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US will default US Treasuries held by China & Japan | |
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Date: August 27, 2004 08:52 PM
Author: Marc Peeters
Subject: US Will default on US Treasuries held by China and Japan
When the US government reaches a point of no return in their debt load they will simply default on the US Treasuries held by the Chinese and Japanese central banks and by foreign investors.
The default will be justified by the US government by saying that both Japan and China are unfair trading partners; that they are sponsors of terrorism and that they are major threats to US national security.
Colin Powell will go to the UN and show the world some power point slides with photos of dangerous looking Chinese and Japanese nuclear installations and he will then state that the US will not continue to honor any debts held by these axis of evil countries.
The US will then introduce a "new dollar" and start all over again with a clean balance sheet without the paper debt load held by the Asians and the other naive foreign investors.
Any attempts by foreign creditors to collect their dues from the Americans will be answered with American carrier battle groups and the planet's most dangerous arsenal of high tech nuclear weaponry.
It will be just like Argentina defaulting on their debt but unlike the Argentines the Americans can nuke any persistent creditor to oblivion.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=180862)
Date: August 27, 2004 09:06 PM
Author: Finster
Subject: Doubtful
That's extremely unlikely. To understand why, simply consider what those US Treasuries represent - promises to pay dollars. The dollars themselves are promises to pay ... nothing. So why would the US balk at exchanging one type of paper for another?
The US will follow through on its promise to exchange the US Treasuries for dollars. But then it need only print up the dollars and hand them over.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=180871)
Date: August 27, 2004 09:17 PM
Author: Chicagobear
Subject: No, the Fedgov will pay...
...with printing press dollars. The Argentines owe dollars, not pesos.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=180878)
Date: August 27, 2004 10:56 PM
Author: anthonyedwarde
But then China will get in a huff & threaten to stop sending 16,000 containers of plastic toys to you every day. What will you do then? When American babies' toy supply is cut off they'll get in a bigger huff. they might even start crying.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=180928)
Date: August 28, 2004 08:27 AM
Author: Vangel
Vesovski
As far as I understand it the Chinese will not stand in the way of any American attempt at national suicide. If anything they will make a few bucks by selling tickets, watching the show and taking a few bets about the timing of the inevitable outcome.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181072)
Date: August 27, 2004 11:13 PM
Author: Commandante
Pachuco
Hey Seņor marc peeters....hahaha....I like you...hahaha...this time we going to drop another big bomb on their heads and say "Here's one for the Gipper...from the last time"....hahaha
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=180936)
Date: August 28, 2004 09:04 AM
Author: anthonyedwarde
hey Commandero, when we strap you to the bomb as a mascot you'll get a mention in the Guinness Book of Records. Fame at last!
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181095)
Date: August 29, 2004 01:49 PM
Author: Commandante
Pachuco
Seņor anthonydwarf...hahaha...I don't need more fame...I am famous now...everybody calls me to cut their grass....hahaha
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181596)
Date: August 30, 2004 06:01 AM
Author:
anthonyedwarde
credit where credit's due. over here in these yon parts landscapers & gardeners are a hit & miss thing. the landlord's gardener broke the lawn mower so he turned up two weeks later with a weed trimmer. needless to say he butchered it. looks like it will take six months to recover. what kind of fertilizer should i be using Mi Commandante?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181775)
Date: September 02, 2004 10:30 PM
Author: Lucius
Foster
Subject: mia comondante,
I do not mind you cutting the grass but smoking it?? Now that is too much. Why can you not wait like the rest of the neighbors until it drys a bit and it becomes more mellow.
My cat got a contact high on your last visit. Got a little laid out and fell asleep with a mouse in his arms. This has got to stop. My Ex wife came by and took pictures, she is tryng to report me for leading the cat astray, says I am a bad example. If she keeps this up I am going to go to her house and steal that pole she used to use in her act down at the strip bar. See See what you are doing Aih Caprone, or is it Al Capone, the accents throw me.
