Let's say the treasuries and the "risk free" rates that are
directly tied to the Fed are the last standing bastion of the
derivative mega bubble. The Fed buys along the whole curve
now, of course, and the derivative mega-banks that got cash
from the Fed follow their orders. Rates were "fixed" by
enormous liquidity injections for the time being, along with
the performance of the stock market. The duct tape can't hold
this thing forever, but it may last for some time, up to a
couple of years, as we have learned from previous duct tape
experiences, and yes, this does depend on the Chinese and
others willing to hold these securities. For now, not only
hold, but also expand holdings. Note, however, that the
net international investment position for USA is around
negative 2.5 Trillion dollars, which is not a lot, considering
the record current account deficit that we ran for some time.
I personally think the T-bubble will break some time later
this year, and maybe soon. A crash is the requirement.
Have you seen this guy around lately? -g-
The truth about T-bonds, sans derivatives? The World can't
possibly buy what the Treasury is selling. They don't have
enough trade surplus for that. |
