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Trending Of US Sovereign Issuance In 2009
Zero Hedge recently wrote about the dramatic transformation in the supply/demand landscape in US fixed income issuance, where courtesy of the Federal Reserve, marginal buyers needed to fill a demand hole of just over $200 billion. This number skyrockets elevenfold in the coming 12 months, all else being equal. And already the US Government is lining up the very first offering for 2010: in the first half of January we will likely see the following being offered, likely in increments of tens of billions:
- 28-Day Bills - January 7
- 91-Day Bills - January 14
- 182-Day Bills - January 14
- 364-Day Bills - January 14
- 3-Year Notes - January 15
- 10-Year Notes - January 15
- 30-Year Notes - January 15
While full supply details will be announced on January 7, we would venture to guess at least $120 billion in coupons and about $100 billion in Bills. Even when taking refunding into consideration, this will likely be a short-dated heavy auction. And as readers are all too aware, the biggest risk for government funding now is two-fold: roll risk, and duration extension. Alas, with just three coupons it seems that the government will continue delaying the dangerous game of pushing out maturities for the foreseeable future. Yet can we read into patterns from 2009 to determine what the issuance of various durations will look like in 2010? Yes, courtesy of the Daily Treasury Statement which breaks down the detail of new issues and refunds daily for all past periods.
The first chart below demonstrates what gross and net Bill issuance looked like in 2009. What becomes obvious is that the government has indeed been focused on reducing the net offering size as the year progressed. In fact, trendlining net Bill issuance indicates that while in the beginning of the year the UST was very focused on large scale Bill issuance, toward the end of the year redemptions were the primary mover of the Supply/Demand curve.
Altogether, the Treasury was a net purchaser of Bills in 2009, with $6.33 trillion in Bills issued and $6.39 trillion redeemed: a net redemption of $62 billion. What is notable is that as Bill yields, especially in the 28-Day category dropped to near zero levels, issuance declined as well: there was "just" $437 billion issued in December, compared to a full year average of $528 billion monthly. The data is too noisy to derive any seasonality components from it.
Yet any prudence in the Bill ballpark was quickly offset by the Treasury's actions in Notes (and Bonds). The chart below demonstrates the ramp in coupon issuance as the year progressed.
In 2009 the government issued $1.92 trillion in Notes while redeeming $605 billion, for a net annual issuance of $1.3 trillion. The chart indicates that the three busiest months for the Treasury were November, June and March, when $313 billion, $266 billion and $254 billion, respectively, were issued ($221 billion, $206 billion, and $193 billion net of redemptions). If this patterns will repeat we should expect a substantial ramp up in Note issuance in 2010. In January 2009 only $64 billion in Notes and Bonds was issued: we believe we will likely double this total with the very first 2010 auction alone. In 2009, the average monthly Note issuance was $160 billion gross and $110 billion net: another set of numbers which will easily be surpassed in the coming year.
Finally, the combination of Bills, Notes and Bonds net monthly issuance can be seen on the chart below: 2009 was truly a busy year for Tim Geithner. All in all $1.26 trillion of net new govvies found buyers. Of this, a sizable amount was acquired by the Federal Reserve and Primary Dealers.
On average $115 billion in net Treasuries was issued each month.
And how did the traditional foreign purchasers do in 2009? The Treasury International Capital database provides good data for the key holders of US debt. In October 2009, foreign holders of US Treasury securities amounted to $3.498 trillion. This compares to $3.076 trillion in December 2008. The biggest holders of USTs are the usual suspects: China ($798.9 billion), Japan ($746.5 billion) and the UK ($230.7 billion).
How willing will these foreign "partners" be to continue financing the US deficit spending is something we will all find out quite soon, especially with the Fed phasing out of the demand-side of the equation quite soon.
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Will we (ZH readers) know if the 30 yrs are secretly Repos?
via NakedCapitalism
Update on Our Brave New Slavery: Yes, It Applies to American Citizens, Too
Chris Floyd is a great writer.
Now that the Supreme Court has ruled that a human being is not a human being,
they are ready to rule that a corporation is
and the journey out of our democracy will be complete
Hooray! Let's go shoot our guns!