Cheers Lucius
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183051)
Date: August 27, 2004 11:24 PM
Author: Kenmeer Livermaile
Subject: attrition
"It will be just like Argentina defaulting on their debt but unlike the Argentines the Americans can nuke any persistent creditor to oblivion."
I don't think China is a wise target for American nukes, especially since they tested those neutron bombs in the late 90s. Nuke war is a war of attrition. China starts out with about 5 times as many potential survivors as America.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=180947)
Date: August 28, 2004 08:25 AM
Author: Vangel Vesovski
Subject: Tongue in cheek or simply daft?
When the US government reaches a point of no return in their debt load they will simply default on the US Treasuries held by the Chinese and Japanese central banks and by foreign investors.
Since you cannot distinguish between who holds one bond and another and since they can be held in different accounts registered to businesses, individuals and institutions it is hard to default to one particular holder of a security. If the government defaults on one it defaults on all and the market will treat it accordingly.
The problem that the US faces is that it lacks a real economy and relies on financial and accounting games to pretend that everything is all right. Once it defaults on anything the game will be over and the illusion will fade away. On that day of default the US will become little more than a third world nation with a lot of military hardware.
The default will be justified by the US government by saying that both Japan and China are unfair trading partners; that they are sponsors of terrorism and that they are major threats to US national security.
Neither Republicans nor Democrats are not stupid enough to believe such a justification. Many on the right will fight the administration for economic reasons as those on the left will fight for social ones.
The US will then introduce a "new dollar" and start all over again with a clean balance sheet without the paper debt load held by the Asians and the other naive foreign investors.
But you have no capital to start all over again. Paper money is not the same as wealth; you need capital goods to produce the things that are needed. Don't you find it ironic that former communist nations have productive capital to compete while you do not?
Any attempts by foreign creditors to collect their dues from the Americans will be answered with American carrier battle groups and the planet's most dangerous arsenal of high tech nuclear weaponry.
Why would foreign creditors want to stop your attempt at suicide? A default means that the FRN is no longer a reserve currency and that you are just another third world nation that needs to import the things it needs because it cannot pay for them.
It will be just like Argentina defaulting on their debt but unlike the Argentines the Americans can nuke any persistent creditor to oblivion.
What is with the weapons obsession of American men? Do you guys feel sexually inadequate or is it something else? China would stand up and applaud if some president decided to default on your debt because it would find out that the RMB buys a lot more oil, iron, coal, etc., than the equivalent amount of dollars under the previous exchange rate did. If you wish to default and give up your status as an economic power you are always free to do so.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181070)
Date: August 28, 2004 08:34 AM
Author: Finster
Subject: Daft
Whoa ... now hold on just a minute there, pardner! Mr. Peeters's proposal to "nuke creditors into oblivion" is hardly representative of the entire class of "American men"!
;-)
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181075)
Date: August 28, 2004 08:22 PM
Author: Vangel
Vesovski
Mr. Peeters's proposal to "nuke creditors into oblivion" is hardly representative of the entire class of "American men"!
Perhaps not my friend but when you read many of the threads on this board over a certain period of time you cannot help but notice an obsession with nuclear weapons and the desire on the part of some people to see them used.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181412)
Date: August 29, 2004 08:13 AM
Author: Finster
Subject: On The Proper Use Of Nukes
It would be just as accurate for me to survey the comments on this board and conclude that Canadian men are obsessed with hard money and libertarianism, no?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181523)
Date: August 29, 2004 11:10 PM
Author: Vangel
Vesovski
Actually, many of the Canadians on this board are quite socialist and believe in government as the solution, not the cause of our problems.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181713)
Date: August 30, 2004 08:04 PM
Author: Finster
Subject: Canadians And Americans
Just as many of the American men on this board are quite pacifist and anti-nuke.
See my point? Both generalizations are invalid. Contrary to your claim, American men are not obsessed with lobbing nukes at creditors.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=182039)
Date: September 02, 2004 10:30 AM
Author:
Vangel Vesovski
Polling data on this type of issue is quite clear. Canadian polls usually produce results that are similar to what you would find in the North Eastern United States. Your national data is very different because it includes attitudes of the NASCAR types in the South, which are a far bigger portion of the population than you would care to admit.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=182798)
Date: September 02, 2004 10:10 PM
Author:
Finster
Subject: Whew!!!
