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USA Economic Depression Thread
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ElJefe Offline
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Post: #26
RE: USA heading into a depression.
(02-24-2016 05:52 PM)The Beast1 Wrote:  
(02-24-2016 05:50 PM)Fast Eddie Wrote:  
(02-24-2016 05:31 PM)The Beast1 Wrote:  He also plans to drastically reduce the government. I know off the top of my head he plans on gutting the Department of Education. One can only hope he will drastically shrink other departments of the federal government as well.

I'm as big a fan of Trump as anyone, but to be honest, there is not much he can do to stave off financial catastrophe. The big items are Social Security, Medicare, and the national debt, and one can't simply magic wand those liabilities away, not even Trump. Everything else is a pittance in comparison.

This is one of the things I think he'll have to back out on. He's going to have to kill social security in one fashion or another. The unfunded liabilities are what will do us in.

Shame really, it's going to hurt quite a lot of people.

Social security can be "saved" by raising the retirement to 68 and letting it track life expectancy.

The health care sector is a bigger mess. Lack of competition and regulation render it prohibitively expensive. You want a system like Singapore where transparency is maximized so consumers pressure providers to provide the optimal point in the trade-off between cost-quality.

Can someone share more on how Trump intends to gut the Dept of Education? That would do a huge amount of good. If he good get rid of the Dept of Agriculture as well, that'd be grand.

Best solution to ending crony capitalismm in the US would be to abolish the corporate tax. That makes lobbying a far less interesting proposition and makes investing in American businesses far more attractive. You could finance it by phasing out cash subsidies, turning capital income taxation into a non-deductible flat tax, and levying a 10% tariff on all imports. That would probably raise GDP 10% right there.

If the illegals are deported that will lead to much better public finances. If legal immigration policy is improved that will also generate serious benefits.

As for the economy... I think the Shiller P/E is high, but not at its highest? Also, despite doom and gloom, it's not uniform across the economy. It's particular to certain demographics. These groups will benefit from mass deportation of illegals.

I'm bullish on US economy if Trump wins, especially with Republican control of Congress. My only fear is he chooses some lousy SCOTUS's

A year from now you'll wish you started today
02-24-2016 06:15 PM
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Foolsgo1d Offline
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Post: #27
RE: USA heading into a depression.
Could it be too late to solve the debt crisis? That debt mountain for the entire world is pretty big and its owed to the few elites who own the central banks.
02-24-2016 06:37 PM
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Onto Offline
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Post: #28
RE: USA heading into a depression.
Economies, Stock Market, and Assets in general are driven by social mood. Just like a person can't be jubliant with anything forever, so is the economy. After all, the economy is made up of people and people are psychological creatures. They are on a wheel of high points and low points, so the economy will be too.

President's don't break or fix an economy. They are just along for the ride.
(This post was last modified: 02-24-2016 06:49 PM by Onto.)
02-24-2016 06:47 PM
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Post: #29
RE: USA heading into a depression.
93 million out of work would equate to 25% unemployment, ouch!

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02-24-2016 07:37 PM
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Deepdiver Offline
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Post: #30
RE: USA heading into a depression.
Real Unemployment and Inflation and Money Supply in the USA:

http://www.shadowstats.com/ click on EMP CPI and M3

The next great bubble to burst crashingbanks.com

Takeaway - The next bubble to burst is the $60 Trillion Credit Bubble - not good.
(This post was last modified: 02-24-2016 08:16 PM by Deepdiver.)
02-24-2016 08:15 PM
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el mechanico Offline
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Post: #31
RE: USA heading into a depression.
Nothing is happening guys. Relax.
02-24-2016 09:12 PM
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Post: #32
RE: USA heading into a depression.
Chinese are shitting their pants now that Trump wants to beat their ass.
02-24-2016 09:18 PM
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El Chinito loco Offline
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Post: #33
RE: USA heading into a depression.
(02-24-2016 02:22 PM)RIslander Wrote:  To the forum economic gurus... whats the maximum debt the US can sustain? What happens when we hit it?

