Sunday, November 09, 2008

Who Will Be Left To Buy US Treasuries......

I think this will be one of the most important questions especially after one "natural" buyer after another buyer like China is obviously has to spend lots of their "war chest" at home ( see this excellent piece via naked Capitalism China Announced $586 Billion Stimulus Plan, No Kidding.... Dubai May Need Help To Repay Debt.... & You can’t even depend on the SWFs).....

Ich denke eine der entscheidenden Fragen in naher Zukunft wird sein ob es den USA weiterhin gelingt genügend ausländisches Kapital zu animieren wöchentlich wachsenden Baliouts (AIG, GM, ..... ) und die gefühlten quartalsweisen "Konjunkturpakete" zu finanzieren ( ganz zu schweigen von dem üblichen Defizit.....). Es sieht immer mehr so aus als wenn etliche der bisherigen "natürlichen" Käufer immer mehr Mittel aufwenden müssen um Ihre eigenen Wirtschaft vor einer ( nennen wir es vorsichtig ) Verlangsamung zu retten ( siehe via Naked Capitalism China Announced $586 Billion Stimulus Plan, No Kidding.... Dubai May Need Help To Repay Debt.... & You can’t even depend on the SWFs).....


In the meantime the US is anouncing one baliout a week ( AIG, GM, ..... ) and is discussing another stimulus package almost on a quarterly basis...... On top of this the Fed is close to a zero interest policy and the recent strength in the $ is likely mainly atrributet to the global delevereging..... Probably not the best circumstamces to attract trillions of foreign capital.... Especially when your futue liabilities are close to $ 50 trillion ( see If we are Rome, Wall Street's our Coliseum make sure you don´t miss the Colbert video with the former comptroller Walker )

Es bedarf schon einer gewissen US Arroganz darauf zu wetten das die Ausländer trotz einer Nullzinspolitik, einer Währung die wohl einen nicht geringen Teil Ihrer letzten Stärke allein dem Umstand des weltweiten Deleverering zu verdanken hat, neuen Haushaltslöchern beinahe im Stundentakt sowie der über allem stehenden tickenden Zeitbombe von Social Security & Pensionszusagen etc ( mit nahezu 50 Billion $ , siehe If we are Rome, Wall Street's our Coliseum , besonders empfehlensert ist das Interview mit dem früheren Oberaufseher der US Finanzen.....) weiterhin gewillt und in der Lage sein werden dieses zu finanzieren.....

I don´t want to speculate what could happen if the foreigners have to sell some of their US assets...... Got gold......?

In allen Überlegungen möchte ich leiber nicht damit anfangen zu spekulieren was passieren könnte sollten die Ausländer anfagen aktiv Ihre Positionen zu veräußern...... Got Gold.... ?


Thanks to Contrary Investor

Needless to say that US debt is still rated AAA.......

Überflüssig zu erwähnen das die US Staatsschulden noch immer mit AAA bewertet werden......

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10 Comments:

Anonymous Barley said...

So my nagging question of the day is do we see interest rates creep up or are we in for an interest shock?

8:43 AM  
Anonymous knapp said...

Who will be left to buy Gold? The shift of central bank foreign reserves from the US Dollar into gold is near the top of the list of factors gold bulls point to in their "inevitable" $2000 forecast. This expectation is still reflected in spot gold yet in light of current events has to be seriously reconsidered. Few expect the opposite. For gold to return to, say, $400. Got deflation?

3:29 PM  
Blogger jmf said...

Moin Barley,

that´s a very good question.

I think that we will see higher rates despite a deep recession and deflation.

Lets hope we won´t get the shock therapy.....

But a few failed auctions could easily spread into chaos & anarchy that is too big for any bailout....

9:02 PM  
Blogger jmf said...

Moin Knapp,

the central banks are net sellers for decades now.

I´ll bet that gold will find the way into every asset allocation for institutional & private investors.

A tiny fraction would be enough to absorb the entire gold from central banks....

The biggest gold ETF is already the 6 largest investor worldwide....

This just in a 2 years....

Even if gold would not rally higher i think there is an excellent chance that gold will outperform other assets ( especially in a deflation )

9:07 PM  
Anonymous knapp said...

jmf,

you're right about the g7 central banks selling gold; I was referring to the potential for China, Russia and Gulf State central banks to buy gold, which I would imagine becomes less likely as their own domestic economies suffer.

I think the asset allocation funds are what pushed gold from $400 to $1000. Those funds have now been burned and might not be so anxious to re-enter the trade.

But I agree that gold will outperform many other assets in a deflation.

5:36 PM  
Blogger jmf said...

Moin Knapp,

i have misread you... Sorry.

I think you are right that other central banks won´t push their gold holdings during the coming recession but compared to the altered mindset from institutional & private investors i think this won´t matter....

When i think back 10 years ago at my active banking time gold was really a red flag for every investor, asset allocation etc....

This time i have heard from former colleagues that if you don´t include gold in the clients asset allocation you have almost no chance of getting the portfolio....

The client just won´t trust you that you are "honest", competent, etc....

9:38 PM  
Blogger jmf said...


All the treasuries in China
FT Alphaville

Furthermore, would China’s own funding of the stimulus package unleash inflationary pressures at home? Peter Schiff, president of Euro Pacific Capital, argues it would. He says the Chinese simply can’t hoard trillions of USDs, buy new debt being issued by the US government and borrow or print their own stimulus funding without suffering dire inflationary consequences. As a result, it makes much more sense for the Chinese to sell-off their treasury reserves.

Selling down their vast reserve of U.S. debt in order to spend on domestic infrastructure (or anything else for that matter) is vastly superior to ‘lending’ it to Americans. If the Chinese authorities finally figure this out, the United States will suffer the consequences.

11:55 PM  
Blogger jmf said...

Wanted to add that gold in € or other currencies is already close to new ATH......

1:47 AM  
Blogger jmf said...

A very good link as ausual from
Jesse's Café Américain



Thinking the Unthinkable: Are the Markets Warning of a US Debt Default?

5:13 AM  
Blogger jmf said...

via Brad Setzer


China’s fiscal stimulus doesn’t necessarily mean that it will stop buying Treasuries

5:19 AM  

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