I am Chumbawamba.
They already rules that a corporation is in person in 1886.
What did you think the American Civil War was about? Freeing Blacks? LOL.
Watch the film The Corporation. We're already there! Have been a while now.
Doesn't matter, US will buy all its own debt via back channels. China, Japan, anything exogenous is not relevant anymore. This is now a completely self-ontained control economy. Just forget entirely the other assumptions you've been working with. This year has proven there is no ceiling on what they can get away with. Fan/Fred is the bow on the package. US Branch 4 [Fed/Treas/Fan/Fred] can create an infinite amount of dollars to pay dollar denominated debt (e.g. everything domestic), control US interest rates, US mortgage rates, T rates, everything with no help from international or Congress. Throw out your assumptions, all bets are off as of 12/24/09.
That you can get away with it one year doesn't mean you can get away with it forever. This just sounds like the 'New Economy' junk a lot of economists believe in.
Dude, I don't endorse it, but it has been empirically proven. If the bag didn't pop by now, it will not pop. Why don't you check over at Denninger's site, who got half his predictions wrong, has been calling for a disruptive event since October 2008, and limits his 2010 predictions to "Um, the sun will rise in the east." There are no disruptive economic events from now on, as the B4 [tm reg US pat off] has all the elements in self managed flow. Look around you--ALL these economists have been weighing inflation versus deflation for A YEAR with no clear consensus. What do make of that, fool? The answer is right under your nose, better fess.
Before the crashes of 2002 and 2008 there were similar thoughts. Couldn't prevent two harsh crashes. It will happen again. Within 3-5 years.
I do not endorse or like this reality. It is pragmatic based on a year's worth of observation and hoping something will pop. If it has gone on and the bag has not yet popped, it never will. Here is more evidence--there is no --zero--concurrence, among professional economists or savants as to whether it is to be inflation or deflation. Forget that discussion. Forget Keynes, Friedman, Mises, everybody. We now have a command economy--the Fourth Branch, or as I now call it 4thBr [TM Reg US Pat Off]--control all the flows. Forget Congress, China, anything exogenous--they control interest rates, mortgages, everything. Forget Weimar and 1930's US, study the USSR and try to deduce how to game it.
Within 3-5 years we will meet & speak here again. The thing will pop. They know it.
Fair enough. But. By saying 3-5 years your making the same kind of prediction Denninger and others made for 2009. You see? The math DOES lie. The event horizon has already been passed, you're in a different dimension now, but you're still operating on Newtonian physics. We control the horizontal, we control the vertical. This is why none of the customary relationships between rates, stocks, VIX, the dollar, gold, etc. are in effect. Throw that whole model out, permanently. Watch for O to announce the Job Guarantee program in the State of the Union speech. "The United States will guarantee a job with a living wage and healthcare coverage to all Americans who want to work." Dem and citizens rejoice, Reps must capitulate and O is a hero. There is no other way for him to get U3 under 10% within 3 years. Dig?
Who is "we"?
"We" is the 4th Branch. Fed, Treas, Fan, Fred and their various tools--I use the word advisedly--Goldman, AIG, GMAC, GM, and you fill in the rest.
I figured as much - the question then becomes are you one of them? If so you're efforts will FAIL - the bears will get you one way or another - either by shorting Treasuries or the stock market. You're going down bitch!!!
Protip: If they know the bears are coming, they can trap the shit out of them. For reference, examine stock index performance March-December 2009, or the same period Citi/AIG/Fannie/Freddie/etc ad nauseum. You must think "they" are out of ammo if you think shorting anything can pull them back to reality; you will find yourself sadly mistaken if you bet money on it.
Hey, man, great post!
Just one problem...I can't find the USSR on a map. Can you help me out here?
In time you won't be able to find USA on a map either. Can you find your car keys?
If you rub this shoe polish on your bald, fat head you'll get just enough of a buzz to figure it out.
Back channel supported here.
Steve
The Reuters piece is linked in Turk's piece. "draining reserves", if diverted to buying Treasuries, is taking liquidity from potential private credit and directing it to Federal credit. Sounds supportive of Treasuries if it happens. Main St would lose out it seems.
