Thread: Harder to buy US Treasuries

Well CB, it means that people are reducing their unsustainable personal debt loads, their cc's are maxed out, $ doesn't stretch as far due to devaluation, and people can't even afford to buy stuff like cheap Chinese goods, which is in part why the trade deficit has been declining.

If China wants to get us buying more of their stuff again, they'd have to break the USD/yuan peg, so that $ can stretch further in terms of Chinese goods. And after that, I'm not sure what comes next. Maybe 350Z or Frixxxx could tell us.

Originally Posted by alevin

Well CB, it means that people are reducing their unsustainable personal debt loads, their cc's are maxed out, $ doesn't stretch as far due to devaluation, and people can't even afford to buy stuff like cheap Chinese goods, which is in part why the trade deficit has been declining.

If China wants to get us buying more of their stuff again, they'd have to break the USD/yuan peg, so that $ can stretch further in terms of Chinese goods. And after that, I'm not sure what comes next. Maybe 350Z or Frixxxx could tell us.

Thanks alevin,

For putting that in nice simple language that this broken down inga-near can understand. I got the feeling that it wasn't good for us, but you helped me understand why.

We are able to buy cheap Chinese stuff - we just aren't.
For that matter, we aren't buying much European stuff either.
Nor, now that I think about it, are we buying much American stuff.

Most folks were kicked in the head for a year. Remeber, Easy Money Bernanke was raising interest rates for a year before the credit and real estate markets completely exploded. He was trying to take the easy money out of the market. So we were adjusting to higher interest rates on the debt we built up during the credit boom years, then we get clobbered on the asset side of the equation.

Most folks are trying to build an emergency fund, pay down their debt, and initiate a savings program so they can make a large purchase under current credit realities.

That was - and, for while still is - me...

What does that mean for us inside our TSP accounts...

It might mean stagflation. Increasing interest rates in a time of unemployment and minimal economic activity. In that case your G/F funds will blow up. They depend on stable and/or declining interest rates. The G Fund will look good, but won't feel good. Inflation will chomp on it. C/S/I - uuugggghhhhh.... It will be a time for active trading.

It might mean gubmint restructuring. Our brilliant politicians seem to finally be a bit worried. They seem to think the problems are still years away. A nice kick to their backside (an inability to sell low interest rate bonds) might be just the thing to wake em up. That would be nice to G Funders. Higher rates of return and the political willpower to resolve an addiction (ours and the politicians).

I would place my lunch money on stagflation.

Also,

Anyone thinking Bernanke would NOT raise interest rates in a time of high unemployment better get their head and wallets straight.

He will defend the dollar.
He will soon get reinstated.

He can't be hassled by Bernie Sanders and the other LOPs anymore. He will not let the dollar continue to fall. See the current dollar move.

That will be another smack to the side of Washington's noggin.

It might mean layoffs for us gubmint types.

The taxpayer will refuse to - or cannot - fund our largess.

Laws, policies, and regulations will change to the new reality.

Thanks Boghie,

I appreciate your thoughts and concerns, which echo a lot of the concerns that I have also.

CB

Originally Posted by CountryBoy

http://www.shanghaidaily.com/article....asp?id=423054

I'm not sure of the overall impact, but this can't be good news. How will this affect the economy, investing and most of all our TSP.

Originally Posted by alevin

Well CB, it means that people are reducing their unsustainable personal debt loads, their cc's are maxed out, $ doesn't stretch as far due to devaluation, and people can't even afford to buy stuff like cheap Chinese goods, which is in part why the trade deficit has been declining.

You nailed it alevin. We buy less of their crap, so they have less dollars to buy our treasuries.

What I don't know is why are they saying this now. This is not news. It's been happening for a while now. Geithner/Bernanke already know this. Hens, the percentage of PD involvement in treasury auctions and the changing of the reporting method. They had two miserable auctions in the last 2-3 weeks I believe. All that's holding yields back is the printing press(to buy treasuries).

The reason China pegs their currency to the USD is so that Americans can afford their products. The Chinese know that if they let their money float, they'd run the risk of appreciation against the dollar, making their exports more expensive for the American "Joneses".

A few central banks have begun raising rates, notably Australia and Israel. I think New Zealand did too, but I'm not sure. Canada has room to waggle if need be as well.

Bernanke is only giving America what it wants. Given devaluation or a remake of the Watts Riots- devaluation was the obvious choice.

Thanks guys,

I agree, but aren't we just kicking the can down the road? I'm thinking we may face some sort of riot situation anyway. Something has to give and like an addict, when Bernake pulls back the punch bowl, folks are also going to be Joneses for all that free and easy tax money.

CB

Bullitt,

Soon, Bernanke will defend the dollar in the teeth of high unemployment and recession. That is his job. He had to defend the dollar from deflation (rapidly increasing in value) this year. If the economy shows any signs of life next year will be very different than this year.

Actually, the cheesy 'G Fund' might be the place to be...

Originally Posted by Boghie

Bullitt,

Soon, Bernanke will defend the dollar in the teeth of high unemployment and recession. That is his job. He had to defend the dollar from deflation (rapidly increasing in value) this year. If the economy shows any signs of life next year will be very different than this year.

Actually, the cheesy 'G Fund' might be the place to be...

How is he going to defend the dollar while he is busy dropping it out of helicopters?

Other thing is, when people are out of work, or afraid of losing their jobs, or their mortgage payments are about to go up, or they're only working parttime or seasonally....-priorities will be food, water, shelter, heat, gas for the car, car repair to keep getting to work, mandatory car insurance, phone maybe, and emergency fund for the what-ifs-then maybe pay down the cc maybe. Anything left over-buy new cheap stuff from China, or browse the secondhand and pawn shops first? not everyones mileage will be the same of course.