Bonds

[switters]

I dont get this. US owes trillions and has falling revenues. Given this the dollar cant really appreciate without making it even more difficult to pay back US debt.

Yet their bonds offer only a few percent over 30 years.

Surely this represents a fantastically bad buying option and yet the government are selling billions of them, many of them to themselves???

What is going on? Who are the people who are buying them and what are they seeing that I cannot?

[Guest Daddy Bear]

I dont get this. US owes trillions and has falling revenues. Given this the dollar cant really appreciate without making it even more difficult to pay back US debt.

Yet their bonds offer only a few percent over 30 years.

Surely this represents a fantastically bad buying option and yet the government are selling billions of them, many of them to themselves???

What is going on? Who are the people who are buying them and what are they seeing that I cannot?

Who are the people who are buying them and what are they seeing that I cannot?

HA HA HA HA HA HA HA !!

Good one!

very subtle - I like it.

[InternationalRockSuperstar]

Who are the people who are buying them and what are they seeing that I cannot?

the inside of their own ******** tract probably.

edit: bloody swear filter

Edited September 20, 2009 by InternationalRockSuperstar

[Guest_ringledman_*]

The US government are buying back their bonds with money printed by the Fed.

This is the biggest Ponzi scheme known to man.

The incompetent BOE and UK government are doing exactly the same.

Prepare for major inflation sometime over the next decade.

The old purchasers of UK & US debt are getting out of buying any more (i.e. the Chinese/Japanese/middle East Sovereign Funds).

They are now buying real money i.e. gold, silver and copper.

Edited September 20, 2009 by ringledman

[the_austrian]

The same people are buying them that are buying paper cash, notes and coins. They are all "funny money" (not redeemable for anything) there is no reason to differentiate. They are not grounded in logic.

[Ah-so]

Risk aversion - despite the financial difficulties, the US government is the institution guaranteed to repay its USD obligations and does not carry a default risk.

If you are holder of USD and want to be sure to get your money back with some interest, however small, Treasuries are the only option. However, yield is not really a concern. In fact, during the hight of the crisis last Autumn when banks were collapsing almost daily, people were holding T-bills and short term treasuries with negative yields, so desperate were they to guarantee principal.

[Guest Daddy Bear]

Risk aversion - despite the financial difficulties, the US government is the institution guaranteed to repay its USD obligations and does not carry a default risk.

If you are holder of USD and want to be sure to get your money back with some interest, however small, Treasuries are the only option. However, yield is not really a concern. In fact, during the hight of the crisis last Autumn when banks were collapsing almost daily, people were holding T-bills and short term treasuries with negative yields, so desperate were they to guarantee principal.

and does not carry a default risk.

INFLATIONARY DEFAULT?

[switters]

The US government are buying back their bonds with money printed by the Fed.

This is the biggest Ponzi scheme known to man.

This is what I thought, and this is insane. Not insane that they are doing it, insane that this is not daily front page news. The Fed are printing Bonds, buying them theirselves, and then using the money to bail out bankrupt banks.

This is Alice in Wonderland stuff.

The Fed is buying their own money....

One more time (because now I have seen it all), let me get this straight: the FED is selling money to themselves and then declaring it a success because they have sold it all.

Someone put me right on this. Surely the FED are not selling bonds to themselves? Somebody?! Anybody?!

This is so insane it makes the Greenspan bubble look like a believable piece of sound macroeconomic policy.

[Guest Daddy Bear]

This is what I thought, and this is insane. Not insane that they are doing it, insane that this is not daily front page news. The Fed are printing Bonds, buying them theirselves, and then using the money to bail out bankrupt banks.

This is Alice in Wonderland stuff.

The Fed is buying their own money....

One more time (because now I have seen it all), let me get this straight: the FED is selling money to themselves and then declaring it a success because they have sold it all.

Someone put me right on this. Surely the FED are not selling bonds to themselves? Somebody?! Anybody?!