Steve
http://www.reuters.com/article/idUSN2816062120091228?type=marketsNews
(thanks to GATA)
In his new commentary over at the Free Gold Money Report, James Turk describes the Federal Reserve's sneaky new contrivance for getting more money for buying federal government debt without having to ask congressional approval. Turk's commentary is headlined "The Federal Reserve Needs More Money" and you can find it at the FGMR Internet site here:
http://www.fgmr.com/december-30-2009-federal-reserve-needs-more-money
Historically, the reserves activities for Treasuries has been around $40B for the big banks. Since November that traditional $40B amount has been purchased. Which is perhaps most of the slack for the big banks.
I think you may see a total of $80B diverted from reserves to Treasuries in FY2010, $40B has already been purchased, so that leaves about $40B more max.
The FED reserves are there to cover known Bank losses that have yet to be moved onto the financial statements. The banks are preparing to recognize the losses on their balance sheet for FY2010. The reserves will be spooled out to keep the banks solvent and try and potentially attract new equity.
Mark Beck
+1
Yep, "Sterilizer Ben" is at it again. Every Intervention is Good if Sterilized.
Could someone please put a bullet in this lame horse already?
I am Chumbawamba.
"While full supply details will be announced on January 7..."
Excuse me for being a bit juvenile but every time I see the word "supply" I have to laugh. Does this mean my septic tank is full of "supply" as well? If so, then I'm adding to my "supply" every time I flush to toilet.
Like I said, juvenile. But also apropos.
great look, TD.
would love to graphically see foreign holders data plotted, as per ROC and 2nd deriv from oct '08 to oct '09, on / with that fancy new 'R'.
outside of a handful of rather secondary outliers, seems to be y/o/y additions across the board. and outside of just a wee bit of indignant jawboning from the usual suspects (china, russia, iran, et al) don't hear many serious complaints from serious holders; infinitesimally relevant bank of mauritius can kiss arkansas' kansas[s] ... china is a lot more verbil kint and much less keysor soze than it is pervasively thought.
What? What? I try and try to understand, but it's increasingly pure gibberish to me: "....china is a lot more verbil kint and much less keysor soze than it is pervasively thought". I can't make heads or tails of this statement.
the usual suspects (movie)
Nice touch Chop--you get the academy award.
One of my predictions for 2010 is a failure of a long bond auction 7-30yr., determined by a bid to cover of near 1. Since primary dealers are in contractual obligation to purchase. Is this a reasonable definition of a failed auction?
Thank you for this summary TD.....it will be interesting to watch treasuries throughout 2010.
A question for those who want to take a stab at it: how in the world can Japan and the U.K. buy any more of our crap let alone roll their existing paper with the massive problems both of them have?
Simple: they just print more, too.
Right, Chopshop?
I am Chumbawamba.
No one buys anyone's crap, everyone buys their own. Except for that small detail of the $ being the world's reserve currency, it could work.
Same way they have for the past ten years or longer.
Japan went into a tailspin over a decade ago. UK
is a developed nation just there nothing else really.
London may be a financial center but taxing their
bankers bonuses means a brain drain should follow. Oh I forgot that one guy makes a good vacuum, Virgin Inc
made Branson a rich man and Knight, Simon Cowell made a name for himself in entertainment.
Footnote 2 UK includes Channel Islands, and Isle of Man HF banking centers plus UK is the frontman for China when China elects to place bids in our auctions thru UK banks. This data does not accurately reflect true holdings of "fast money" (HF) or the perceived more stable "political" holdings of central banks. Nevertheless HF are part of the top 4 holders. Bottom line we need a stable to gradually rising dollar and back up in treasury rates to attract much needed global value investors. Fast money will beat a hasty retreat from the "risk free" trade if the curve continues to flatten. As our banks need a steep curve and now are large holders of treasuries I would imagine they would defend a steep curve along with their spec clients for as long as economically feasible and/or until their clients sucessfully unwind the trade.
They will roll out treasury auctions until they can't. But isn't there infinite monetizing?
We will wake up and paper will be just worth paper.
