3 Years Ago When Fed Decided To Buy...

I said that Fed was buying these mortgages and this was going to eventually cause valuation problems of Treasuries since they will be perceived like a mortgage paper. What does that 5T new debt correspond to? A bunch of sinking and worthless paper and now after QE, even the economic value is declining. Fed has done something very very reckless with QE2, many major bond dealers warned, they should've let the economy ramp up slowly or inject much slower, classic pushing a string. The ratings agencies took a notice of what happened about 3 years later, US has now a colossal debt and yet not much to show for it. The valuations are impossible to push above 1340-1370 zone for years to come. There is nothing worse than a credit bubble bursting, I suppose. We got to see a tech mania to bond bubble bursting, and two wars, this has to be a very unique time in American history and now Fed is cornered pretty much, but somebody has to buy the 2T new debt coming and trillions more. Currently, the stock market decline instead of a bond sell off (as higher rates cannot be supported) is keeping the bonds stable or even rallying higher. What happens when the stocks get smashed and the govt still continues to issue these bonds? You will have forced higher rates in an already broken economy. Tea Party "extremists" tried to really fix the issue as if there is a solution and then they also understood that we are already bankrupt, so they silently went away...

I said that Fed was buying these mortgages and this was going to eventually cause valuation problems of Treasuries since they will be perceived like a mortgage paper. What does that 5T new debt correspond to? A bunch of sinking and worthless paper and now after QE, even the economic value is declining.

Fed has done something very very reckless with QE2, many major bond dealers warned, they should've let the economy ramp up slowly or inject much slower, classic pushing a string. The ratings agencies took a notice of what happened about 3 years later, US has now a colossal debt and yet not much to show for it. The valuations are impossible to push above 1340-1370 zone for years to come.

There is nothing worse than a credit bubble bursting, I suppose. We got to see a tech mania to bond bubble bursting, and two wars, this has to be a very unique time in American history and now Fed is cornered pretty much, but somebody has to buy the 2T new debt coming and trillions more. Currently, the stock market decline instead of a bond sell off (as higher rates cannot be supported) is keeping the bonds stable or even rallying higher.

What happens when the stocks get smashed and the govt still continues to issue these bonds? You will have forced higher rates in an already broken economy. Tea Party "extremists" tried to really fix the issue as if there is a solution and then they also understood that we are already bankrupt, so they silently went away...

Yer getting me depressed.. lets just keep playing the game until the game is up..

Here's the trend -



And unless Americans and their politicians grow some brain, here's the destination -



- check those different y-axis.

Also, keep in mind the downgrades of Japan in the nineties - some impact, ey?


The concern for us turning into Greece (can't happen) is causing us to instead turn into Japan (is happening).

How long will it take for people to recognize this? And, mirror mirror on the wall, who will be blamed for "hiding" it from us?

Edited by salsabob, 04 August 2011 - 09:57 AM.

Fed, smed. QEs, poo-ee

With the possible exception of the credit rating agencies, I can't think of a more impotent entity right now -



That difference between the yellow line and the other is the excess bank reserves sitting as e-digits on the Fed's computer and no place to go.

Edited by salsabob, 04 August 2011 - 10:14 AM.

Once the "last safe haven" gold market breaks, the Fed can do QE3.

I truly like you Arb-but remind me to never take a vacation with you! I will NOT be trading my 3 days off next week-no need. I may, in your honor-enter a couple positions before I leave.