This is so insane it makes the Greenspan bubble look like a believable piece of sound macroeconomic policy.

And another one see reality dawn...

Mark my words...a tipping point coming very soon.

GET OUT OF PAPER !!!

[Guest_ringledman_*]

This is what I thought, and this is insane. Not insane that they are doing it, insane that this is not daily front page news. The Fed are printing Bonds, buying them theirselves, and then using the money to bail out bankrupt banks.

This is Alice in Wonderland stuff.

The Fed is buying their own money....

One more time (because now I have seen it all), let me get this straight: the FED is selling money to themselves and then declaring it a success because they have sold it all.

Someone put me right on this. Surely the FED are not selling bonds to themselves? Somebody?! Anybody?!

This is so insane it makes the Greenspan bubble look like a believable piece of sound macroeconomic policy.

Yes they are and the BOE are doing exactly the same. They then declare that they sold all their bonds. F****** crazy it is.

Peter Schiff and Marc Faber have plenty to say on the matter on youtube.

The old purchasers from the East (China et al) are trying not to talk down the dollar too much as they own trillions of the stuff but privately they are diversifying the heck out the dollar into hard assets (i.e. commodities).

They are also getting their citizens into silver and gold ownership.

The real government crisis is ahead of ourselves.

Own precious metals and foreign assets not denominated in dollars or pounds.

Check out the Peter Schiff's google speech on youtube.

[LuckyOne]

I dont get this. US owes trillions and has falling revenues. Given this the dollar cant really appreciate without making it even more difficult to pay back US debt.

Yet their bonds offer only a few percent over 30 years.

Surely this represents a fantastically bad buying option and yet the government are selling billions of them, many of them to themselves???

What is going on? Who are the people who are buying them and what are they seeing that I cannot?

I have often made the mistake (only in the short term) of thinking about the terminal value of assets.

There are a lot of excellent traders out there who are very successful in estimating intermediate moves in asset prices.

As they are the most active people in the market, they can influence short term price movements which are at odds with expected terminal values.

This is a convoluted way of using the oft quoted phrase : "Markets can remain irrational for far longer than you or I can remain solvent".

[Guest_ringledman_*]

Schiff has some interesting comments along the lines of - wait until the asians shit themselves about the falling dollar and they dump them on mass, then all these dollars will come flooding back into the USA.

Once this happens trillions more dollars will be chasing the same quantity of good within the USA and inflation will go ballistic!

The Fed will have to raise interest rates to stop the rot of their currency and inflation. They days when central banks can control their interest rates will be over. When rates hit 20% in the early 80's America was the world's largest creditor nation and had a huge savings rate.

Now the US is the world's largest debtor and until recently had a negative savings rate.

The Fed will have to raise rates massively and will likely send the country under. Most likely they won't even be able to stop the inflation.

Its going to get interesting. I think the UK could face the same fate.

[Guest Daddy Bear]

Schiff has some interesting comments along the lines of - wait until the asians shit themselves about the falling dollar and they dump them on mass, then all these dollars will come flooding back into the USA.

Once this happens trillions more dollars will be chasing the same quantity of good within the USA and inflation will go ballistic!

The Fed will have to raise interest rates to stop the rot of their currency and inflation. They days when central banks can control their interest rates will be over. When rates hit 20% in the early 80's America was the world's largest creditor nation and had a huge savings rate.

Now the US is the world's largest debtor and until recently had a negative savings rate.

The Fed will have to raise rates massively and will likely send the country under. Most likely they won't even be able to stop the inflation.

Its going to get interesting. I think the UK could face the same fate.

If they raise IR's = Hyperinflation

If they don't raise IR's = Hyperinflation

100% guaranteed

[LuckyOne]

If they raise IR's = Hyperinflation

If they don't raise IR's = Hyperinflation

100% guaranteed

Has there been a bout of hyperinflation in the world when it has been better to buy a house than a few 12.44 kg (400 oz) gold bars?