Wow, you are watching too much TV, Vangel!!! Them good ol' boys down south are jus' a bunch o' rednecks that wanna blow them lone sharking feregners to thermonucleer annihilation, eh? ;-)
Now left coast urban elitist propaganda aside, I still have trouble considering the average American man as befitting the image you portray. If we have to stereotype people at all, I'd suggest your NASCAR types are among the least likely to have $499,000 mortgages on $500,000 homes, plasma TVs, and Lincoln Navigators in the their three-car garages ... the debtors who'd sooner blow up their creditors than pay up.
You need to keep in mind that the political leadership in this country is almost exclusively from the elite, that each pulls its own populist segment along with it. On the Democrat side it's the socialist and victimhood elite with the unions and minorities in tow. On the Republican side, it's the corporatist industrialist elite with the rural and social conservatives in tow. Having lived most of my life in Middle America, I can only say that the average American with which I am familiar is much less concerned about nukes and foreign creditors than his own family's welfare and his own business. As Bill Bonner said in yesterday's DR, true conservatism is dead in American politics:
Don't let the Hollywood version of America fool you.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183042)
Date: August 28, 2004 08:36 PM
Author: Kenmeer
Livermaile
Subject: an entire class
"Whoa ... now hold on just a minute there, pardner! Mr. Peeters's proposal to "nuke creditors into oblivion" is hardly representative of the entire class of "American men"!"
Bingo. Like I said before, 'Middle America' has no spokesperson. It speaks as it can.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181417)
Date: August 29, 2004 12:22 PM
Author: Marc Peeters
Subject: Defaulting Selectively & Creatively
The US has a massive debt problem without a solution in sight; it will be an increasingly faster and faster degradation of the currency until the day will come when you will need a wheelbarrow full of magic green paper just to purchase a pack of cigarettes...
The options therefore are either slow agonizing degradation into hyperinflation or a quick painful solution such as defaulting.
Defaulting can be quiet stimulative; less than 3 yrs after the Argentine default the country is running a very nice trade and budget surplus which is making funds available for social programs, pensions and medical care.
Bond investors of Argentine debt in Tokyo are not getting paid but they are too far away to be bothered with; nobody will listen to their screams and pleas for compensation. The Japanese and other global investors who had played Russian roulette by purchasing high yielding Argentine bonds failed miserably to analyse the risk involved; when you play at the casino and you lose you dont go to the casino owner and demand compensation. If you want safety go and buy a Swiss bond that yields 2%. Same goes with anybody buying US treasuries; you have only yourself to blame if you hold a piece of paper backed up by a massive printing press running at full speed spewing out trillions in worthless paper !
3 years after defaulting therefore Argentina is back on track; employment is up, stock market is up and the currency is stable and competitively priced for the export markets. Investment is up and interest rates are coming down nicely.
The US could follow a similar track; the US government is very creative and could package and sell the default to minimize the chaos. It could opt to honor the debt held by Americans and American institutions; with regards to China and Japan there would be plenty of ways to justify a refusal to honor the debt held by these countries. One would be massive lawsuit by the RIAA arguing that China and their billion person population have illegally copied and downloaded millions of US songs and movies; compensation would be set at U$ 1000/illegal download- factor in a decade of illegal copying by hundreds of millions of Chinese and you will find that all the treasuries held by China do not even come close to make up to pay this massive lawsuit. China would end up owing the US- not vice versa.
Japan is also an easy target; 30 years of blocking their domestic market to US products including beef, rice , GM and Ford cars etc. A US court would fine this illegal market blockage at say U$ 100 Billion/year x 30 years + interest and you have a nice little haircut on the US treasury claims held by the Japanese.
In short; America has a massive debt problem which can either result in a slow process resulting in hyperinflation or it can be solved by drastic measures to put the country back on track with a clean balance sheet in less than 3 years.
