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Brilliant Article On Us Moneyization

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Brilliant article on US MONEYIZATION

http://www.financialsense.com/editorials/s.../2006/0302.html

First at the national level in the U.S., denial and shifting of blame are the policy norms. The new chairman of the Federal Reserve, and other misguided analysts, contend the U.S. trade deficit is the fault of the rest of the world. Economic policies in other countries are the reasons for U.S. consumers spending more than their income. Greenspan was motivated to please Wall Street. Bernanke is motivated to please the Washington politicians. Such a motivation is the prime reason for holding forth with Bernanke's Delusion. Such views suggest future Federal Reserve policy is likely to be supportive of the value of your precious metals.

Second, the trade deficit of the U.S. is structural, and long-term in nature. As a way of understanding this consider the third graph. Plotted in this chart is the number of U.S. workers, in millions, employed in real work. That means they are making real goods. As is readily apparent from this graph, U.S. employment in jobs producing real stuff is no higher than it was at the end of the 1960s.

...

The U.S. economic expansion is built on consuming foreign made goods paid for by money received from converting home equity into debt. U.S. workers that do go to day jobs are involved in creating mortgage debt, servicing mortgage debt, construction financed by mortgage debt, or moving goods purchased by the cash from mortgage debt. This structural trade problem is not to be reversed. The factories are not coming back even if the yen goes to 50 or the Euro to $5. Chinese renminbi might go to 2 to the buck, and the factories will not move back. The consumers of tomorrow are in that big swath of land from Poland to the Pacific Ocean.

...

The structural nature of the U.S. trade deficit and denial by U.S. policy makers, in the form of Bernanke's Delusion, mean that the U.S. dollar is going down in value over time. With the housing bubble now deflating, the Federal Reserve policy will move to further destroy the value of the dollar in an attempt to prevent a financial calamity in the mortgage debt markets. Pressure will increase on domestic prices, regardless of how the government statisticians attempt to cover up the problem. Rates are going higher and a Mega-Recession is on the way. Only twice before has a major economy faced a collapse in demand, the U.S. in 1929 and Japan in 1990.

...

The trade deficit of the U.S. is both structural and long-term in nature. The spewing forth to the rest of the world of green pieces of paper is not about to abate soon. Analytical delusion on the part of the Federal Reserve has prevented and will prevent actions before a dollar crisis is in full bloom. With the U.S. housing market already showing the first signs of implosion, the Federal Reserve will "toss dollars from helicopters" in a vain attempt to stop the collapse of mortgage debt. As the U.S. economy plunges into a policy created economic abyss Canada will be dragged along, like the roped mountain climbers plunging to their death.

...

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In LONG TERM RATES (TNX), which as of Friday, were at a DOUBLE TOP,

and look set to break out next week.

What do you mean by a DOUBLE TOP - long term rates forecast to be in double digits?

To us Brits Bubb, a double top usually involves a bit of bully... and lots of very overweight men chain-smoking and drinking themselves to an early grave!

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What do you mean by a DOUBLE TOP - long term rates forecast to be in double digits?

To us Brits Bubb, a double top usually involves a bit of bully... and lots of very overweight men chain-smoking and drinking themselves to an early grave!

a double top is a reversal pattern

and the 10 year note (tnx) chart

BOND REPORT

Treasurys drop on rate worries

Market fears rate increases in U.S., Japan and euro zone

By Leslie Wines, MarketWatch

Last Update: 3:20 PM ET Mar 3, 2006

NEW YORK (MarketWatch) -- Treasury prices sold off Friday, sending yields higher, amid worries that interest rates in the U.S., Japan and the euro zone could all move higher at the same time.

The benchmark 10-year Treasury note closed down 13/32 at 98-18/32 with a yield ($TNX : CBOE 10-Year Treasury Yield Index Last: 46.84+0.46+0.99%) of 4.683%, up from 4.637% in late trade Thursday.

Earlier the yield touched 4.69%, it highest level in nearly a year.

Overnight Japanese consumer-price data was higher than expected. The report intensified speculation that the Bank of Japan could back away from its quantitative easing policy sooner rather than later. The central bank meets next week.

"Whether the Bank of Japan policy board will lift quantitative easing on March 9 is a close call, but we now see a slightly better than even chance for it, given relatively subdued protests against such a move from the government," said analysts from Banc of America Securities.