Extend and pretend is a common practice most recent high
profile case of this is Dubai World and their banks buying time for a global rebound in real estate prices. The fact we are a fiat currency has many deep thinkers pointing to this as our undoing. The Bretton Woods System ended 8/15/1971 when President Richard Nixon ended trading of gold at a fixed price of $35 ounce. Interesting to note there are only two US Presidents whose name contains the
word criminal, drum roll please- Richard Millhouse Nixon
and William Jefferson Clinton. How's that for synchro-
nicity! And no Obambi is not on this distinguished list....
If I recall correctly, it is a total of 3.6T that is required in new and rollover financing to take place this year. Poor Uncle Sam let crack put him in ruins. Soon he will be in the alley on his knees for the next to the last rock.
Buying gold and silver with both hands.
This morning I bought another 1/2 oz gold in two 1/4 oz Eagles, 100 Standing Liberty quarters, and 100 Mercury dimes. This'll probably be the last purchase I make for a while. I have my little pile, plus the jewelry my wife's collected over the years.
Guns? I have a .38 and a .22 rifle. Food? Plenty of rice and beans, enough to last a couple years, I reckon. Cheap insurance. Put a hand pump on the well last week. I'll probably die of a heart attack tomorrow, but it won't be for lack of aspirin, etc.
I was in the Air Force during the Carter Administration. We had even/odd gas rationing (based on your license plate #), double digit inflation, high unemployment, and shitty attitudes. Somehow, things seem worse this time, even though inflation hasn't hit yet. Everything is propped up on reeds. Euler's limit applies to columns; I wonder if there isn't a similar equation for catastrophic economic collapse. It doesn't happen gradually---it looks stable until it falls all at once, in an instant. The dollar drops 70% in the space of a day, for example. Nothing's the same after that.
I'll predict no failures in the bond auctions, but instead a massive failure in the stock market as the U.S. gov't is forced to sacrifice higher stock prices for higher bond prices (or at least stable bond prices).
I don't understand the reasoning behind "NO FAILURES IN THE BOND AUCTIONS" I too think we will have a retest of 667 on the spx and with that money would move to the short and mid term bills and notes I believe. I can't imagine anyone wanting to lock up money into 7-30 yr bonds? What would be the benefit with rates already this low? You can get the same false sense of security buying short rates and your money back without risk of larger loss. All markets for years and been moving together and now we see many markets moving in opposition. For years you could overlay any chart and it would have the same slope of hope. Would it be possible for all markets to move down and I mean all markets?
thank you for taking the time to compile such data for us.
The F/F joke will be on the tax payers. The Fed sensing the end game was near in late 2008 for the central banking model, they "offered" to help by acquiring F/F credits at par and with barely a year elapsing since and as soon as they fabricated a recovery in the economy, the Fed shifted those liabilities onto the US taxpayer with the raising of the ceiling. The Fed wouldn't see itself caught dead with that toxic paper that threatened its own solvency and what most convenient way than to dump it all before that hand grenade explodes onto the unsuspecting tax base. Anyone who doesn't see that is either blind or a central banker.
Once again, the important statistic is aggregate U.S. debt and that hasn't budged at all. The public sector is merely stepping in to replace the collapse of demand for private credit. Yes, sure the public balancesheet is exploding but it's barely keeping pace with the collapse of private credit and the banking sector will end up soaking up the Treasury supply especially given that govies have 0% risk weighting and the curve wil lstay this steep if not steeper
Indeed. Those excess reserves pack a punch, but only after some further steepening.
Hi, I've been following bonds for about a year. I read somewhere the following:
There is a higher foreign appetite for treasury debt as the dollar is declining in value. They can keep their respective currency undervalued by purchasing treasuries. And that they may purchase less as the dollar is gaining in value.
I am wondering if this is true, and if so, can you use this as a reliable tool to predict demand at auctions? For instance, the dollar is strengthening now, so would one expect bids to be light causing higher rates?
Thanks in advance...
I direct your attention to Bloomberg article just
released "Believing Barclay's means minimum 8%
return in $/yen carry trade" may answer your question.
I expect Bernanke, Geithner, LLP to engineer a "mini-crash" in the SPX to about 915 by claiming that they are withdrawing emergency stimulus measures.