[Guest sillybear2]

Nobody is buying gilts, apart from the BoE, they have two QE funds, the official £175b scheme designed to 'give confidence' to the markets and a shadow £200b fund of bailing money hiding its operations behind dealers, foreign central banks and offshore trusts.

[Traktion]

And why shouldn't the government be able to print its own money? Instruct the BoE to stick to a rule (like CPI now, but I would suggest M4 or something that includes asset prices) and then they can give the government the extra money to spend from "thin air".

I find it interesting that people can be outraged at the printing of fiat, but then accept that we all run about spending numbers on computers and bits of paper. It's all about trust, confidence and the scarcity of money; as long as both parties get a token to exchange for something else, wtf does it matter?

See here for a thread about chartalism.

The fact that the central bank backed, fractional reserve banking system created all this credit (97% of the money supply), through irresponsible "lending", is the problem. If they hadn't made too many bad loans, there would be nothing to bail out through printing.

We need monetary reform and anything which replaces insipid bank credit is a good thing... just as long as the idiots in power clamp down on what can be leant out again (say, 0-50% reserves, rather than 97%). That's not that I don't expect high inflation (and high unemployment etc), to work the debt through quickly, but it is in no one's interest to have a hyperinflationary holocaust (wheel barrows and all).

Spouting the same old dogma about printing, hyperinflation etc as if it is set in stone is facile; the bigger picture is far more complex and the rules of money may be changed at any time. Banking may never be the same again and the world would be all the better far it.

[Guest sillybear2]

And why shouldn't the government be able to print its own money? Instruct the BoE to stick to a rule (like CPI now, but I would suggest M4 or something that includes asset prices) and then they can give the government the extra money to spend from "thin air".

I find it interesting that people can be outraged at the printing of fiat, but then accept that we all run about spending numbers on computers and bits of paper. It's all about trust, confidence and the scarcity of money; as long as both parties get a token to exchange for something else, wtf does it matter?

See here for a thread about chartalism.

The fact that the central bank backed, fractional reserve banking system created all this credit (97% of the money supply), through irresponsible "lending", is the problem. If they hadn't made too many bad loans, there would be nothing to bail out through printing.

Printing money to fund government deficits ("underfunding") is basically the same thing as reckless private sector credit growth, probably worse as it's almost certainly wasted and malinvested. One form of f**kwittery doesn't justify another.

Edited September 21, 2009 by sillybear2

[caparn]

The UK government is buying bonds from banks with money it has Quantitatively Eased (printed electronically).

It is then also selling bonds. How many idiots are there thinking buying these bonds is a good idea when they just buy them back with GBP that they have printed. Surely this is just undermining the UK currency by creating just one level of indirection to rolling money off the press. The people who are getting the end of the stick with the crap on is everyone who has bothered to save any GBP. The government must think we are mad :angry: . I'm going to take all my GBP out of the bank look to buy some other more stable currencies.

Anyone know any good way to buy foreign currencies without losing too much in commission and fees?

Edited September 21, 2009 by caparn

[Bloo Loo]

The UK government is buying bonds from banks with money it has Quantitatively Eased (printed electronically).

It is then also selling bonds. How many idiots are there thinking buying these bonds is a good idea when they just buy them back with GBP that they have printed. Surely this is just undermining the UK currency by creating just one level of indirection to rolling money off the press. The people who are getting the end of the stick with the crap on is everyone who has bothered to save any GBP. The government must think we are mad :angry: . I'm going to take all my GBP out of the bank look to buy some other more stable currencies.

Anyone know any good way to buy foreign currencies without losing too much in commission and fees?

no. the UK government is SELLING bonds to bidders AT INTEREST.

the taxpayer is still paying for the bonds backed by the taxpayer.

