Change you can believe in....Deficit grew by $181 billion in July

[GASOUTHERNVOL]

How does that lead to inflation? Inflation is about too many dollars demanding too few goods.

my hypothesis is that it will lead to a de-valuation of the American dollar compared to the yin, euro, etc which will cause inflation of the dollar on the international market

 

[WA_Vol]

How does that lead to inflation? Inflation is about too many dollars demanding too few goods.

To finance the debt, the U.S. treasury issues U.S. savings bonds. When they issue more U.S. treasury bonds, then there are buyers then they have no way to finance the debt, other then monotize the debt, a.k.a. print money.

 

[GASOUTHERNVOL]

To finance the debt, the U.S. treasury issues U.S. savings bonds. When they issue more U.S. treasury bonds, then there are buyers then they have no way to finance the debt, other then monotize the debt, a.k.a. print money.

that too

 

[droski]

To finance the debt, the U.S. treasury issues U.S. savings bonds. When they issue more U.S. treasury bonds, then there are buyers then they have no way to finance the debt, other then monotize the debt, a.k.a. print money.

with the 30 year treasury currently at 4.5% it seems pretty obvious we aren't going to have huge problems financing our debt. the question no one answers if all these foreign investors flee the us where will they go? do you really think europe, south america, or asia is in better shape than the US?

 

[WA_Vol]

with the 30 year treasury currently at 4.5% it seems pretty obvious we aren't going to have huge problems financing our debt. the question no one answers if all these foreign investors flee the us where will they go? do you really think europe, south america, or asia is in better shape than the US?

The yellow line shows the decline in foreign investment in treasures.

First, observe the recent decline in the percent of public debt held by foreign creditors. After peeking at 50.1% in August 2008, the foreign take of US public debt has fallen by 3.2 percentage points to 46.9%. Over that period, foreign creditors absorbed just 36% of US public debt new issuance, a far cry from the 74% absorbed in 2008 or the 73% absorbed since 2002. This poor result, despite the mad rush into US dollars, and by extension US treasury bills, in the 4th quarter of 2008.

Foreign Investment Flows into U.S. Treasuries and Money Printing Consequences :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

They are preferring to put their money in U.S. real estate or euro's etc.

 

[droski]

The yellow line shows the decline in foreign investment in treasures.



Foreign Investment Flows into U.S. Treasuries and Money Printing Consequences :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

They are preferring to put their money in U.S. real estate or euro's etc.

that's great, but we still have treasury rates near all time lows so clearly the "china will stop buying treasuries and destroy our economy" nutjobs are way off base.

 

[WA_Vol]

that's great, but we still have treasury rates near all time lows so clearly the "china will stop buying treasuries and destroy our economy" nutjobs are way off base.

What's your opinion of this graph?

Note the blue line. Quite a drop in the amount of US public debt foreigners have been willing to take of late, at least as a percent of US public borrowing needs, don’t you think?

 

[droski]

What's your opinion of this graph?

it is soley due to the ridiculously low interest rates public debt is offering and the bottoming of the stock market. 4% in 30 years isn't very temping. particurally when high yield and preferreds were yielding well over 10%. if the market fear comes back, or treasury yields go up, we'll see that chart change. it has very little to do with our budget deficit or lack of confidence in america to pay it's debts.

 

[T-TownVol]

"Damn that Bush Administration!"

 

[WA_Vol]

it is soley due to the ridiculously low interest rates public debt is offering and the bottoming of the stock market. 4% in 30 years isn't very temping. particurally when high yield and preferreds were yielding well over 10%. if the market fear comes back, or treasury yields go up, we'll see that chart change. it has very little to do with our budget deficit or lack of confidence in america to pay it's debts.

I would like to be that optimistic, but look at these charts: Safehaven | Foreign Investment in the U.S. - Going Down, Down, Down | Printer Friendly Version

 

[BigPapaVol]

I would like to be that optimistic, but look at these charts: Safehaven | Foreign Investment in the U.S. - Going Down, Down, Down | Printer Friendly Version

So you don't think it has anything to do with our short term rates being roughly 0?
Posted via VolNation Mobile

 

[droski]

I would like to be that optimistic, but look at these charts:

say you are right and foreigners are scared to death of american paper. does it matter as long as 30 year rates are around historical inflation rates? we're basically financing our debt for free at this point.

 

[BigPapaVol]

say you are right and foreigners are scared to death of american paper. does it matter as long as 30 year rates are around historical inflation rates? we're basically financing our debt for free at this point.

exactly, short term rates result in negative real returns and long term rates are effectively 0 in real terms. Why loan the money?

 

[WA_Vol]

say you are right and foreigners are scared to death of american paper. does it matter as long as 30 year rates are around historical inflation rates? we're basically financing our debt for free at this point.

But we can't finance out debt without foreign investment.

There's some fear out there that one of the big "shoes to drop" could be dropping -- namely our massive debt and the potential unwillingness of our trading partners to keep financing it. This week saw a series of monster bond sales--so many, in fact that buyers may be getting a stomachache.

WSJ: Tension on Wall Street trading desks began building late last week when the Treasury surprised the market with plans for a record week of sales. A Monday sale of $90 billion in Treasury bills with maturities of as much as a year went well. But China appeared absent from the following two sales, which totaled $81 billion of debt, traders say.

By Thursday morning, trading-desk heads were frantically working with clients to ensure a better fate for the $28 billion seven-year note auction. It did fare far better, allaying some concerns. When asked about the shaky auctions, a Treasury official gave exactly the kind of answer that could assure nobody.

China Avoids US Bond Sales