If you're holding U.S. treasuries get out now.

Discussion in 'Money, Investing & Precious Metals' started by Canadian, Mar 26, 2009.

  1. Canadian

    Canadian Well-Known Member

    Taken from one of my investment articles:

    When you perform work or provide services for a debt-wracked spendthrift you should have a pretty good idea that their IOU's are never likely to be honored, and are thus not likely to be worth the paper they are written on.

    The Chinese, who have been supplying the United States with vast quantities of consumer goods for years in exchange for Treasury Bills and Bonds, which are a form of IOU, and various other dubious "investments", have been slowly waking up in recent months to the fact that they "have been had".

    They have been breaking out in a cold sweat as they realize that they have in effect been conned out of trillions. Thus they have been attempting to scale back their purchases of US Treasuries in an effort to stop throwing good money after bad, and have been accumulating more gold.

    This has increasingly threatened to pull the rug from under the Treasury market. The Chinese (and others) are in a "catch 22" situation with regard to their vast holdings of US debt, as if they make any serious attempt to divest themselves of it in significant quantities they will collapse the market. They are therefore to a large extent stuck with it - all they can do is drastically scale back purchases and try to offload as much of it as they can clandestinely.

    However, the reduced demand resulting from their change of stance has nevertheless been threatening to bring down the Treasury market. The Chinese are going to lose big time, and last week the Fed decided the manner of their losing. They won't lose as a result of falling Treasury prices - at least not for now - they are going to lose due to a severe devaluation of the dollar.

    The big danger to the Treasury market and to the United States by extension is that the Chinese and others put two and two together and, realizing they are about to be fleeced by a falling dollar, decide to cash in for what they can get ahead of the dollar collapse.

    This would cause the Treasury market to collapse rapidly, and the Fed, having last week "thrown down the gauntlet" would find itself having to buy up Treasuries not just to the tune of a few hundred billions of dollars but by the trillions, all the extra money created for this purpose rapidly feeding through into the economy as a hyperinflationary meltdown.

    If they don't buy the unsold Treasuries their price will plummet causing interest rates to spike to levels that would almost immediately bring the hugely indebted US economy to a dead stop. Since we know how their minds work - they take the path of least resistance - we know that they are going to create as much money as it takes to prop up the Treasury market, happy to push the ultimate cost of this on to the man in the street in the form of massive inflation or even hyperinflation.

    This is the message that they telegraphed to the markets - and to the world at large - last week. This was great news for China, which is desperate to cash in its war chest of accumulated US debt to use for more constructive purposes, such as supporting its flagging economy and buying commodities and hard assets for the future.

    So the Chinese response to the Fed's newly proclaimed stance will be "Thanks very much - sold to you!" and they will in effect call the Fed's bluff by selling and selling and selling, knowing that they can't back down, can't let the Treasury market collapse because of their dread of an interest rate spike, and thus must manufacture trillions and trillions of dollars to buy Treasuries. Hence the bill for all the excesses of many years of debt financed overconsumption will finally land on the doormat of the US consumer in the form of a plunging currency and hyperinflation, although China will still pay a heavy price because of the collapse of the dollar.

    Those who think that the $300 billion Treasury purchase is a one-off event are presumably the same people who thought that the big $780 billion bail out package that caused such a furore last year was the same.

    - If you're holding now would be the time to get out fast -

  2. set2survive

    set2survive Active Member

    Get out of dollars into what? Gold, I guess is the obvious answer for the little guy, but what about the big guys and nations? The stage is being set for the sudden 'opportunity' for a new safe haven for wealth, the new 'global' reserve currency sponsored by China, Russia, and the Arabs. Bernanke, Giethner, Obama won't see it coming.

  3. Viking

    Viking Well-Known Member

    If I have the time to do some back checking to get a link I'd post it but what the article said was that there is a feeling that the Chinese may start asking for commercial and private real estate in exchange for the basically worthless USA debt bonds they hold, that wouldn't suprise me in the least. They pretty much own America one way or another. Sadly the majority of people in this country don't realize just how bad our leadership is. The things I see going on hurts my heart deeply, so when I see how people feel here and on other good websites I do see a glimmer of hope. I realize we are of the same cloth that formed our founding fathers. The five percenters'.
  4. Herbalpagan

    Herbalpagan Well-Known Member

    Does anyone know what bearer bonds are and if they would be worth getting. I hear they are supposed to be good always no matter what currency you are with.
  5. Canadian

    Canadian Well-Known Member

    Bonds are all tied to the same system. If one type of bond goes down in general all of them do. It's also impossible to know which bonds are tainted by sub-prime toxic waste. Bonds are the worst thing to have your money in right now.

    Gold and silver are good. Also uranium is set to spike in value one the stock of old russian warheads are gone. Good old oil is due for a comeback but I'm not brave enough to touch that one. Stay out of bonds in general.
  6. Paronoid1

    Paronoid1 Member

    You bring up a great point that often is not considered. All this debt of ours that China holds is backed by assets of various sorts, that is the basic nature of debt and collateral. In addition to real estate, infrastructure and natural resources are on the block.

    I've read that there are vase oil reserves under the Dakotas, California, and let's not forget ANWAR, and the oil shale fields of Utah. Does anyone think China would have any hesitation to extract those resources? Of course they will, and they will not at all be concerned with being environmentally conscious.

    The American people have thrown away what our forefathers bled and died for. I am with you in your feeling of sorrow as I witness where our country has come to. Dark times are ahead :(