Public debt to GDP is kind of an interesting metric because if you look at Japan they have been in serious debt for decades now. The rule seems to be there is no rule to this. If you're an important developed country and you are a global economic hub then you can set your own policies and just get by on being barely solvent.

The U.S. and Japan are such massive producers in the world and so much finance and global investment equity flows through that "too big to fail" is a real thing.

Plus who the hell is going to come forcibly collect on the U.S. ? We aren't living in times of colonial gunboat diplomacy or militant mercantilism. In addition when you have the largest and most well equipped military in the world and also control two of the biggest financing institutions in the world (World bank and IMF) then you set your own rules.

Let's say if the U.S. government put large tracts of land up as collateral on debt no foreign nation will ever collect on that anyways. It'll just be signed over on paper while the U.S. economy recovers and then the land will be repurchased back at market rate in good faith plus maybe some interest.

The problems start occuring when you're a mid level sized or lower tier country who doesn't produce that much and is also in serious debt. An example are the southern european nations. Italy is still pretty important but you see countries like Greece barely keeping it together.
02-24-2016 09:42 PM
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Fast Eddie Offline
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Post: #34
RE: USA heading into a depression.
(02-24-2016 09:42 PM)El Chinito loco Wrote:  
(02-24-2016 02:22 PM)RIslander Wrote:  To the forum economic gurus... whats the maximum debt the US can sustain? What happens when we hit it?
Plus who the hell is going to come forcibly collect on the U.S. ? We aren't living in times of colonial gunboat diplomacy or militant mercantilism. In addition when you have the largest and most well equipped military in the world and also control two of the biggest financing institutions in the world (World bank and IMF) then you set your own rules.

Let's say if the U.S. government put large tracts of land up as collateral on debt no foreign nation will ever collect on that anyways. It'll just be signed over on paper while the U.S. economy recovers and then the land will be repurchased back at market rate in good faith plus maybe some interest.

The problems start occuring when you're a mid level sized or lower tier country who doesn't produce that much and is also in serious debt. An example are the southern european nations. Italy is still pretty important but you see countries like Greece barely keeping it together.

It doesn't quite work like that. Nobody is going to "forcibly collect" on any sovereign debt, even on that belonging to tiny island nations. The problem the United States faces is that it must continue to borrow in order to fund the running of the government, and in order to keep borrowing it cannot default on existing debt obligations. Aside from that, at some point the debt will rise to such a level that US government bonds will come to be seen as a risky investment, and there won't be enough creditors willing to lend. Are we there yet, no, but it is something that will eventually come to pass if the debt/GDP keeps climbing.
02-25-2016 05:01 AM
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jayko Offline
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Post: #35
RE: USA heading into a depression.
Russia+China intend to rock the reserve currency boat and is doing it now as we speak. Watch for dead of petrodollar when Saudi agree to accept other currencies for their oil trade. We live in interesting time, people. WWIII is not too far off from the smell of it.
02-25-2016 08:35 AM
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The Beast1 Offline
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Post: #36
RE: USA heading into a depression.
(02-25-2016 08:35 AM)jayko Wrote:  Russia+China intend to rock the reserve currency boat and is doing it now as we speak. Watch for dead of petrodollar when Saudi agree to accept other currencies for their oil trade. We live in interesting time, people. WWIII is not too far off from the smell of it.

The petrodollar has already died. I believe I read somewhere that oil nations are withdrawing their cash from the financial systems as opposed to putting more into it.

I think we're also at the point where US government debt isn't being absorbed by actual investors but hidden away using trick financial moves. When China was liquidating its US bond notes an entity working through Belgium was absorbing the sales. Where they were going? No one knows.

Times are going to get very very interesting.
02-25-2016 09:52 AM
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Post: #37
RE: USA heading into a depression.
China has officially unpegged themselves from the Petro Dollar, interesting times ahead indeed.

