Old Wizard

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Freya, I believe the reason the fed was and is buying treasuries is because banks were buying them rather than lending the money to home buyers and businesses. You need to research this yourself. A reference can be found by googling"federal reserves buying treasuries and then clicking on "economic essays Why the Federal Reserve Is Buying Treasuries" The buy was 300b! On the China Control, I was using another SA article as the source and you are probably right that China doesn't control 95% of the supply. I think that article may have used the rare earth supply as important to the battery manufacture of high powered electric cars, but since I can't find the article I'll concede the error. That said I still believe that China will dominate the market and the long term effect will be to keep us dependent on not necessarily friendly countries for our transportation energy and keep our country's current account significantly negative.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Freya, Is it your position that the larger banking world which now includes integrated financial institutions are not buying any treasuries? I said controlled by, not existing reserves ,for a reason. China and Chile are producers, while Bolivia has reserves but its ability to produce large amounts is still in development. Since China has made resource agreements with some of the other countries which are producing , have have large reserves of their own and relatively no environmental restrictions they are in a strong position. Further, they are a big lithium battery supplier now and are entering the electric car market. Compare that with the US's position. Our mine are shut, we have relatively small reserves, have adopted electric plug-in vehicles as a cog of our future transportation, energy and environmental strategy and will have to import much of the lithium to support the national policy we have adopted. Meanwhile we are borrowing large amounts of money from China, while we try to juice up a domestic battery industry. The 2.5b set of grants announced to facilitate this, was sent to a host of companies, but if one looks at where more than 50% of the money really goes one finds that it went to S. Korean, Chinese and Japanese companies.
The spread between savings account interest and treasuries interest, home mortgages interest to qualified buyers and the more risky loans represents a bonanza for the banks.This bonanza winds up being paid for in part by those folks who put their money in savings accounts and CDs, if th real inflation rate plus the decreasing value of the dollar is more than the 1% the savings accounts are yielding. BTW I don't think my comment stated that lithium was a rare earth element.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Fitz, The value of the dollar is an interesting issue. No one in the current administration wants a strong dollar. Let's look at what is the real policy. Our monetary policy is to keep the fed rate at 0, ostensibly to spur economic development, lower interest rates and create jobs. We also are insisting that stimulus is necessary and are borrowing record amounts from anyone who will lend it to us. At the same time, the treasury secretary and others are urging the public to save more. Let's look at the real policy. Banks are giving their depositors around 1% for their savings, while buying treasuries at 3.5 to 4 % and lending it to qualified home buyers at 5 to 6% and to others at higher rates. Meanwhile the Gov. piublishes reports that the underlying inflation rate is near zero or even negative. Of course this figure excludes food and energy, both of which everyone must use to live. When we look at the cost of living, which includes food,energy, increased local sales taxes and hidden taxes like tolls, etc., the real inflation rate to those who save money is 3% or more. The net result is that the savers are paying for getting the banks well and in large part for the Government's spending spree. Meanwhile, our government invests much of this borrowed money in lithium battery technology in the far east, in petrobras[through thr ex-im bank] for oil-drilling off the brazillian coast while limiting investment for new oil drilling off our coasts and keeping our lithium mines closed for environmental reasons. Given that 95% of the supply of lithium for electric car batteries is currently controlled by China our forced march to electric cars is destined to trade dependency on the mid-east to dependency on China for our transportation energy. Allowing our dollar to decrease in value further hurts the savers because their purchasing power decreases and of course allows debts incurred now to be paid back with cheaper dollars. No wonder the smart financial opportuistic people are so quick to take highly leveraged risks, especially with other people's money. For the income redistribution crowd our policy is also consistant, take real money from the savers and give it to those who either can't or won't.save. A real problem-solving energy solution which is in the economic and strategic interests of our citizens is not and, I have come to believe, never was the intent of this administration.