Armagedon

Effects of the Long Dated Treasury Bubble

Actually I have been on the deflationary recession camp for some time, and I too do not see how the US will pay its debt. The crisis will generate a huge whole in the US top-line on top of the already burdensome debt levels. I actually believe a US default is the most likely scenario given current debt levels.

I think you will notice the market has already started pricing this in. My inverse treasury swaps are at the money despite the central banks lowering interest rates. That can only happen if the market is discounting a new risk factor.


On Nov 07 12:01 PM JasonC wrote:

>
> Is everyone here very stoned?
>
> You do all realize, right, that exactly the brain trust making this
> same one-note idiotic prediction are the ones who blew all these
> bubbles, in real estate, in oil, in every commodity there is, in
> metals. Because if infinite inflation is just around the corner
> the right thing to do is get short dollar debt by borrowing to the
> hilt to carry real assets. Oops, everyone on earth just tried that.
> And it blew apart. Who'd pay them?
>
> In fact, the Fed left spendable money - M1 - unchanged for 3 straight
> years, and all the debts are therefore real, and all the real-asset
> bets against them went smash. And will go right on going smash,
> until you-lot get this inflationary brainstorm out of your system.
> Everyone holding debt is getting paid, and everyone betting against
> it is being forced to give away every asset they own.
>
> Will any of the johnny one-notes ever admit that it is precisely
> their hyperinflation prediction that just crashed and burned?

Effects of the Long Dated Treasury Bubble

Printing money in the US requires a debt obligation to be purchased by the Federal Reserve. If the Fed cannot off-load that obligation on banks then no money is printed. So no, the US cannot print its way out of this hole.


On Nov 07 09:32 AM Rhunzzz wrote:

> Ok. Could you explain why there is no way the US government can repay
> its debt? When the economy recovers, the US government can cut spending
> or raise taxes (even if the political will may not result in that
> happening) or in extremis, they can always print more money. Yes,
> that would be inflationary, but that is another issue. By the terms
> of its nominal obligations, the US can always pay off its debt.
>
>
> Still, it's very likely that long-term interest rates will have to
> go up. There is no other logical outcome to the Treasury about to
> issue oodles more debt. And that is ultimately what will tackle the
> inflation that will soon be created, indeed, is being created now.

Dollar Strength: An Illusion

Edward,

The dollar is strengthening precisely because the US is tanking/deleveraging. This causes a destruction of currency supply. Less supply gives you a higher price. It is that simple.

The amount of currency being pumped is at least 10x less than the currency being destroyed, so no inflationary pressures will arise.

Best,

Arm