Global trade partners would have to go along with the above and adjust accordingly; the US market is too big to be retaliated against; BMW will need to continue selling in the US market even if they get paid in "New Dollars" or a variant thereof. Same with the Japanese and Chinese.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181567)
Date: August 29, 2004 06:55 PM
Author: len
Subject: default on treasuries ?
They will simply adjust > close the window for a while and re open for business > Iwill never believe that even as far out the FED may seem to be that they are not still much savier than any foreign/Asian purveyors or debt> So we will sit and wait for scenarios that will never come to pass> The currency will never be a global thing But I believe the wise folks here who promote currency allied with commodities is the way >
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181671)
Date: August 28, 2004 08:08 AM
Author: Gerd Boettcher
Subject: world currency
maybe it pays to have a weak dollar when they introduce a world currency
there may be some other dynamics we have not thought of yet that could help out the USD
is there any place where one can read up on what the Fed is thinking, the Fed System as opposed to the Austrian System?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181064)
Date: August 28, 2004 08:29 AM
Author: Vangel Vesovski
There will never be a world currency other than a monetary commodity that cannot be created at will by dishonest governments.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181073)
Date: August 28, 2004 08:23 AM
Author: b
Subject: currency
as oil is the problem of late for the economy, if you want to believe that for a moment. let's say oilgoes way up to $75 barrel, ok what does that do to YEN EURO etc... it makes them less atractive. as well as the US $. but in this case the US $ is still the reserve currency even though it is a fiat currency, so are all the others. as the liklyhood of a global recession unfolds funds will be buying treasuries and the dollar. look for a down leg in gold to $325 or lower by December
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181067)
Date: August 28, 2004 08:34 AM
Author: Vangel Vesovski
Your logic is totally wrong. If oil hits $75 per barrel few will be lining up to purchase little pieces of paper being printed by a debtor country without any fiscal discipline. Under that scenario you will have a run to real assets, not paper. The paper assets had a two decade bull market. That market is now dead and the tide is going out very quickly; no amount of paddling will help you get to where you used to be.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181076)
Date: August 28, 2004 09:48 AM
Author: tbo
If it takes 30 more dollars to by a barrel of oil, then buyers of oil would 'need' 30 more dollars, thus a demand for dollars. So, the dollar goes up, gold goes down. (Unless the oil nations start demanding payment in something else). Seems logical to me, no Vanguel??
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181139)
Date: August 28, 2004 10:03 AM
Author: anthonyedwarde
dollars are supplied by press runs, diluting the whole, depressing fx value, raising oil's price in $$. Other sovereign entities won't pay more if they don't devalue their currencies but they have all been doing so & will continue to compete in their trade markets. Why do other nations care they're invoiced in dollars, all they need do is exchange at market rates.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181158)
Date: August 28, 2004 10:14 AM
Author: Finster
Subject: Seņor Vanguel Is Right
The fact that it took thirty more dollars to buy a barrel of oil in the first place is a symptom of the fact that the dollar has already gone down. At least against oil.
That there could be an increase in the demand for dollars and a concomitant increase in their value is quite true, but it would be more a result of the enormous amount of dollar debt owed by individuals and institutions around the world, especially in the United States.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181168)
Date: August 29, 2004 06:16 PM
Author: Agent Tokyo
Subject: eh?
"Seņor Vanguel" ???
Finster, please don't tell me that you're Commandante Pachuco!
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181659)
Date: August 28, 2004 08:27 PM
Author: Vangel
Vesovski
Subject: Careful...
It is only logical if you get confused like Keynes who argued that when prices went up governments must print more money to keep pace. Of course the opposite is true; prices go up because governments print too much money.
If you look at the markets over the last few years you will note that the price you pay for oil has gone up significantly while prices for oil (in euros) moved up at a much slower pace. That happened because your currency is depreciating faster than the euro, pound, rand, peso and many other currencies.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181413)
Date: August 29, 2004 11:00 PM
Author: bart
Subject: An aside on Keynes...