That's only a 25% correction.
But once we pass 20%, everyone will be declaring a "new bear market" in stocks, and that will send any and every hedge fund careening back to the bond market, where all this "excess supply" of new Treasuries and rollover will be voraciously lapped up, each auction 350% oversubscribed.
The Fed will not have to buy any of it.
Because panicked hedge funds will be liquidating stocks en masse and piling into Treasuries so fast, we could see another super spike in bond prices.
When the SPX reaches 915, trillions of new debt will have been floated off at near zero cost, yields on long bonds will be so low, and short rates will likely be negative, and "Animal Spirits" will be re-ignited with "Stimulus No. 2" and stocks will u-turn and rally up to new, world record highs by the end of 2010.
LOL...
yep, that is the pattern.
if that's the case, they'll have to get moving soon due to the mid term elections. gotta get the equity correction/crash out of the way so market is rising into early fall election season. gotta get the bonds floated soon to grab the 2010 mid term stimulus/jobs bill money and drive rates low to coincide with spring home buying season...getting mortgage rates back into the 4's would provide lots of fodder for the "housing crisis is over and things are booming" Rahm inspired campaign theme.
I can see that,except for the new highs
From Bloomberg: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7I0yRLF4adQ
"Treasury’s Competition
The U.S. will face increased competition from other debt issuers, spurring investors to demand higher yields as the Federal Reserve ends a $1.6 trillion asset-purchase program, according to James Caron, head of U.S. interest-rate strategy in New York at Morgan Stanley. The central bank was the largest purchaser of Treasuries in 2009 through a $300 billion buyback of the securities completed in October.
The Treasury will sell a record $2.55 trillion of notes and bonds in 2010 [note: this does not include Bills], an increase of about $700 billion, or 38 percent, from this year, Morgan Stanley estimates. Caron says total dollar-denominated debt issuance will rise by $2.2 trillion in the next 12 months as corporate and municipal debt sales climb."
One must wonder how equities will fair when competing with greater capital demands in the debt market.
Of course, it would be a mistake to base the opinion of a nation's well-being and general vitality largely upon how well it's equity markets fare. However, when fiscal (debt) policy falls further from the purview (seemingly abandoned) oversight of elected officials and appointed regulators into the hands of an unelected (apolitical? pffft!) body which attempts to paper over the irresponsibility of the aforementioned officials, then we have conflated a situation which, from a nation security perspective, can erode from a condition of merely attempting to socialize the consequences of repeatedly reckless strategies into something truly a danger to the continuation of a political & philosophical framework so hard won.
So there.
Your friend,
Francisco Bandres de Abarca
Leadership. Morals. What' my cut?
Is the following not a microcosm of everything that America is experiencing?
in ELKHART Indiana one persons strory (from the White House Press Office aka the Associated Press)
Jan 2, 7:31 PM ESTPoster child for recession shows signs of recovery
http://hosted.ap.org/dynamic/stories/U/US_ELKHART_GLIMMER_OF_HOPE?SITE=N...
and from down the street in Evansville Indiana the story from a few thousand people and their Christmas Story of `recovery`
Global recession pounds shine off decade's promising start in areahttp://www.courierpress.com/news/2009/dec/24/bull-gives-way-to-bear-glob...
Poster child for recession shows signs of recovery
Welcome to the new economy. You thought one job was good... how about two?
I have been following the Elkhart story on MSN for a while. In reality it mirrors America's hubris for the last 25 years especially where the middle class has been buying the illusion of grandeur while the red carpet has been pulled from beneath its feet and into the red state (China). Elkhart needs to get back to reality even it means a lot of short term pain. I wish Americans would realize how they have been HAD for so long !! Its a shame and sad how we exist in this head-in-the-sand status.....
What use is such a farcical "glimmer of hope" for Elkhartians when twice as much pain will have to be felt when the SHTF in 2010/11 if the free market ever is going to exist in this degenerating country !!!
Why do you assume that the Fed's monetization of Agencies went into Treasuries? The sellers of those securities likely bought risk in 2009 with the proceeds.