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02-25-2016 10:20 AM
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Fast Eddie Offline
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Post: #38
RE: USA heading into a depression.
(02-25-2016 09:52 AM)The Beast1 Wrote:  I think we're also at the point where US government debt isn't being absorbed by actual investors but hidden away using trick financial moves. When China was liquidating its US bond notes an entity working through Belgium was absorbing the sales. Where they were going? No one knows.

Do you have a link? I'd be interested to look into this.
02-25-2016 10:48 AM
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The Beast1 Offline
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Post: #39
RE: USA heading into a depression.
(02-25-2016 10:48 AM)Fast Eddie Wrote:  
(02-25-2016 09:52 AM)The Beast1 Wrote:  I think we're also at the point where US government debt isn't being absorbed by actual investors but hidden away using trick financial moves. When China was liquidating its US bond notes an entity working through Belgium was absorbing the sales. Where they were going? No one knows.

Do you have a link? I'd be interested to look into this.

http://www.zerohedge.com/news/2015-05-18...-treasurys

It's old news now. ZH was reporting on it pretty heavily a little under a year ago.
(This post was last modified: 02-25-2016 10:51 AM by The Beast1.)
02-25-2016 10:51 AM
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Fast Eddie Offline
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Post: #40
RE: USA heading into a depression.
(02-25-2016 10:51 AM)The Beast1 Wrote:  http://www.zerohedge.com/news/2015-05-18...-treasurys

It's old news now. ZH was reporting on it pretty heavily a little under a year ago.

Ok, I read that and it seems what's going on here is simply China disguising its own US debt maneuverings through a Belgian front, rather than China dumping Treasuries and some shadowy entity (implied to be FED) buying them up through a Belgian front in order to avoid a global panic sell off. The latter would be end days indeed, the former is just business as usual.
02-25-2016 10:59 AM
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The Beast1 Offline
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Post: #41
RE: USA heading into a depression.
(02-25-2016 10:59 AM)Fast Eddie Wrote:  
(02-25-2016 10:51 AM)The Beast1 Wrote:  http://www.zerohedge.com/news/2015-05-18...-treasurys

It's old news now. ZH was reporting on it pretty heavily a little under a year ago.

Ok, I read that and it seems what's going on here is simply China disguising its own US debt maneuverings through a Belgian front, rather than China dumping Treasuries and some shadowy entity (implied to be FED) buying them up through a Belgian front in order to avoid a global panic sell off. The latter would be end days indeed, the former is just business as usual.

Try this Google link:
https://www.google.com/search?q=zerohedg...9&ie=UTF-8

There was quite a bit more news about it extending in the summer. Here's another post:
http://www.zerohedge.com/news/2015-07-17...hs-belgium

I think the implication is that the FED is in fact buying these USTs and disguising them in some form to keep them off of the books. What if the FED buys all of the UST's and the federal government just pays interest to the fed? Is that necessarily a bad thing? Sure you can't really get anymore credit at that point, but it does seem rather dire.
(This post was last modified: 02-25-2016 11:06 AM by The Beast1.)
02-25-2016 11:03 AM
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Fast Eddie Offline
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Post: #42
RE: USA heading into a depression.
(02-25-2016 11:03 AM)The Beast1 Wrote:  I think the implication is that the FED is in fact buying these USTs and disguising them in some form to keep them off of the books. What if the FED buys all of the UST's and the federal government just pays interest to the fed? Is that necessarily a bad thing? Sure you can't really get anymore credit at that point, but it does seem rather dire.

Well, that ZH link just said China is dumping treasuries, it didn't imply that there aren't any "real" counterparties out there and that these treasuries are being stealthed by the FED. Especially now with the dollar so strong and global markets teetering, I don't think there is any lack of demand for treasuries, people are flocking to US denominated assets for "safety."