The other side of Keynes theories may not be well known by some who read these messages... he also recommended that the deficit spending be paid back during better times.
The politicians conveniently forget that one.
bart
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181709)
Date: August 29, 2004 11:13 PM
Author: Vangel
Vesovski
I think that it was Henry Hazlitt who pointed out that Keynes' books never contained a single doctrine that was both original and true. What was true was not original and what was original was false. Keynes is a waste of time for anyone who wishes to learn anything about true economics.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181714)
Date: September 02, 2004 10:52 PM
Author: Lucius
Foster
Subject: Money, Credit and balancing.
The original thinking way back in 1955 was that the up coming utilization of Credit cards which in time would lead to the cashless currency, would create a support for each individual person. This credit could be utilized to carry over those certain times when income was restricted. It would of cours be repayed when income resumed. As you can see there is a problem. Income resumes you continue your standard of living and you have a balance due on the cards. Where comes the money to pay off the card? The answer from the Optimist, why from my increases in pay. Stop There. Not a good answer. But that was the thinking way back in 1955 Wash DC.Seminar Georgetown Univ.
Papers were presented most in my opinion only suitable for sanitary purposes.
Lucius
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183061)
Date: August 28, 2004 10:52 AM
Author: DC
Subject: In currency terms
I think it comes down to whose economy has more to lose? It seems to me that the American economy is much more vulnerable to high oil than a number of other countries. Europe itself has very high fuel prices as it is, but a large proportion of that is down to tax, thats something that politicians in the respective countries have direct control over. They might not particularly want to cut fuel duty (they certainly don't in the UK) but presumably they could if needs be?
The Euro at the moment is very much trading as the anti-dollar, most of its movement on the EUR/USD are USD driven. If you compare EUR/USD and the cable (GBP/USD) the graphs look pretty similar. If oil did go to $75 the dollar would fall precipitously against the Euro and the GBP, Japan I'm not so sure about, it is probably in an equally as bad position oil wise as the US.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181175)
Date: August 28, 2004 12:18 PM
Author: wetmore
Subject: Faulty reasoning on default
I think the goverment will inflate-long before default. I think the overall % of entitlements as compared to the rest of the budget may shrink, if it is done gradually. It is a high-wire act for Greenspan & Co. and I would not be surprised to see riots over food and energy! As usual, retirees and savers- on fixed incomes will be devastated. I would expect to see a resurrection of some Populist candidate or party. But I never expect any politician to default on the dollar, because basically he/she would be throwing in the towel on the full faith and credit of the U.S. government. As such, no one is going to discredit themselves and take any blame for the situation.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181214)
Date: August 29, 2004 04:19 AM
Author: Ricardo Smith
Subject: Fiat currency & oil
There is no real cuurency left anywhere on the planet. Bad money drives out good so we have al ended up on fiat. Due to WW2, the USA was placed at the center of the NWO system, for those countries outside the communist system, and a tentative lnk to gold was left to stop US politicians just monetizing the voters to re-elect them. Under Johnson, with his guns 'n butter policy of war and great society entitlements, he tried monetization anyway. De Gaulle called his bluff and the US was forced off the gold link, though not before De Gaulle was forced into exile in Ireland.
Off gold, and with communist Russia and China still loose to try and enslave everyone else, plus with the example of De Gaulle fresh in mind, no other country wished to cahllenge the new fiat system. Increasingly via coordinated G-7 meetings all were induced to go along with the phony money. America implied it wouldn't abuse [too much] its priviledged position. All had an interest in [what seemed to be](free) rising prosperity and living standards. Few in society understand how things reallly work, nor for the most part should they care. At some level, we all must trust that Alan Greenspan isn't a thief although we all know that he's a liar.
Unfortunately the benefit of fiat is all front loaded. As the problems increasingly arise, ever more complicated schemes must be devised to overcome the previous problem. Each monetization fix becomes bigger than the last and very fast we're way beyond any ability to tax or cutback to a fix. Borrowings increase because there is never any intention to repay in anything but inflated dollars. The financial ecomomy supplants the real economy. Which brings us to today. The evil empire no longer exists to unify us under America's leadership, while 2 other fiat currencies dominate in their economic areas. The euro in most of western Europe, with the 10 newbies to adopt it over the next few years. The Yuan in the Chinese empire trading area.
