The fiscal cliff

[rufus]

First off your second link goes to a story about "The Governments plan to take retirement accounts".
They say the reason is the lack of demand for Government bonds. So when you start a story with a lie, how can you believe anything else they say ?

How do you determine that is a lie?

 

[hemet dennis]

Quote:
Because there's no lack of demand for government bonds. If there was then the interest rate on the bonds would be higher.

 

[hemet dennis]

Quote:
The bonds are a loan not a commodity. If people don't want to loan you money then you have to pay a higher interest rate. It's the low bid that gets the bonds at the Treasury auction, not the highest interest rate.

just a short word about Economics.....

 

[rufus]

I guess everyone is entitled to their opinion on this issue, but unfortunately some of us will be wrong. I think if 61 per cent of the government bonds are being force fed into the federal reserve system, that is a recipe for massive inflation. That will be followed by hyper inflation, and that means that we all will be poor.

Money flows in a twinkling of an eye from country to country now. People will seek to put their savings into accounts in countries that are perceived to be safer. Or, they will put it into the stock market or precious metals. Real capital will flee the country as the phoney money floods it.

Prior to 1965, the US dollar was backed by silver. When we went straight to a fiat currency, the US government convinced the oil producing nations to price oil in dollars rather than pounds sterling. Thus was born the petro dollar. Everyone needed oil, and as long as payment was required in dollars it had value.

Now if those oil producing countries switch to the renminbi, the dollar is toast.

When those middle eastern countries and China start dumping all of those dollars they have accumulated, the situation will go from bad to worse.

The Ghilarducci plan would seize the savings of those who worked and saved while it would reward those that didn't. But then again, if the dollar becomes worthless, what does it matter?

 

[hemet dennis]

Quote: The Government doesn't set the interest rate, that's what the auction is.

The short definition: In economics, a commodity is a marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services.

When people get a 30 year mortgage don't they do the same ? Don't they payback the loan with cheaper dollars ?

If I give you money to hold for me isn't that a liability for you to give it back when I need it ?

liability [ˌlaɪəˈbɪlɪtɪ]n pl -ties
1. the state of being liable
2. (Economics, Accounting & Finance / Banking & Finance) a financial obligation

And if I loan you money then that's an asset that i can collect on ?

In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash

There's a demand for U.S. government bonds because you're more likely to get your money from them then any other governments bonds. Now if you want to collect a higher interest rate then you can invest in any other governments bonds. I think you'll get the one of the highest from Greece.

 

[hemet dennis]

I guess everyone is entitled to their opinion on this issue, but unfortunately some of us will be wrong. I think if 61 per cent of the government bonds are being force fed into the federal reserve system, that is a recipe for massive inflation. That will be followed by hyper inflation, and that means that we all will be poor.

Money flows in a twinkling of an eye from country to country now. People will seek to put their savings into accounts in countries that are perceived to be safer. Or, they will put it into the stock market or precious metals. Real capital will flee the country as the phoney money floods it.

Prior to 1965, the US dollar was backed by silver. When we went straight to a fiat currency, the US government convinced the oil producing nations to price oil in dollars rather than pounds sterling. Thus was born the petro dollar. Everyone needed oil, and as long as payment was required in dollars it had value.

Now if those oil producing countries switch to the renminbi, the dollar is toast.

When those middle eastern countries and China start dumping all of those dollars they have accumulated, the situation will go from bad to worse.

The Ghilarducci plan would seize the savings of those who worked and saved while it would reward those that didn't. But then again, if the dollar becomes worthless, what does it matter?

The Federal Reserve Bank buys less then 10% of the bonds, and they buy no bonds from the Treasury.

 

[rufus]

The Federal Reserve Bank buys less then 10% of the bonds, and they buy no bonds from the Treasury.

Dennis, where do you get those figures? Read this and then re think the issue: http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106

The article is exactly one year old, but I don't think the situation has changed.

 

[hemet dennis]

Quote:
I don't know at what time the person was talking about. He may have been talking 2008-2009 when the FED did buy a big chunk.

But if you take this month the treasury will sell about 260 billion in bonds. the FED is buying about 80 billion a month but also retiring about 24 billion for a net of about 56 billion. So this month it will be less then 20%, that's along way from 61%. And they buy no bonds from the treasury they only buy on the open market.

The last time I checked a month it was less then 10% so it does go up and down.

 

[hemet dennis]

Quote:
I don't know at what time the person was talking about. He may have been talking 2008-2009 when the FED did buy a big chunk.

But if you take this month the treasury will sell about 260 billion in bonds. the FED is buying about 80 billion a month but also retiring about 24 billion for a net of about 56 billion. So this month it will be less then 20%, that's along way from 61%. And they buy no bonds from the treasury they only buy on the open market.

The last time I checked a month it was less then 10% so it does go up and down.

Oh that's what it was I had forgot about something. The Fed isn't buying 80 billion in bonds, they're also buying mortgage-backed securities. So it's much less then 20% of the bond that the FED ends up with. I knew 20% was to high.

 

[rufus]

Dennis are confusing the T bill auction with the side deals between the fed and the treasury? I suspect there are two different ways they sell bonds.