The United States is going to attack Assad in Syria?

[rebelcowboysnb]

If tom comes back by today I will ask if she has talked about the banks.

 

[Teery]

" When the interest rates rise, it will explode the national debt. If the debt stayed were it is now, every 1% rise in the ten year treasury would add an estimated 170 billion annually to interest payments."
Sorry this statement is often used on the gold selling sites by the crash promoters. For it to be true all of the $17 trillion debt would need to be reset at the new interest rate yearly, and that doesn't happen. Government Treasury Notes are sold at a fixed rate. Just like your 30 year fixed rate mortgage has the same interest rate for the 30 years, a 10 T- note has the same interest rate for the 10 year life of the note. So for all the 10 T-Notes to go up 1% of interest would take 10 years.

Now will the U.S. hit Syria ? Maybe.
What will we hit if we do hit them ? Well we said we don't want take out the leadership, we cant hit the chemical weapons, we could hit there command and control buildings but those are empty by now so we would be hitting empty buildings, now the one place I would stay away from is any airfields in Syria. The Syrian government is getting supplies from Russia and Iran by air everyday. So about the only way we can hurt them is at their airfields.

Treasuries work inverse which confuses allot of people. You lose money if interest rates rise and you are currently holding treasuries. You dump your current position and purchase at the higher rate or dump them and stay on the sidelines. Banks are required by law to purchase treasuries back regardless if they have matured. The ten year is used by the markets as a "indicator". Where the ten year moves, the rest of the rates track that move. Keep in mind the government sells short and long term instruments. From 30 days up to 30 years...A buy and hold strategy in today's market will end up being a buy and lose and it is not the average Joe or mom and pop that owns the majority of the bonds, it is hedge funds, wall street investment banks, large institutions, and foreign governments along with the fed..Mom and pop bond holders will get crushed if they don't move with market forces. Google or youtube "bond bubble" to get a better understanding.

Gold / silver has a purpose but it is not what people think. If a worse case scenario should occur, and a currency becomes useless, gold / silver will not be your savior in the near term. After things have worked there way out, gold / silver gives you a commodity (hedge) to exchange for a new currency. It won't necessarily feed you or pay your bills during a crisis as most will want food or other things and will likely barter with like commodities.

 

[hemet dennis]

Quote:
All that is goobly goop.
The point is you told people that for every 1% rise in interest rates adds $170 billion annually in interest payments, sorry but that's not true. Treasuries work inverse ? Inverse of what ?

A person that buys a $1000 10 year Treasury note for $950 with 3% interest will collect $30 a year for 10 years, at the end of the 10 years they receive $1000. So for the investment of $950 you will receive a total of $1300.

Banks are not required to buy any bonds back. Banks will resell bonds for you. If you do decide to sell a note that hasn't matured yet then it will be at a discount. You don't lose money if interest rates rise.

Please don't go by some You Tube video.

 

[Teery]

All that is goobly goop.
The point is you told people that for every 1% rise in interest rates adds $170 billion annually in interest payments, sorry but that's not true. Treasuries work inverse ? Inverse of what ?

A person that buys a $1000 10 year Treasury note for $950 with 3% interest will collect $30 a year for 10 years, at the end of the 10 years they receive $1000. So for the investment of $950 you will receive a total of $1300.

Banks are not required to buy any bonds back. Banks will resell bonds for you. If you do decide to sell a note that hasn't matured yet then it will be at a discount. You don't lose money if interest rates rise.

Please don't go by some You Tube video.

You actually have no clue of what I am talking about which is no fault of yours. Maybe I am not articulating it which has always been one of my weakness's. I tend to skim over things. So I will try again...

When new bonds are issued, they typically carry coupon rates at or close to the prevailing market interest rate. Interest rates and bond prices have what's called an "inverse relationship" – meaning, when one goes up, the other goes down. During treasury auction, it is inverse as the low bid wins.

If interest rates go up say 1% or say new bonds costing $1000 are paying an 4% coupon ($40 a year in interest), buyers will be reluctant to pay you face value ($1,000) for your 3%. In order to sell, you'd have to offer your bond at a lower price – a discount – that would enable it to generate approximately 4% to the new owner. In this case, that would mean a price of about $875. Banks have to take back the bond and try and sell it (by law). But they will pay you only what they can sell it for. Generally, they purchase it at or below that price when you take it in.

Keep in mind the national debt is not static in terms of finance. It is constantly being refinanced as bonds mature. The U.S. is not just borrowing on new debt, it is constantly refinancing old debt as well. Rates are down only because the fed's QE. Buying 40 billion a month in bonds allows them to manipulate the rate. Once they taper the buying, rates will go up fast. Many EURO zone countries are paying between 5% and 7% for there ten year. If that happens here, well do the math..What is the interest payments on the debt (bonds) if they go from 2.5% to 5%..It will start lower but as more debt is rolled over (refinanced), it climbs rapidly. It is a ticking time bomb and the clock starts if the fed's exit QE, If you have noticed in my past posts, I basically give the U.S. 3 to 5 years before it starts feeling the crunch (pressure) It will take about that amount of time for the refinancing of the debt to give the U.S. trouble. Hopefully, I will be out of the U.S. by then...