I draw your attention to page 18 of the Flow of Funds
Report -Household Sector. Line 24 Tsy Securities and
Line 27 Agency and GSE Securities. The investors
contained within the Household Sector sold a massive
amount of Agency and GSE Securities and bought a massive
amount of Tsy Securities in 2009. Not every investor out there can act like an opportunistic Hedge Fund. Some are
constrained by the pesky detail of investment guidelines.
1/4 PIMCO cuts holdings of treasuries, gilts and corp bonds. hugging benchmarks no bold positioning. Paul McCullay 2010 outlook. Just out on bloomberg.com
usa t bond "auctions" will never fail. mystery buyers show up from islands and continents far and wide when weakness is present. this has been going on for a long time.
Yeah, China, Japan, Taiwan, UK, etc.
All seem to have an insatiable appetite for more U.S. debt, no matter how much money we spend.
I suppose they figure that the more we borrow and spend, it is bound to spill into their own economies.
After all, look at the explosion in sales of new cellphones, iPods, LCD TV's, Coach handbags, etc.
All are made overseas....
Wash, Rinse, Repeat
Another unstoppable Perpetual Motion Machine
you both missed my allusion
cayman islands, the uk, they have been stealth monetizing for decades.
Yes it is widely known the Household sector in the FFA
contains the assets of US domestic Hedge Funds but as of
2008 this sectors exposure to agency and GSE debt was
vast when you combine direct holdings of 844bn with 900bn
of mutual fund holdings, pension fund holdings of 269bn
324bn state and local gov'ts and 391bn of holdings by
insurance companies. The fed is not disguising anything.
If you sense weakness in tsy auctions it is merely the
market telling the fed they need greater compensation
for their perceived risk in owning treasuries whether due to supply or inflation now or in the future or policy or all of the above.
Tyler has been on one side of this thing ahead of everyone. The low volume statistics he's been warning about since October are indicative of a dying equity market. Why is this important? Well big money is now married to 1-3-6 month Treasuries and if they elect NOT to roll them but start swapping out of USD instruments and going to overseas markets and/or commodities they are essentiall shorting the dollar. The play is to short the dog snot out of the USD at any price level between 80-82 on the USDX because the dorks at the Fed HAVE to institute MASSIVE bond purchases (QE) or face a total implosion of the rollovers on the Option-ARMs and underwater Prime Jumbos.
This sucker is going to blow sky high and Ben has to decide in public even though the decision has been made for him:
Inflate or die.
Watch the funds inflows into bonds and bills for safety in Q1/Q2.
I'm just sayin'.
Where have you been this year? For the last ten for
that matter with the explosion of not so Emerging Mkts.
This popular "investment" does include local currency debt
and equities. These markets are very attractive for
their emergence of a middle class with the means to
spend. China's focus on these folks extends beyond just
a thirst for commodities it also has an eye on their
consumers as their next victim to sell their cheap junk
to because we as a consumer seen to be tapped out for
the moment or sadly longer so it seems.
Treasury sales now account for 46% of GDP
Your name makes me grin. Love it. Go find an avatar that lives up to it. You rakist you, with your rakish good looks.
http://www.yard101.com/s/10015/MyProducts/yard-butler-rake.jpg
http://comps.fotosearch.com/comp/IMZ/IMZ004/cartoon-drawing-rake_~pgi042...
http://www.georginadevon.com/images/Book%20Covers/TheRakeL.jpg
And?
I am astonished that no one think about the most important:
Devaluation!!
This is what they want and this is what they will get
Marla or Tyler or Cornelius,
If I never saw this blog before, because of our lovely New Year's decorations, it would be difficult to know that this was ZeroHedge. Yea it appears on my firefox bar, but one could argue it should be a little more prominent. You have the ZeroHedge debate society if you scroll down a little, perhaps that is enough. I just wanted to point it out, you may not care.
Keep reading you may learn something or alternatively
you could go back to decorating which apparently has occupied your attention lately.
You missed my point entirely.
How so? If I have please clarify what is your point?
And to whom is it directed?
If you cannot read who I addressed the comment to, then there is clearly no communicating with you.
The Government and the Federal Reserve will need to find new mechanisms to conduct QE, which is nothing more than monetization of debt, or to use the vernacular, paying your bills by printing money instead of earning it.