As to whether FED buying up treasuries would be a bad thing? Well, it'd be money printing, pure and simple, with all that this implies. As with all money printing, the end result would depend on "how much?"
(This post was last modified: 02-25-2016 11:34 AM by Fast Eddie.)
02-25-2016 11:32 AM
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Post: #43
RE: USA heading into a depression.
Business is the worst since the 80s recession.

http://www.zerohedge.com/news/2016-02-25...-year-lows

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02-25-2016 11:56 AM
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Deepdiver Offline
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Post: #44
RE: USA heading into a depression.
The USA used its control over the SWIFT system OECD countries to force global banks to comply with onerous FATCA anti financial privacy regs for US Citizens... at the threat of being cut off from the SWIFT interbank global funds transfer system banks either knuckled under to US Treasury Department IRS wishes or stopped accepting US Passport holders as clients.

Interesting pilot program designed to securely transfer money around the world over the inexpensive internet using autonomous Ethereum smart contracts and block chain technology - clearly 11 major global "Money Center" banks outside of the SWIFT system could be a way to thwart OECD FATCA anti privacy rules... a technology break from the IRS desire to control income generated around the world. A good thing for US Based International Flag focused individuals and their business and investment diversification and asset protection strategies.

http://www.afr.com/technology/bitcoin-ri...211-gmrltn
(This post was last modified: 02-25-2016 02:26 PM by Deepdiver.)
02-25-2016 02:22 PM
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The Beast1 Offline
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Post: #45
RE: USA heading into a depression.
(02-25-2016 11:32 AM)Fast Eddie Wrote:  As to whether FED buying up treasuries would be a bad thing? Well, it'd be money printing, pure and simple, with all that this implies. As with all money printing, the end result would depend on "how much?"

Wouldn't be much worse than QE at this point. Undecided
02-25-2016 03:50 PM
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Post: #46
RE: USA heading into a depression.
(02-24-2016 02:22 PM)RIslander Wrote:  To the forum economic gurus... whats the maximum debt the US can sustain? What happens when we hit it?

There is no limit technically. The problem becomes when others no longer want U.S. Treasury Notes and U.S. Treasury Bonds in exchange for their goods and services. This is when the supporting platforms begin to buckle. It is the ESF buying the treasuries through the New York window at the Federal Reserve now that is the lynch pin of which the people are unconscious and keeps the jackals at bay (for now).

Here is the previous post in its entirety that was used as a link between why the value of the U.S. dollar is so high and geo-political issues. I have bolded the paragraph that more directly relates to your question.
______

I am not a banker, bond trader, nor professional in the market. I was a student of warfare and a practitioner of warfare. All warfare has an economic basis and all warfare is based on deception.

A bond is a loan, it is an IOU. Literally it is something that binds. When money is loaned to a government or a company they commit to paying you back at a date in the future. In the meantime, they pay you interest (in the form of a ‘coupon’) on the loan. The interest rate (‘yield’) you desire will depend on a few things. It will depend on how much risk is there that they will not pay you back. If you believe the risk is smaller, you will more likely accept a lower yield. If you believe the risk is higher, you will ask for a higher yield. Secondly, how much yield do you need to make a ‘real’ (after-inflation) return?

Bonds are important because the bond market ultimately dictates the cost of borrowing in the economy. If an investor is expecting inflation to be low (or negative), the investor will normally accept lower yields on the bonds and they are willing pay more for them. If inflation is expected to rise or be higher, the investor will want higher yields and they will want to pay less for bonds.

Treasury bonds in general, refer to 3 specific sub categories depending on the maturity. Treasury Bills are less than one year, Treasury Notes are greater than one year, Treasury Bonds are 10 years and greater.

Governments issue bonds to fund their spending and their debts. Currency is created when the Department of the Treasury (DOT) creates a bond and gives it to the Federal Reserve (Fed). The Fed accepts the bond and in return creates an account and provides the currency (Federal Reserve Note or FRN) to the DOT account. The Fed also may create accounts for other customers as well.

