Posted on 01/11/2009 11:46:18 AM PST by Golddigger3
On both sides of the Atlantic, investors are finding very different experiences when buying country-specific debt. Wednesday, Germany sold €4 billion ($5.49 billion) of debt, but low demand forced the Bundesbank, Germany's central bank, to retain about one-third of the issue.
That fueled concerns that subsequent auctions from Spain, France and the U.S. also would fall short of expectations and be a sign that the global market was starting to balk at government-bond issuance. It would be especially troubling for the U.S. The vast lending and spending undertaken by the U.S. Treasury Department and the incoming Obama administration will have to be financed through the sale of more debt.
Bank of America estimates a $2.14 trillion financing need for fiscal 2009 and $1.02 trillion for 2010. And investors have been fearful that other countries will tire of being U.S. benefactors and will demand higher yields or sell Treasurys en masse, weakening the U.S. dollar.
But Spain and France held successful auctions, and the U.S. Treasury's sale Thursday of $16 billion in 10-year notes was marked by stronger-than-expected demand. "The strong across-the-board performance for this reopening should in the near term provide some solace that 10-year Treasury paper in the U.S. still has a strong following," wrote George Goncalves, Treasury and agency strategist at Morgan Stanley.
Jessica Hoversen, . . . analyst at MF Global, doesn't expect China or Japan to sell off their holdings of U.S. Treasurys, "If China decreases dollar holdings, they're putting dollars in the market and taking back yuan," she said,"which their economy cannot handle right now."
(Excerpt) Read more at online.wsj.com ...
The things that frustrates me about currency discussions is how deceptively insular they are.
Political reactionaries consistently predict the demise of the Dollar.
What economy is a better investment than the US economy?
I really cannot fathom it.
The US economy is in decline. But which global economy is in ascendancy?
Ironically, economic decline does cause investors to flee to safe havens such as the US economy.
China, India, Spain, I dont know what country people might be thinking do not have better safer economies.
Truthfully, all these reactionaries do this stuff deliberately because they hold Gold and want to artfully twist more money out of people’s hands.
How? See the ending to the old Clancy novel ‘’Debt of Honor’’ for one method.
I do not know about the author’s motivations. Perhaps your suspicions are well founded.
However your argument for the strength of the US economy compared to other economies is weak. Recovery will take bitter medicine that no one wants to swallow. I am convinced that the stimulus will not bring recovery. It will just kick the can down the road. However, the stimulus will balloon budget deficits at a time deficits should be shrinking or at least stable. In addition, the rats have a multitude of programs aimed to lower economic growth over the long run (CO2 taxes, much more employment regulation, labor union coddling, nationalized health care, renewable energy mandates, looser litigation laws, much higher taxes on producers, ...). These programs combined with the very large deficits indicate serious long-term problems. Other countries that swallow the bitter medicine now will have a big advantage in the next decade. Other countries have moved in more conservative directions. The US is moving to big-time socialism with wealth and power concentrated in the enemies of economic freedom (labor unions, environmentalists, trial lawyers, and politicians).
Did you get "true that" from "The Wire" TV show? I love "true that" and the first season of "The Wire".
Nope. Just some local slang. :)
EVERYBODY will be affected when he raises taxes. Even those who don’t pay tax because their bosses will have less income after their higher taxes to retain all the existing employees or even hire new ones.
The significance I take away from this is the trend - the seven failures of Bund auctions started in the latter half of the year. Before that, we have to go back to 2000 for a failure of the Germans to auction off their paper at the rates they’re trying to achieve. Now we see the Bundesbank taking back about one-third of the auction, rather than allowing the rates to rise. They can’t do that for very long in their situation - they no longer mint their own currency.
They were peddling Bunds at something like 4.68% in June and as rates have come down, they’re having bigger shortfalls and auction failures. What I take away from that is the market is telling them that they’re going to have to expect higher interest rates if they want to peddle their paper - probably signifying that the market perceives more risk in the German banking system than in the US, where we’re able to have over-subscribed auctions at much lower rates.
Since the Germans are the lynchpin of the Euro, this now becomes more complicated. They can’t follow the model of Bernanke. They don’t own their own currency, and there are political implications in the rest of Europe that constrain what the Germans can do.
People are finding out in a hurry that the Euro has a problem and it is this: it is a fiat currency with no clear, single decision making sovereign behind it. Instead, it is backed by this confederation of people who like to talk, talk and talk some more about their problems.
I'm new to economy watching. Would you mind elaborating on:
1) What are your worries/predictions for the economy?
2) Do you think we have a treasury bubble that could send us reeling to a Great Depression II?
3) What do you think about the governments approach to the crisis?
4) Are you worried that we seem to do nothing but consume rather than save and make things, and how can we keep that up?
2) Ironically, economic decline does cause investors to flee to safe havens such as the US economy.
1) Isn't the rate of growth of China and India, and the continued stength of Japan and S. Korea compared to our decline huge?
2) If we can only pay back the holders of our debt by printing money with increasingly worthless dollars, won't there come a point soon where the other countries say it isn't worth it?
The Euro must unravel at some point, there's no help for it. One cannot possibly (see the US Confederation and ERM for historical details) have a ''unified'' currency wherein the participants all play by different sets of rules.
Italy goes out first, say I, followed by (in no particular order) Spain, Greece, Hungary, and sundry other of the smaller Eastern members. Cyprus have no business being in EMU, but doubtless find it convenient and will almost surely stay. Time frame: 5 years or less, bar some cataclysmic economic upheavel in the interim that effectively coerces the weak/uncooperative EMU members to stay in the Euro.
Note this doesn't mean that there will be no Euro any longer, merely that the number of nations in EMU will decrease unless the EC starts cutting yet more deals for backsliding nations to evade/avoid/ignore Maastricht...in which latter case, which is likely enough, the Euro will be at 85 vs JPY and under 100 vs USD.
This study by two UCLA economists says that The Great Depression was created by FDR's economic regulations: http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx
Won't huge inflation brought on by printing money be a bigger burden on the voters, and isn't this, afterall, a kind of tax, only without representation?
I have a brother with big bets in ETFs sponsored by Deutsche Bank and another one of the German banks. Do you think the German bank risk is high enough to warrant getting out of those ETFs for that reason alone?
It won’t be long before there’s limited demand for US 10 and 30 year Bonds...offered at 10% rates.
Another point to add re the risk of ETFs sponsored by German banks: The German government has guaranteed Deutche Bank and just Friday said it would guarantee another.
I have no idea. I’m guessing that the ETF’s are reflecting a basket of underlying issues, and those are the issues I’d look at first in any ETF.
Great video. The largest Ponzi Government in world history is about to collapse. The leaders we will have in a few weeks will be remembered for centuries as the absolute worse leaders ever to run a government.
Peter Schiff predicted the crash years out and is on many YouTube videos arguing with the status quo sages. The most famous of these videos is at:
http://www.youtube.com/watch?v=2I0QN-FYkpw
On my last post the hyperlink didn’t show up. Doesn’t anybody know what I might be doing wrong?
Here I am trying to give you that famous Peter Schiff video again: http://www.youtube.com/watch?v=2I0QN-FYkpw
Hope it takes this time.
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