The markets uses the ten year bond price to figure where government and private corporations debt loads are going. It is a indicator. It is basically used to find the average. A 30 day bond vs. a 30 year bond has two different rates. 2 year v.. 15 year and so on. The ten year rate is generally considered the average. On average a rate of 1% rise in the ten year treasury will add a 170 billion when the recycling of the debt is achieved. 200 billion at a 20 trillion dollar debt and so on...In 2011 the treasury department issued 7.5 trillion in debt. The 2011 budget deficit was 1.3 trillion. That mean 6.2 trillion was refinanced.

 

[rebelcowboysnb]

 

[hemet dennis]

Quote:
Please post a link or a public law no. where it says banks must buy your T-Notes back before they mature.
The banks have to redeem the Notes when they mature but not before. They will resell them for you for a fee before they mature.

OK let say I buy a 10 year T-Note at 3% and then after 3 years the interest rate goes up to 4%. Why would I sell the bond at a discount so the buyer will collect 4% so that I can buy another T-Note at 4% interest ? If I bought it for $950 and sold it for $875 the lose would be all but $15 or the interest I earned for the last 3 years. Why would I take that loss ? So I now buy another 10 year T-Note at $950 and 4% interest that will earn me $400 in interest and $1000 at maturity for a total of $1400, but I had to give back $75 on the first Note so it's $1325. So was that $25 worth waiting 10 years ? That's an extra $2.50 a year. But I didn't add the fee for selling the first Note. So it would really be no gain.

To raise the annual interest payments $170 billion with a 1% interest rise would take a minimum of 5 years. But the FED will taper bond purchases on an improved economy, in an improved economy the government will have smaller deficits so they will issue less bonds and notes.

But back on topic
If we attack Syria and they decide to attack Israel with chemical weapons then what do we do ? What will Israel do ?

 

[suncatcher]

Satire people.

LOL! Good one, Senator Obama did vote present many times! Not so easy to do when you are president of the United States, although he has somehow managed to wiggle out of EVERY scandal in his administration so far.

 

[Teery]

Please post a link or a public law no. where it says banks must buy your T-Notes back before they mature.
The banks have to redeem the Notes when they mature but not before. They will resell them for you for a fee before they mature.

OK let say I buy a 10 year T-Note at 3% and then after 3 years the interest rate goes up to 4%. Why would I sell the bond at a discount so the buyer will collect 4% so that I can buy another T-Note at 4% interest ? If I bought it for $950 and sold it for $875 the lose would be all but $15 or the interest I earned for the last 3 years. Why would I take that loss ? So I now buy another 10 year T-Note at $950 and 4% interest that will earn me $400 in interest and $1000 at maturity for a total of $1400, but I had to give back $75 on the first Note so it's $1325. So was that $25 worth waiting 10 years ? That's an extra $2.50 a year. But I didn't add the fee for selling the first Note. So it would really be no gain.

To raise the annual interest payments $170 billion with a 1% interest rise would take a minimum of 5 years. But the FED will taper bond purchases on an improved economy, in an improved economy the government will have smaller deficits so they will issue less bonds and notes.

But back on topic
If we attack Syria and they decide to attack Israel with chemical weapons then what do we do ? What will Israel do ?

The 17 trillion dollars is on the books..It has nothing to do with future deficits..Deficits is borrowing for current account short falls not current account balance. The 17 trillion (which is the current account balance / liability) doesn't disappear if the U.S. runs 0 deficits..The 17 trillion gets refinanced as treasuries sell or mature. I obviously cannot articulate why you would dump your bonds. ....If you have ten year's at 3%, you have nothing worry about as the rate is 2.77. The markets though will dump bonds if the rate rises as they are chasing yields.

The fed will be forced to taper and it will have nothing to do with the economy, it will be because of inflation. You can't monetize the debt forever and expect no consequences. I just read a note the banking law was changed in 2012 according treasury direct when it comes to institution (banks) redemption's. I didn't read the rule change but the note stated something to the affect that Meryl Lynch was the redemption broker or the Fiscal Service in the Office of Public Debt Accounting, Debt Accounting Branch (DAB) I am not sure if , or how that does, or does not affect redemption at a local bank.

I suggested 3 to 5 years as most debt purchased by the bond market is short duration (30 day to 2 years) The fed is buying most, if not all the 10 year and greater. What percentage is what, I haven't a clue. At 40 billion the fed is buying 480 billion a year.