To increase the currency supply, the Fed moves currency from bonds into cash. To decrease the currency supply, the Fed moves money from cash to bonds. The details are complex, but the basic idea is that each day, the Fed buys (or sells) billions of dollars in U.S. Treasury bonds from (or to) certain financial companies who act as dealers. Where does the Fed get this money? They just make it up.

The Fed purchases not only Treasuries but also other securities and debt instruments, SPV (Special Purpose Vehicles) are off balance-sheet trusts that issue short-term securities collateralized by loans or other receivables, a popular form of credit derivative is the credit default swap (CDS) it is a contractual agreement to transfer the default risk of one or more reference entities from one party to the other. IRS (Interest Rate Swaps) Interest rate swaps are similar to credit default swaps because their value similarly depends on a reference variable, in this case, interest rates. CDS´s and IRS´s are examples of over the counter market derivatives.

A derivative is simply an agreement transferring risk from one party to another; its value is dependent on an underlying price, rate, index, or financial instrument. The agreement (which is given value) is derived from the something else (considered to have value). A credit derivative is an agreement designed explicitly to shift credit risk between parties; its value is derived from the credit performance of one or more corporations, sovereign entities, or other debt issuers.

Other debt instruments include, CDO´s (Collateralized Debt Obligations) which is a financial instrument that entitles the purchaser to cash flows from a portfolio of fixed income (debt) assets, which may include bonds, loans, mortgage-backed securities, or other CDOs. A CDO is a type of Asset Backed Security (ABS). Another is the MBS (Mortgage Backed Securities) which is a tradable security that represent claims on the cash flows from underlying mortgage loans. An MBS investor owns an interest in a pool of mortgages, which serve as the source of cash flow for the security. These securities are a type of ABS.

The list of these instruments will continue to grow in the future.

Why does the bond auction not fail causing a solvency crisis? The bond auctions never fail because there are always buyers present. The auctions are oversubscribed and designed not to fail. The primary dealers are required to bid but that is never a problem as they act as intermediaries to sell the bonds to various clients. If the primary dealers cannot sell their inventories the Fed can step in and soak up the demand.

The Fed has been doing this and their balance sheet is increasing. The Fed can technically do this to infinity. As infinity is approached confidence is declining and a greater risk premium is desired. If a sufficient risk premium is not provided, investors exit. That is what is happening with nations now. They are selling their hoard of US Treasuries that have been accumulated. The Fed continues to purchase them. What if the Fed purchases all of them (hypothetically) from every country? Nothing, right up to the point where that sovereign country says, I no longer want your US Treasuries for my goods and services. Instead I want X. If the US does not have X, it will either do without the goods and services (shortages) or it will domestically produce them. Otherwise it will go obtain X and trade it with the other party (nation).

I suggest that under the guise of the AIIB and NDB such as system has been initialized and it is independent of the SWIFT financial system. X will be something like a gold back trade note. Not a currency or gold standard system. If you want one of these notes, transfer something (your independently audited gold) to location Y and you will receive the gold trade-notes and you can trade them between the participating countries (entities). The current system could then be circumvented. If the US wants to play, it will need to pay, but not with their current dollar. I suggest that they will then pay with another form of the dollar (to be initially backed by resources still in the ground) that will be created (and devalued) to be used only within the (domestic) US while the international dollar (current dollar) is revalued in comparison to X or on the basis of X.

If the US continues to run a deficit, who will accept the bonds to pay for the extra spending and how will the current debt be repaid? Not the foreign countries, they sold their bonds and now they want X. The Fed can accept the new bonds that the Treasury creates to pay for the deficits and the debt, but the Fed will not pay itself interest. The citizenry will pay the interest through the continuous devaluation of the new (domestic) currency and the people will become more impoverished.

Technically the bond system does not need to default, it is transformed and revalued.