On Thursday the European Central Bank lifted its key rate and Jean-Claude Trichet, the central bank's president, make hawkish remarks that were seen as suggesting more rates are in store in the euro zone.

In addition, a number of recent strong U.S. data reports have left many investors convinced the Federal Reserve will continue lifting rates.

A stronger than expected report from the Institute of Supply Management on the services sector Friday further reinforced that view. The index's reading for February was 60.1%, up from 56.8% in January. MarketWatch had projected a reading of 58.2%.

The Fed funds target now stands at 4.5%. The market has priced in at least one more quarter point hike to 4.75% and many investors expect a second increase to 5% by the end of the first half.

However, Lehman Brothers economists Friday forecast that overnight rates will increase four more times by late summer and push the target up to 5.5%.

Previously, Lehman was expecting the Fed to stop raising rates when it got to 5%., but it changed the forecast because the housing market is not cooling as quickly as expected and the economy remains strong.

Brant Carter, managing director of fixed income at Morgan Keegan, said it appears the market is driving U.S. yields upward because international investors demand higher rates to keep buying U.S. instruments.

The prospect of simultaneous economic strengthening and rising rates in the U.S., Japan and the euro zone has not been seen since the 1980s, according to Paul Podolsky, an analyst with Bridgewater Associates See full story.

The combination could magnify the cyclical pressures on inflation around the globe, he said.

There was limited reaction to news that the University of Michigan's February survey of consumer sentiment was revised downward to 86.7 from 87.4, according to news reports. The MarketWatch forecast, based on a poll of economists, was for a stronger reading of 87.7.

The yield curve remained fully inverted Friday. The yield on the 2-year note stood at 4.754%, above the 4.683% yield on the 10-year note and the 4.660% yield on the 30-year bond.

Some economists are nervous about the inversion because they believe it signals a recession.

However, Federal Reserve Chairman Ben Bernanke thinks the inversion in the current environment results from strong foreign demand for U.S. assets and doesn't reflect deteriorating fundamentals

Leslie Wines is a reporter for MarketWatch in New York.

Investors are loath to invest in Treasuries when they yield less than the fed funds rate, primarily because the fed funds rate represents the cost of money to those who borrow money in the repo market to finance their inventories of Treasuries. This is of particular importance to the nation's primary dealers, who finance their fixed-income inventories via the repo market.

It is rare for coupon Treasuries (issues dated two-year and longer) to yield lower than that of the fed funds rate. In fact, for the two-year note there have been only five occasions in 16 years when its yield dipped below the fed funds rate. On each occasion, the Federal Reserve reduced interest rates within six months, with most rate cuts occurring much sooner than that. On each occasion, investors tolerated this so-called negative carry for short periods solely because they felt the Fed would soon lower the federal funds rate, thus reducing borrowing costs and restoring positive carry to their investments.

The point is that investors will tolerate negative carry only when they feel that the cost of money will be heading downward and will thus eliminate the negative carry. In the current situation, with no interest rate cuts on the horizon, it therefore seems unlikely that Treasuries will yield lower than 4.25% if such a scenario becomes more widely expected.

Investors also can express their bearishness by shifting money out of long-maturity bond funds. Moreover, if Treasury rates rise, expect corporate bond rates to rise at an even faster pace. In other words, prices on corporate bonds could fall faster. In equities, interest rate sensitive groups might be vulnerable. These could include the homebuilding shares (short term), for example, as well as financials, capital goods, and other cyclical industries such as basic materials.

Edited by RobertPaulson

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Thank you.

I now going to quote a line from Star Trek when the crew, once again in danger and about to save the Universe yet again, rely on their android, Data, to work out what is going on. He describes the threat facing the Universe as a "multiphasic temporal disutrbance of time and anti-time in the space-time continumm".

To which the girlie Doctor replies:

"In English please Data!"

Any chance, for us dummies?

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Thank you.

I now going to quote a line from Star Trek when the crew, once again in danger and about to save the Universe yet again, rely on their android, Data, to work out what is going on. He describes the threat facing the Universe as a "multiphasic temporal disutrbance of time and anti-time in the space-time continumm".

To which the girlie Doctor replies:

"In English please Data!"

Any chance, for us dummies?

A point well made. But I smell a fellow geek!

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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