Here is a oldie but goo-die: What is different is the debt is greater but the interest rate is lower, but the principle discussed on the debt / interest is the same:

As far as the economy getting better, that is unlikely. There is too much uncertainty and as interest rates rise, corporate borrowing costs rise as well. Corporate expansion will be minimal at best. Household debt is 12 trillion so relying on consumers spending to the improve the economy while wages are stagnated will be minimal at best as well. From a strictly demographic point of view (no politics) the U.S. population is aging (baby Boomers) and retiring. During the next 17 year period, 26% of the population will be retired and collecting social security and medicare. This will cause the U.S. debt to rise as well. Generally, when retirement occurs, seniors downsize. I doubt they will add much to the economy. If the economy does improve, it is not likely to start another spending boom.

Indicators right now suggest the U.S. has entered another recession cycle...see: http://www.zerohedge.com/news/2013-08-29/has-never-happened-outside-recession

As far as Syria, It appears Obama may have to go at it alone (France may still help). UK Parliament rejected the use of military force / strike.

 

[hemet dennis]

This ?

OK I see where you're getting the bad information from. Didn't I say not to listen to the You-Tube videos ?

To dump bonds as you say, you have to have a buyer now if you have to discount the bonds you are dumping so the buyer will get the current rate then you will gain nothing, just as I showed you.

All Federally chartered banks have to redeem T-Notes interest coupons and the mature Notes, none have to buy your Notes that have not matured.

Just another note, the government gets back the interest that they pay to the FED for the Notes they hold.

The Social Security fund will be able to payout full benefits for the next 25 years without any changes to the system. They have about 2.6 trillion in the trust fund to pay benefits. Now soon you will hear that Social Security wont be able to send out checks unless the debt ceiling is raised, but it's a lie. The trust fund is special interest bearing T-Notes. So to raise money to pay SS checks, say they need $1 billion over what was paid in from payroll taxes, then treasury needs to issue $1 billion in Notes or bonds, and payoff $1 billion in the special T-Notes. That doesn't raise the debt, it only changes who is owed.

Almost forgot, in that video he says that the government owes SS $4.6 trillion, that's wrong. So you have to ask, does this guy know what he's talking about if he can get something so basic wrong ?

 

[Teery]

This ?

OK I see where you're getting the bad information from. Didn't I say not to listen to the You-Tube videos ?

To dump bonds as you say, you have to have a buyer now if you have to discount the bonds you are dumping so the buyer will get the current rate then you will gain nothing, just as I showed you.

All Federally chartered banks have to redeem T-Notes interest coupons and the mature Notes, none have to buy your Notes that have not matured.

Just another note, the government gets back the interest that they pay to the FED for the Notes they hold.

The Social Security fund will be able to payout full benefits for the next 25 years without any changes to the system. They have about 2.6 trillion in the trust fund to pay benefits. Now soon you will hear that Social Security wont be able to send out checks unless the debt ceiling is raised, but it's a lie. The trust fund is special interest bearing T-Notes. So to raise money to pay SS checks, say they need $1 billion over what was paid in from payroll taxes, then treasury needs to issue $1 billion in Notes or bonds, and payoff $1 billion in the special T-Notes. That doesn't raise the debt, it only changes who is owed.

Almost forgot, in that video he says that the government owes SS $4.6 trillion, that's wrong. So you have to ask, does this guy know what he's talking about if he can get something so basic wrong ?.

ROTFLMFAO The social security fund is a piece of paper... a IOU...The government does not have 2.6 trillion in a bank account somewhere..LOL...Where does the government get that 1 billion from? The market at current market rates...it borrows....you are confusing accounting gimmicks with some fund availability fantasy..That 2.6 trillion fund (bond) was already spent by the government...it doesn't have it...their is no trust "fund". there is a IOU..All taxes collected, including SSN goes into the general account to be spent where the government needs it. They make a ledger entry for Social Security.

If the debt ceiling isn't raised Social security will still be paid..but not because the government will want to, but because it is political suicide if they don't. The military may not get paid along with government employees, but creditors will. In essence, if the debt ceiling isn't raised, the government defaults. It won't be able to pay all its bills. They will raise the debt ceiling after the political jousting and the blame game is over...

IMHO, there is absolutely no way the government will ever pay down / off the debt. Interest alone will make it explode over time. But that doesn't mean congress doesn't have options. There has been discussion lately that the government may (under the guise of consumer protection) require 401K, IRA's, and other retirement instruments to hold a certain percentage of 30 year treasuries. If this became law, the government could rely on a steady stream of income to finance its debt after the fed exists. Problem with that is the government will regulate private retirement accounts..in essence they will have a say in your retirement...

Yep, they do get interest from the fed but it is an accounting gimmick..a ledger entry that allows them to issue more debt...

The government doesn't owe social security, it is obligated to pay social security. In terms of accounting, yes the government owes the trust fund if it should ever put that trust fund in a real account with real dollars instead of a ledger.

As far as dumping treasuries Read: http://www.reuters.com/article/2013/08/16/us-usa-economy-capital-idUSBRE97F02T20130816

Hedge funds holding treasuries will dump and short the bond market. You do understand shorting, correct?