Monday, May 25, 2009
Stagflation
Telegraph: US bonds sale faces market resistance
The US Treasury is facing an ordeal by fire this week as it tries to sell $100bn (£62bn) of bonds to a deeply sceptical market amid growing fears of a sovereign bond crisis in the Anglo-Saxon world.
Posted by devo @ 12:58 AM (818 views) Add Comment
9 Comments
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1. alan said...
Today's FT carries a useful article about China being stuck in a "dollar trap". China holds staggering amounts of US debt!
I wonder what would happen if they pulled back a little?
2. quiet guy said...
"I wonder what would happen if they pulled back a little?"
Alan, they already have. Here's a link from the page
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5373570/Gold-bugs-at-last-have-their-perfect-trinity.html
subheading: "China has doubled its bullion reserves and left us in no doubt that it will spend more of its $40bn monthly surplus on hard assets rather than the toxic paper of Western democracies."
It will be interesting to see the inflation versus deflation argument next year.
3. general congreve said...
As it says in the article, 'there's no get out of jail free card' on this one. Dollar down, gold up, yippee!!!
4. crunchy said...
2. quiet guy YES, THEY NEED MORE GOLD TO GOLD BACK THERE AMBITIONS FOR RESERVE CURRENCY.
TONNES THAT THEY CANNOT PRODUCE AND THAT'S SAYING SOMETHING!! There are many ways to dump the dollar.
Will oil follow suit? That's one for the inflationists here.
5. bellwether said...
Bernanke's assumption that you can effectively issue debt at no cost has always looked totally improbable and his failure to address how fhe markets would react seems to give the game away.
While there is little possibilty of foreign holders of US debt dumping also there isn't the appeitite (or ultiamtely the wealth) for the massive issuance needed and yeilds must go up. I wouldn't bet this would be good for gold as it suggests that QE won't work to get the world out of the debt deflation trap. Noticed an advert this morning where people are being encouraged to pawn any gold they have for cash. The thing is people will do it ie they value readies over gold.
Funnily enough the fed sponsored rally hasn't been good for treasuriers which was kind of obvious. It worries me there is no way out of this. The UK in particular is vulnerable to an outright bond strike.
6. bellwether said...
At a more basic level all systems even the simplest one celluar creatures eventually fail to react to repeated stimulus. The notion that we can keep stimulating the economy seems absurd especially as the by product of the stimulus is debt at toxic levels, no-one ever has an answer what we will do with the debt, it was created in huge amounts during the boom, now that the cycle has changed and it is increasing still what hope do we have of making it manageable. That fact that noone ever explains how you will GDP your way out of the debt when GDP growth is predicated on debt is telling.
7. uncle tom said...
Governments all over the developed world are borrowing heavily. It is patently obvious that the funds needed are not there - not even nearly there.
Those that argue that QE is just a temporary measure, and that the US and UK will sell the bonds they have bought in a year or so, so everything will then be tickety boo, are missing the big picture.
The limited funds available for investment on the global stage are going to home in to those nations that are not printing cash, who are protecting the integrity of their currencies.
That will push countries like the US and UK into a scenario where all government deficit is met by creating new cash - not borrowing it; a scenario from which it will be very difficult to emerge.
Bernanke's 'no cost' quote will come to haunt him..
8. bellwether said...
And to add to hopefully add to your comment UT bust currencies do not make for productive economic exchange, at best we will see countries withdrawing into themselves and a shift away from globalisation.
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