The immense "reserves" in the banking system that right now are earning .25% overnight (and to my mind, were already earmarked to cover losses and prevent overt insolvency) are now to be deposited with the Federal Reserve as more lucrative "term deposits" to help "mop up" these immense puddles of "excess liquidity" (positively Orwellian in how they describe their madness). Presumably the next question is, well, gee, what should we do with all of these "term deposits" in our FR Bank? How shall we safely and responsibly invest them? The prize goes to those of you who guess that the deposited funds (which if you recall were merely swiped into existence as "reserves" in 2008 to "backstop" a then, and still, faltering banking system, but now, properly cellared and aged, laundered by a series of fancy sounding moves and, most importantly, cured by the passage of time in a world suffering from attention deficit disorder, these reserves turn out to be "real money," as if earned and then deposited by Joe Sixpack) will be invested in that which is the safest investment of all: debt issued by the US Treasury. You'll note that these investments are "not the Fed's." No, they represent the investment of the banks who have made the term deposits.
I will be interested to hear how this is presented, but predict you will see a rather insistent "match" of term deposits with the purchases of Treasuries, loudly proclaimed not to be QE, but rather merely a prudent investment of its depositors' funds. Too, as a QE program, it has the desirable attribute of being nominally "finite" in nature, as did the Fed's direct purchases under its QE programs, which had an announced time span and dollar amount. In this case the limit is much bigger of course, that of being all of the excess reserves (might even be enough to cover 2010's financing needs for .gov!) Still, a limit nonetheless. This is a requirement for successful QE as it rules out the hyperinflationary* "we'll print as much as we feel like it, thank you very much" policy that might otherwise be assumed to be (and of course, actually is) the policy. It will not all be used that way - heavens no, that would betray its true purpose. Someone will have to decide just how far this can be pushed. And of course, there is always the "Household Sector" to soak up any excess.
Brilliant. GSEs bloat like a tick in 2010, and the Federal Reserves continues QE (debt monetization) by utilizing the term deposits to "invest" in US debt, all the while loudly proclaimed to be an eminently sensible program designed to reduce the risk of "inflation" caused by debt monetization, er ah, "excess reserves." The circularity of it is sheer genius. But keep in mind that the above is but one of the "all available tools" in the box. Equity crash and driving investors to debt would be useful, as another tool. God's work never ends.
__________________________________________
*hyperinflationary" in the sense of creating fertile grounds for "currency discontent".
Thank you for this insight. Perfectly logical and perfectly Orwellian. Just another reason why it is very difficult to properly time the markets, as the nonsense could seemingly continue for at least another year as you point out. Will there be a hiccup before continued monetization? Allowing the insiders (cough, Goldman Sachs, cough) to go short before going long again? Sure would be nice to be a fly on the wall. All one can rationally do at this point in time is hedge for whatever decision the banksters make.
Sure glad Obama brought all that change...
I posted something similar to your thoughts about QE in the "Year 3000" post before I read this. Your 'cover story' makes so much sense that I would not be surprised if this is exactly what the Fed/Treasury will tell us in coming months.
Also the Fed wants us to think they are 'tightening' by holding the 'reverse repo' story continually in front of us. In the end they will be lucky if even 5% of the total growth in the Fed balance sheet was offset on the liability side by reverse repos.
The global elite will initiate another GFC to nudge the world toward an IMF/BIS/FSB controlled international monetary regime based on the SDR as a single global currency. The next financial crisis will provide a further impetus toward world government by allowing the IMF vis a vis the austerity measures accompanying its bailout packages to generate revenues for supranational organizations.
The stranglehold of the global elite on the world economy will be cemented by virtue of a mandatory carbon cap and trade system and financial transaction taxes (the first truly global tax and denominated in SDRs). Specifically, sovereign debt defaulters will be required to pay back IMF sponsored bailout loans in SDRs as well as implement austerity measures utilizing some combination of carbon taxes, carbon emission limits and/or mandatory acceptance of carbon cap and trade system.