At present oil trades in dollars and since 1973 there has been a secret agreement between the US and Saudi Arabia that SA will always price its oil in dollars. Effectively till now, that meant OPEC would price in dollars. No matter the US domestic monetization, there would always be international demand for dollars. Now that is starting to change. With over 50% of Russia's import export trade going to Europe it incresingly makes sense to use euro rather than crossing back and forth via dollars. But that would mean pricing Russia's oil and gas in euro. Similarly with Norway's trade with Europe, but again that means pricing Norway's oil in euro. As China emerges as the second largest importer of oil after the US and as more of its export trade develops outside America, the pressure will soon exist to pay for trade in Yuan, once they float the Yuan. All this is probably less than a decade away.
It would make sense for all to make the transition in an orderly way, via a new grand economic council, rather than an abrupt dollar crisis, yet I doubt that it will happen. First it seems highly probable that Mr. Bush will win and will continue on with his spendthrift ways. Any adjustment hurts more in American, followed by western europe, as the reserve aspect of dollars becomes a duality then a triality. If anything, Mr Bush promises more spending and war, with plans to go back to the moon, launch for Mars and take-out NK and Iran. Mr Kerry says me too but faster, but anyway seems more interested in becoming President of France or the EU than America.
My point is, that readjustment just buys time for the fiat currencies, rather than a true fix. Until we get back to an honest exchange of goods for "money", the problem is just one of consuming today via fiat, our children's resources of tomorrow. After the state made us all bankrupt, in the past it has usually tried to take away our freedoms.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181502)
Date: August 29, 2004 06:24 AM
Author: FAST FRED
Subject: NO DEFAULT
The US will never default on dollars , but they may place limits on their use.
The Chinks could come with the shiploads of "dollars" we sent for K mart crap ,
and begin to own Boeing , LTV , or any of the big US companies at will . Buy and OWN!
OR perhaps just purchase Montanna , ALL of it!
There too smart to want Calif!
That would surely cause concern, and laws.
FAST FRED
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=181510)
Date: September 03, 2004 10:03 AM
Author: cherokee
Subject: it is called...
... monetization of debt. debt is paid off by converting it to non-interest bearing notes. The treasuries are then held by the fed - when gives the interest back to the treasury.
basically the price of money is the interest.
lower the interest (fed funds rate), and cheapen the money.
when no one wants the treasuries (ie, the market interest rates climb), the fed can always buy them via the back door via the primary dealers "free market".
anyone who trusted the govt and saved in currency based assets (cash , bonds etc), is screwed. that's what paper money is for. to be able to pay debts unfairly.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183161)
Date: September 03, 2004 10:08 AM
Author: Finster
Subject: Can You Clarify?
What is this conversion to non-interest-bearing-notes? Who is buying and who is selling? Are you saying the Fed is buying Treasuries and the Treasury does not pay interest on them, or that something else is being bought and sold?
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183164)
Date: September 03, 2004 12:25 PM
Author:
cherokee
Subject: yes, fed buys them...
... the fed usually buys short term govt paper.
but there is nothing in the law to prevent the fed from buying govt paper of any duration.
the fed puts a peg on the interest rate. when the rates go above that peg, it injects reserves into the banking system. it does that by buying govt paper (from the banks). that way it takes away interest bearing assets (govt paper) from banks and gives them non-interest bearing reserves.
to maintain profitability banks have no choice but to look for someone to loan money out using those new reserves.
The FRN is just another govt paper (which is what i meant by conversion of future maturity interest bearing paper to zero-maturity non-interest bearing paper) - it just pays no interest, and has to be accepted in transactions within USA. Any future maturity paper is not legal tender.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183225)
Date: September 03, 2004 12:27 PM
Author:
Finster
Subject: Thanks
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183227)