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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (20015)	12/31/2004 12:38:04 PM
From: russwinter	Read Replies (4) \| Respond to of 116555

The US debt market probably now needs a paper money printing heroin fix in excess of $15 billion a week (my estimate, but we can certainly debate this) from some form of monetary authority intervention(not to be confused with "Japanese" or "Chinese" private investors). I define intervention as direct purchases (bought outright) by the Fed, Fed permanent coupon passes, foreign CB custody purchases, or a combination of defacto purchases through croonies/Boyz: cheap loans(securities lending, tapping the OMO temporary stash). Plus the $15 billion needs to be carry traded ad nueseum and leveraged by speculators. Here's the set-up as I presented it on the Epic thread this morning: Message 20902917 To keep up this pace means the world is just choking on more paper currencies of all kinds. Right now the numero uno upchuck currency is the USD, and the CBs seem bent on issuing more of it to bail out the litany of blow-ups (FNM?) that steadily occur in this unstable, unbalanced environment. And the more it chokes on excess printing press thin air, the more pressure to get rid of it. How anybody can call for a legitimate (as opposed to a rigged one, see defintion above) "bond rally" in this environment is beyond any comprehension to my pea brain. So by extension the Big Bust in the bond market occurs when: 1. the $15 billion a week (or whatever) printing press game abates even somewhat, or 2. There are so many securities issued without real backing, that it (the so called fantasy market) just collapses under inflationary weight, pure unmitigated oversupply (gawd, wanna buy another 3.5% agency issue, gcm.com gotta a cheap loan to help ya with it?), or some form of panic. In 2005 if the twin deficits (will go even higher because of higher interest costs paid to foreigners) persist we get to see how the markets handle another 12% of US GDP in new USD debt. LOL. 3. Both.