The bonds, therefore have a value as they are backed by a real asset....you and me.

the Banks have a problem...its called deflation....its not in the money supply per se, its in the credit supply, caused by the bankers losing ASSET values in £ terms every second of every day. they NEED to change these assets into something that wont loase value in £ terms....CASH is the perfect item.

so to acheive this, the BoE is creating more cash...as they always have done...and swapping cash for the new bonds, old bonds and other "assets". They also have a fund that lends against the impaired "assets"...quite who has these is a secret.

the QE is mostly staying on deposit within banks. it earns interest at the BoE. where it stays.

lending is down generally...money supply via credit IS reducing. slowly. as it must. they have to trade through this crisis. removing bonuses would make the process quicker and more equitable.

[Guest The Relaxation Suite]

I cannot believe otherwise intelligent people seriously think the US and UK will soon be in the grip of 50% inflation per month and more. I cannot accept this. I can only accept that these people are simply ramping the economy because they have bought hard assets too early.

Daddy Bear - you are clearly an intelligent poster. You're telling me you think in the near future a loaf of bread will be marked £35,000 and a brand new Ford Focus is going to "cost" £250,000,000? You seriously believe this?

Edited September 21, 2009 by D-503

[RandomBear]

I can't make up my mind whether some form of heightened inflation is more likely or whether we won't see it because all these policies are really doing is papering over massive asset price deflation that SHOULD have happened but hasn't.

[Guest The Relaxation Suite]

I can't make up my mind whether some form of heightened inflation is more likely or whether we won't see it because all these policies are really doing is papering over massive asset price deflation that SHOULD have happened but hasn't.

Our economies are far more complex than ever before, so comparing contemp. trends with depression era economics is almost completely pointless, IMO. My view is we had a massive period of ridiculous inflation up to the 2007 bubble peak. Before 1998-1999 a normal person on a normal wage could afford a normal house at a normal LTV. Since then the inflation has been wild. So we've already done the inflation thing.

What's been trying to happen since 2007 is this: the markets were deflating to bring sanity back to our economies, but vote-hungry psychopaths in governments round the world colluded with banking dynasties to stop this happening. So today we live in an artificially propped up inflated balloon - with the Fed and BoE holding that balloon mouthpiece tight with their fingers. When they let that thing go........................................................Meantime, talk of hyperinflation is absurd. Politicos could not cause hyperinflation even if they wanted to.

Daddy Bear fills in his "global dash for assets" phase and another box is ticked. What global dash for assets? Some managed stories coming out of Beijing about gold purchases? Ever thought about what's going to happen to the price of gold when half the West sell all of their stocks to help pay their debts off? Talk about inflation - gold was $200 very recently. Come on DB - you know what happens when you let go of a blown up balloon that hasn't been tied up. That energy has to go somewhere and it's going to be an average house price of £75,000.

Edited September 21, 2009 by D-503

[Guest sillybear2]

Daddy Bear - you are clearly an intelligent poster. You're telling me you think in the near future a loaf of bread will be marked �35,000 and a brand new Ford Focus is going to "cost" �250,000,000? You seriously believe this?

Ask people two years ago whether the public would accept underwriting a £1.2t banking system, you also assume at that stage there would be any bread on the shelves or that petrol remained freely available.

[Guest The Relaxation Suite]

Ask people two years ago whether the public would accept underwriting a £1.2t banking system, you also assume at that stage there would be any bread on the shelves or that petrol remained freely available.

It's my considered opinion that the part of the public that actually understands what you have just described not only recently discovered how shocking the economy was, but also that they were completely powerless to stop the govts in the pursuit of this policy.

[Traktion]

Printing money to fund government deficits ("underfunding") is basically the same thing as reckless private sector credit growth, probably worse as it's almost certainly wasted and malinvested. One form of f**kwittery doesn't justify another.

No argument from me there - we should have no government debt at all. The banks should have been left to fail, with new money lenders given a helping hand to enter the market, in a reformed monetary system.