for example. The sovereign solvency issues there are minuscule compared to what we have with the United States, which is the elephant in the bathtub. The markets know it's there. The central bankers know it's there. Again, with the downturn in the economy, all the issues are going to be brought to a head. As they come to a head, there will be that effort to dump the dollar...
(Excerpt) Read more at marketoracle.co.uk ...
LOL!
Which risk free government bond purchases do you imagine are out there? Be specific.
?
If you imagine buying a 10 year Treasury bond is a risk free investment, please, for God’s sake, don’t invest the money of anyone you care about.
That leaves option #2, which is what many other governments throughout history have attempted to do. They will attempt to inflate their way out from under this debt. Problem is, as history shows, governments overplay this option and inflation quickly gets out of control as holders of the money begin to realize what is happening and try to dump their reserves of the money quickly , causing inflation to ramp up at a faster and faster rate until a full blown panic occurs, causing a monetary collapse which brings forth hyperinflation. History is replete with examples. Our stupid government and Fed officials are no smarter than those who have tried this failed approach in the past. (Why does anyone think Bernanke is called Helicopter Ben?) They will end up leading us all down that same well trodden path to monetary destruction.
You're joking, right?
If you buy $1,000,000 worth of 10 year T-Bonds when rates are 3.7% and rates jump to 5% in the next 6 months. Did you make or lose money on your investment?
Second when your using “other people's money” (US taxpayer funds) what do you these banks have to lose?
Banks with TARP loans are paying a fairly high rate on that loan. Higher than the 10 Year Bond is paying today. Try again?
I totally agree unless something happens (i.e. chain reation) that causes the debt pressure to go nuclear.
You mean like a domino chain effect global financial collapse? If yes, then I agree. The odds of it occurring seem to be rising every day. I hear more and more pundits making comments about the need for a global currency to stem this possible scenario. That tells me there are quite a few that think a global financial meltdown is a growing possibility.
Increased our holdings of course. (Ignoring inflation since we're using fenced funding)
Banks with TARP loans are paying a fairly high rate on that loan.
From everything I've read (see linked articles above), these banks are getting the discount rate of 0 to .5 %. I research some of the criteria and it plainly states they may borrow for purchases of US securities. Do you have information that disputes these articles?
:)
Increased our holdings of course.
After you made or lost money on your original purchase?
From everything I've read (see linked articles above), these banks are getting the discount rate of 0 to .5 %.
You said taxpayer money. That's not the discount rate. You know the difference between the Fed and the Treasury, don't you?
I research some of the criteria and it plainly states they may borrow for purchases of US securities.
Goes back to the original question, do you believe a 10 Year Treasury Bond is a risk free investment?
Is it just me, or does it seem ironic for someone with a screen name of 'historyrepeatz' to make this statement?
The Treasury borrows, the Fed prints and we pay?
do you believe a 10 Year Treasury Bond is a risk free investment?
Ain't nothing in this world full-proff except coup deville's and hookers! - Roy Bacon (Honeymoon in Vegas)
The Treasury, thru TARP, loaned taxpayer money to banks.
The Fed, thru the Discount window, among other things, loans money that doesn't come from the taxpayer.
Ain't nothing in this world full-proof
Great, so you'll stop repeating the silly claim that banks can make a risk free profit?
So you realize you can lose money buying Treasury securities?
Ok, We can agree this took place. I will accept that funds were at a higher rate. It's probably the reason the banks were in a hurry to pay this back and replace the funds with money borrowed from the Fed. Correct?
The Fed, thru the Discount window, among other things, loans money that doesn't come from the taxpayer.
This is were we are having a disagreement. First, I am stating what articles I've linked are saying. There are many more like them from authors in the know. I asked you to dispute the claim that the funds would not eventually have to be bankrolled by the taxpayer. You did not respond to that request.
The Fed is pretty secretive about their operations but you seem to have working knowledge of where these funds originated from. I would be interested in reading your additional comments on the subject. Email me if you don't care to reveal that information publicly. We're not talking member bank borrowing.
So you realize you can lose money buying Treasury securities?
You can lose money from trading Treasury securities and certainly people have and do everyday. No one has lost money from buying/investing in treasuries to date if held until maturity. If you've noticed my other comments you'll find that I think they are a poor investment and a possible coming calamity.
I think treasury certificates are basically safer than loaning money to business for banks who borrow the money from the Fed at the discount rate. They can't borrow at the discount rate for business loans right? Whats the risk for them unless the monetary system collapses and then they are history anyway.
Ok, We can agree this took place.
That's a relief. LOL!
I will accept that funds were at a higher rate. It's probably the reason the banks were in a hurry to pay this back
Bingo.
and replace the funds with money borrowed from the Fed. Correct?
Not so much
This is were we are having a disagreement.
You think the Fed loans taxpayer money?
First, I am stating what articles I've linked are saying.
Repeating incorrect articles doesn't make them right.
I asked you to dispute the claim that the funds would not eventually have to be bankrolled by the taxpayer.
Repeat your question, in English.
The Fed is pretty secretive about their operations but you seem to have working knowledge of where these funds originated from.
It's not a secret, the Fed doesn't loan out taxpayer funds.
No one has lost money from buying/investing in treasuries to date if held until maturity.
Your claim was that a bank could borrow overnight and buy long term bonds, booking a risk free profit. Sticking by that claim?
Did investors who bought 30 year bonds and held them until maturity lose money if their purchase date was 1970?
I think treasury certificates are basically safer than loaning money to business for banks who borrow the money from the Fed at the discount rate.
Current borrowings at the window are about $6 billion.
They can't borrow at the discount rate for business loans right?
Why not? Do you think borrowing overnight to fund such a loan is a good idea?
Whats the risk for them
It's called interest rate risk.
Good article...very interesting...doesn’t look good for the year ahead. In fact looks bad...am wondering if the stall on Iran is because they might use that war to cover the fall of the dollar etc. and blame it then on the war costs etc.
Either way there’s a mess coming.
You may actually know more than the authors or maybe not.
Your claim was that a bank could borrow overnight and buy long term bonds, booking a risk free profit. Sticking by that claim?
I said, "No one has lost money from buying/investing in treasuries to date if held until maturity".
And yes I'm sticking to that claim.
Did investors who bought 30 year bonds and held them until maturity lose money if their purchase date was 1970?
Of course not. The original funds along with interest rate at time of purchase would be returned to them as promised at maturity. Who is being "silly" now?
I'm starting to realise our entire banking system has morphed into a mutually assured destruction relationship between the commercial banks, Fed and Treasury.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.