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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Crimson Ghost who wrote (86502)9/18/2007 6:27:36 PM
From: stan_hughes  Read Replies (1) of 110194
 
Treasury rates can only stay low if the parties that are financing US debt accept those low rates -- if they do not, then rates must rise until they catch enough of a bid from somewhere to roll over any currently maturing debt -- the only other alternative being to default on that debt, which most people would view as unthinkable for the USA

So, by the Fed willingly throwing the dollar overboard here, we must conclude one of the following:

(a) that the Fed believes that the Chinese and Japanese are going to be willing to accept lower rates of return on their US Treasury investments, including a newly increased devaluation risk that has already been set in motion as of today, or;

(b) that the Fed has an alternative lender lined up to buy their maturing Treasuries instead. The identity of this substitute investor for Treasury debt remains somewhat of a mystery however -- given that only the Asian states hold sufficient reserves to finance US debt, it must be someone from Mars, or perhaps Venus

At this point, it looks like (b) may be more likely than (a). This is all going to end very badly I'm afraid
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