The requirement that the bailout be paid back in SDRs and mandatory restrictions on carbon emissions will allow supranational organizations to dictate industrial policy by regulating the global economy at its core -- energy usage.
The climate change movement will provide the IMF the moral high ground it needs to justify highly restrictive austerity measures and limits on economic growth. Moral justification the IMF sorely lacked in prior bailout efforts.
Meanwhile the G20 have directed the FSB and IMF to promulgate a set of international financial regulations that will eventually govern capital requirements and underwriting standards at major money center banks. An international financial transaction tax will be levied on the money center banks to fund their respective bailouts for stupendous mistakes in the capital markets.
The growing and, of course, unregulated markets in CDS on sovereign debts will be utilized to institute behind the scenes attacks on nation state victims Lehman style. Naturally there will be no disclosure regarding the "investors" behind these future sovereign debt CDS attacks. The recent action in CDS on Greek sovereign debt was merely greasing the skids for the real show.
The leading candidate for the next financial crisis is clearly the unwinding of the dollar carry trade combined with severe duration funding mismatches which will cause sufficient economic destruction to overcome the widespread, lingering resistance to the handing over of national sovereignty to global organizations.
One can see practice runs of this “busting out” process in the island nations of Ireland and Iceland. Ireland recently voted in favor of the Lisbon Treaty in exchange for Euro bailout money. Iceland agreed to become part of the Euro Zone and make the UK whole on its Icesave bailout in exchange for IMF funds.
Now there is tremendous public pressure being placed on David Cameron to agree to a vote on the Lisbon Treaty if the Tories come to power in England. The Lisbon Treaty basically creates a European super state.
An alternative financial crisis would be a US dollar collapse. However, in a US dollar collapse scenario, the IMF would not have sufficient leverage over developing nations whose external debt is primarily USD denominated. A USD collapse would also allow too many corporate, government and individual debt slaves to throw off their shackles. Not something the global elite will allow to happen.
This passage from a recent Reuters article describes how the IMF perceives major financial crises as opportunities to implement its global agenda.
I guess Strauss-Kahn must be reading from the same playbook as Rahm Emanuel.
NO TIME TO LOSE
Strauss-Kahn expressed concern that political willingness to overhaul the international monetary system will falter if, in a year's time, the visible signs of the economic crisis have faded.
He said the momentum to cooperate had already eased somewhat, six months after the London summit of the Group of 20 agreed on a need for change to ensure a more stable global financial order.
http://www.reuters.com/article/businessNews/idUSTRE5AG0I720091117?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+reuters/businessNews+%28News+/+US+/+Business+News%29
Brilliant article.
If you look at the last table....except UK and japan no one else seems to increase their treasury purchase.........
fresbee
http://www.investingcontrarian.com
Neither it seems is PIMCO go look at Bloomberg.com
Normally insanity is defined as doing the same thing over and over again expecting a different result – here it’s the insanity of doing the same thing over and over expecting the same result. ie. willing buyers.
I believe the saying is "stop doing the same thing
expecting different results" having to do with stupid
behaviors not insanity. There are willing buyers at a level the market is in the process of defining a new level of interest in treasuries within an ever changing invest ment landscape, variables and the most widely accepted
interpretation of these events in real time.
I see a lot of advertisements by GS urging folks to invest in their mutual funds or in funds that seek GS's esteemed advice. Have GS guided funds been seeing massive withdrawals lately with all the negative publicity GS has been garnering ? Even commoners (sheeple) I meet are aware of GS's role in the fiasco !! Any way to track fund flows for GS ??
Sure if your name is on the Goldman investment committee.
Derivatives the more complicated the better they are there.
To really see the measure of the man read the following if
you haven't already www.mcclatchydc.com/227/story/81465.html
If Goldman tried to give me investment advice I would run
from that loaded coin.
Anyone notice that Luxembourg holds 91 Billion, while Germany only holds 59 Billion?
Luxembourg, a tiny country the size of the Greater LA Area, but less urban, is an infamous tax haven in Europe.
And 170 Billions in the Carribean. Together these two combined represent more money than the UK holds. (170 + 90 = 260 Billion). Throw in some of the 146 Billion from this murky "All others".
What does that mean? Who owns that money?