We are getting around this now to maintain the confidence of the bondholders because the US Treasuries do not show up in US Fed accounts and a dichotomy is created. Global USD accounts are dropping and the dollar is getting stronger. If the fundamentals indicate that if the world is bailing on dollars, then the dollar cannot get stronger. Yet, the US dollar is getting stronger on the FOREX, therefore the world cannot be bailing on the dollars (this is the logical fallacy known as affirming the consequent.) The media is not telling the public that these bonds are being redeemed so that the illusion can be propagated.

The drop in the reserves does not support the narrative of a strong dollar. Therefore something has to be done to put reserves back into the system. The manner in which the US Federal Reserve puts it back into the system is through the Reverse Repo´s (repurchases) where they sell short term government securities to the dealers in exchange for cash and therefore reserve accounts are supported. These sales are not congruent with zero interest rates. These sales are congruent with Fed tightening, therefore you have the illusion of tightening to support the sales. It is about supporting a false narrative. The dollar is strong and the world is not abandoning the dollar. My understanding is these sales are over $200 billion per day. So why has a collapse not happened? It is because we are continually lied to and the confidence of people is maintained. The stories continue to change and new financial products (in addition to the ones previously mentioned) are invented to mask what is happening. I would put forth that the collapse is happening now and is a slow burn that is accelerating. Watch for signs in more and more countries, not just Venezuela and Argentina. Friends in Canada and many other countries are becoming concerned as the price of basic goods is increasing at an alarming rate. Canada is not Zimbabwe.

I am suggesting that to disguise the return of foreign treasures, the DOT under the aegis of the Exchange Stabilization Fund (ESF) is soaking up the bonds. Recall that the Fed creates an account and there is a level of transparency. With the ESF there is NO transparency. The bonds are purchased from what I will now term as a ´Dark Pool Account (DPA).´ The DPA is off the books. When the bond enters the DPA it appears as if debt just magically disappears. The problem becomes if all of the debt magically disappears and the US debt goes to zero, the former buyers of the treasuries will realize that the system does not function as they were led to believe and will lose confidence in the dollar. The ESF is operated at the discretion of the Secretary of the Treasury, it follows no laws and is accountable to no one. The original 1934 mandate of the ESF is to defend the value of the US Dollar. The Fed through the Federal Reserve Bank of New York is a front for the ESF.

Normal analysis is not sufficient when the puppet masters are engaging in sleight of hand. I am of the opinion that some of the puppet masters really believe that they can outsmart the market and I think the smartest of them understand that the time of reckoning is coming, they are simply experimenting with the system and will pass on whatever they learn from this manipulation down to the future generations of puppet masters to then be applied well into the future on that unsuspecting generations after you and I are have departed. Furthermore, they will use this opportunity for yet, another (greater) purpose (at least in their deluded minds).
02-25-2016 03:52 PM
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jayko Offline
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Post: #47
RE: USA heading into a depression.
(02-25-2016 09:52 AM)The Beast1 Wrote:  
(02-25-2016 08:35 AM)jayko Wrote:  Russia+China intend to rock the reserve currency boat and is doing it now as we speak. Watch for dead of petrodollar when Saudi agree to accept other currencies for their oil trade. We live in interesting time, people. WWIII is not too far off from the smell of it.

The petrodollar has already died. I believe I read somewhere that oil nations are withdrawing their cash from the financial systems as opposed to putting more into it.

I think we're also at the point where US government debt isn't being absorbed by actual investors but hidden away using trick financial moves. When China was liquidating its US bond notes an entity working through Belgium was absorbing the sales. Where they were going? No one knows.

Times are going to get very very interesting.

it is gonna be interesting in months or years to come,
"when all else failed, they take us to war" gerald celente.

i guess the seed of WWIII was buried long ago, QE to infinity, massive printing , massive debt, and start economy reset by blaming it to WWIII, it just perfect.
Belgium according to Jim Willies of goldenjackass is the frontman of the Fed.

here is another interesting theory by joel skousen, