Saturday, Dec 26, 2009

Does Mervyn King talk to Ben Bernanke?

Zero Hedge: Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold... Or Else

If someone asks you what happened in 2009, the answer is simple - two things. There was a huge credit and liquidity crunch, and then there was Quantitative Easing. The last is the Fed's equivalent of band-aiding a zombied and ponzied corpse, better known as the US economy.

Posted by devo @ 12:05 AM (1785 views)
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14 Comments

1. This comment has been removed as it was found to be in breach of our Blog Policies.

 

2. devo said...

Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March.

Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand.

To sum up: $200 billion in 2009; $2.1 trillion in 2010. Good luck.

clever financiers like (in order of merit), freetrader, 51ck, spivtastic, noel, particleman techieman etc. may want to comment on this; either here or on the forum - I don't really mind
Saturday, December 26, 2009 12:27AM

Saturday, December 26, 2009 12:33AM Report Comment
 

3. tpbeta said...

yes i didn't understand a word of it, so I couldn't judge how hard the confirmation bias was in play - as it usually is on zero hedge.

Saturday, December 26, 2009 10:07AM Report Comment
 

4. ant said...

What's the news? It has always been so blatantly obvious. Pytel has been writing about it on his blog for nearly a year. READ: "Financial crisis? It's a pyramid, stupid.": http://gregpytel.blogspot.com/ and you will realise that we are the victims of the massive fraud engineered by the financiers (with politicians help and, at least, blessing). Little wonder, the mainstream media, analysts, politicians simply ignore it. Are they really that daft? Or maybe it is about corruption, thieving and dishonesty. A classic financial criminals conspiracy. Draw your own conclusions.

Saturday, December 26, 2009 11:18AM Report Comment
 

5. mountain goat said...

Draw your own conclusions.

People who appear on here saying "it's obvious stupid" are usally wrong, of fixed views, and not interested in exploring the truth.

Saturday, December 26, 2009 12:47PM Report Comment
 

6. ant said...

@mountain goat: I think it is relative. For some people who understand basics of nature workings (basic maths, physics, chemistry, biology, etc) certain things are stupidly obvious. For example jumping from the top of the Empire State Building is highly likely to result in depth. Similarly jumping right in front of the train with reasonably high speed. Adding sugar into tea is likely to making sweet. Putting a pan of soup over a fire will make a soup hotter. And so on. I disagree with you, "mountain goat", that people who know such basics "are usually wrong, of fixed views, and not interested in exploring the truth".

The causes and mechanics of the current crisis are as trivial as examples above. Any half-properly-educated and half-intelligent person understands it at first sight and, if had a chance to look into it, would have predicted it with no problem. No benefit of hind-sight needed. Unfortunately the financial system appears to be run by criminals who are not even knowledgeable or half-intelligent.

If you care to study the blog "Financial crisis? It's a pyramid, stupid." (http://gregpytel.blogspot.com/) you should realise the correctness of the arguments above: there exist things that are glaringly obvious and the causes and mechanics of the current crisis are ones of them.

Saturday, December 26, 2009 01:22PM Report Comment
 

7. drewster said...

"The number one reason why 2010 is set to be a truly "interesting" year is a result of the upcoming explosion in US Treasury issuance [and the end of QE]."

No no no. Printing dollars and printing treasury bonds are effectively the same thing. Both are rectangular pieces of paper printed by the government. Both are backed by the government. Both are highly liquid and easily tradeable. If government bonds came in the same physical size and low denominations as banknotes, with the words "I promise to pay the bearer the sum of $10, signed T.Geithner", you'd probably be able to spend them in shops. Once you get your head round this, everything else starts to make sense.

Saturday, December 26, 2009 02:20PM Report Comment
 

8. ant said...

"Both are highly liquid and easily tradeable."

so why not print them them as fast as possible? To infinty. And give them to all in the world in abundance. Then we will all be rich. ... like in Zimbabwe:-))))

Saturday, December 26, 2009 02:32PM Report Comment
 

9. techieman said...

thanks for the mention devo - although really i dont think i am worthy. To my mind the fed has stepped in from being the lender of last resort to just being the lender. In terms of funding requirements i have made the point before (a few months ago in fact) that UK Gilt yields must rise over the medium term because of the funding requirements. That is because of the non replaced lending of the banks or even because of any inflationary risk - in other words the actual deficit spending is the issue - rather than the replacement paper -in my view. When that increases yields then this drags mortgages rates higher (regardless of base or even LIBOR).

Otherwise you are just replacing private paper with public paper. If all of the points made in the article are right (and there wasnt another side to the equation) then why has the dollar appreciated?

Like i say i am really not a fundamentalist so you may be able to drive some holes in that argument. Remember the TA doesnt need to look at these arguments (after all there are always two sides to each argument) we just listen to the market tell us what it wants to - then its a case of who intently we listen!!

Merry Christmas Everyone..... even crunchie :-).

Saturday, December 26, 2009 03:03PM Report Comment
 

10. techieman said...

"or even because of any inflationary risk" should say "and not because of any inflationary risk". As i have said before - at this time i dont think inflation is something we need to be concerned with. That may change and if and when it does i am confident that the market will highlight it.

Saturday, December 26, 2009 03:07PM Report Comment
 

11. drewster said...

You've answered your own question. Too much debt is just as bad as too much money-printing, it devalues the currency.

This equivalence only applies in countries which issue debt in their own currency and have control over their own currency. The Euro-zone countries fail this test. Whether this is good or bad for those countries remains to be seen.

Saturday, December 26, 2009 03:07PM Report Comment
 

12. techieman said...

drewster if thats right then are you making a distinction between originating public and originating private debt?

If one just replaces the other then there is no difference. If one (eg public) cannot be ratcheted up enough to replace the retirement of the other (private) then the credit is deflated and since credit+banknotes is effectively "money" then they have to be accounted for in the aggregate?

The argument then is a. whether or not the public credit programmes can replace the private ones and b. whether there is an appetite for them from the debtors and c. will that debt be pushed into the same areas as before - or will it be pushed elsewhere.

b and c are not mutually exclusive

Saturday, December 26, 2009 03:33PM Report Comment
 

13. drewster said...

Techie,
I don't claim to have all the answers. I'll leave you and others to think through the ramifications.

Saturday, December 26, 2009 05:27PM Report Comment
 

14. fallingbuzzard said...

Higher interest rates is the only ramification of relevance to investors.

Sunday, December 27, 2009 09:53PM Report Comment
 

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