$USD Bullish - $2 Trill bonds must be sold

[JKD]

Re: $USD Bullish - $2 Trill bonds must be sold

This is plausible. The Fed has shown the ability to look ahead and coordinate. They started buying agencies before China started dumping them. Perhaps the same arrangement has been made this time, with China and the additional issuance.

Let's test the idea - are the biggest QE countries the biggest deficit countries?

I think the US is unique in this respect amongst non-emerging market countries. Japan's QE was from a position of relative financial strength (surplus and high presonal savings) and thus, IMO, a legitimate attempt to juice money supply and get the economy rolling.

My point is not that China will soon be selling Treasuries, and there is some sort of arrangement whereby the Fed is front running this as they did with the MBS. My point is that the defecits will be so huge, and the domestic savings pool already so low, that China/Japan/UK etc. will no longer be capable of absorbing the volume of debt that will be coming to market. The money just doesn't exist to fund these future defecits (and I do not see China or anyone else printing their own currency to buy US Treasuries). So the Fed will buy the debt because the have to.

John

[GeraldRiggs]

Re: $USD Bullish - $2 Trill bonds must be sold

China is not going to start selling their treasuries. They may wean themselves off buying as much as they have in the past. This is a political willissue. NO ONE has the political will to do the right thing! Not in the US or anywhere else. All politicians are scared shitless and NOTHING is going to change the status quo without an exongenous event like a country default or something else.
On the subject of gold.......I own some and hope it does go up. I think it will go up long term.......However, with all the manipulation of the PM markets NO ONE can predict with any accuracy what is going to happen short term. Please stop trying unless you're just trying to convince yourself to feel better.
The markets are so damn corrupt and manipulated they go up when they should go down, etc. It's a damn shame and it all ends with a big "Poom". It's just that no one knows when that is.

[GRG55]

Re: $USD Bullish - $2 Trill bonds must be sold

...I am certain that within 12 months my own company will be paying for Chinese manufactured goods in RMB. I'm not sure just what is required by the Chinese Central bank to allow that to happen but as a first step in getting away from the USD I am sure that it will happen. Certainly my suppliers will be very pleased to see it so.

How does your firm exchange Aussie Dollars for RMBs in order to accomplish this? [I am presuming that your sales and therefore revenue stream is predominantly Aussie and Aussie Dollars, respectively]

[The Outback Oracle]

Re: $USD Bullish - $2 Trill bonds must be sold

How does your firm exchange Aussie Dollars for RMBs in order to accomplish this? [I am presuming that your sales and therefore revenue stream is predominantly Aussie and Aussie Dollars, respectively]

GRG as yet we cannot. I'm not sure of the mechanics with respect to Banks, but I do think that it will become possible within 12 months or so. I'm argiuing that the US Reserve currency status may slip away in such small stages. Currently we are quoted two ways USD and RMB. Either way doesn't matter much as the calculations are the same. It is just a question of whether we do the maths or the supplier does.
Currently we buy USD which go through New York on the way to China. US Banks take a bit along the way. The USD arrive in the account of our supplier who then convert them into RMB (mainly??). Banks take a bit for every conversion of course.
One of our suppliers did start accepting A$m but I don't see this as a trend.

Suffice to say our suppliers would dearly love to be able to quote and to be paid in RMB. I thinkthe Chinese central Bank will start taking steps to make this possible.

[GRG55]

Re: $USD Bullish - $2 Trill bonds must be sold

GRG as yet we cannot. I'm not sure of the mechanics with respect to Banks, but I do think that it will become possible within 12 months or so. I'm argiuing that the US Reserve currency status may slip away in such small stages. Currently we are quoted two ways USD and RMB. Either way doesn't matter much as the calculations are the same. It is just a question of whether we do the maths or the supplier does.
Currently we buy USD which go through New York on the way to China. US Banks take a bit along the way. The USD arrive in the account of our supplier who then convert them into RMB (mainly??). Banks take a bit for every conversion of course.
One of our suppliers did start accepting A$m but I don't see this as a trend.

Suffice to say our suppliers would dearly love to be able to quote and to be paid in RMB. I thinkthe Chinese central Bank will start taking steps to make this possible.

Thanks for the clarification. It'll be very interesting to see if the PBOC eventually allows the RMB to be used at this level of transaction [instead of the more easily controlled big state-to-state stuff they are experimenting with now]. I don't imagine either you or your suppliers will miss having to route transactions through a US clearing bank if you get the chance to get off the US Dollar.

[The Outback Oracle]

Re: $USD Bullish - $2 Trill bonds must be sold

GRG,,,yeah brother!!!! They charge us for the privilidge and sometimes lose it anyway...then we get this "we are not responsible for it" answer. All fees and no responsibility!
It would be a load off if we can send it straight to the account that's for sure...as well as a few % cheaper!

[c1ue]

Re: $USD Bullish - $2 Trill bonds must be sold

Interestingly enough - in Russia the business bank accounts can be in US$, euro, rubles, or yen. No interest paid, but you are able to keep deposits in these various denominations.

I haven't asked about RMB - probably worth looking into.

As for what will happen with the $2T Treasury auction - I believe in Naked Capitalism there was a link to an example of France in the inter World War period.

http://www.nakedcapitalism.com/2009/...-has-been.html

Link referred to:

http://www.voxeu.org/index.php?q=node/3490

France had a huge Sterling position not dissimilar to China vis a vis the US today.

The review of France's behavior revealed a France initially complaining about Sterling abuse via poor UK government policies morphing into active Sterling defense to protect French capital - ending in a conversion of all Sterling holdings to gold.

China surely knows this as well - perhaps they intend to skip the middle step (actively protecting the dollar).

Either way I think the auction next week will be rife with danger for the bulls.

Falling interest rates means speculation on government intervention - one problem with the Fed announcing Treasury buys.

http://www.newyorkfed.org/markets/op..._schedule.html

We've got 2 days ahead of us for announced Fed buys...

Rising interest rates means danger of inflation/economic distress due to interest rate strangulation.

A Treasury rate over 3% would pretty much signal a complete failure of the Fed's program this quarter.

Of course the way things are - I'd not be at all surprised to see front running of the Fed purchases going on.

It is amusing though. Previously with the Soviet Union, the practice of Kremlinology came into being to try and understand/predict what the USSR government would do.

Today we have FedTreasuology: watching the Fed and US Treasury to try and understand/predict what the US government will do.

Regierung Uber Alles...

[cobben]

Re: $USD Bullish - $2 Trill bonds must be sold

"Interestingly enough - in Russia the business bank accounts can be in US$, euro, rubles, or yen. No interest paid, but you are able to keep deposits in these various denominations."

In Swedbank in Latvia (not in Sweden) the standard personal account is a multicurrency account where you can keep about 10 - 12 different currencies, including the RUB, and switch between them with a mouse click and no fee except the spread (which can be significant).

The only currencies you can get a savings account for which pays interest are the LVL, EUR & USD however.

They write that you can make an agreement with them to keep even other more exotic curencies if you want to, I have not checked this out.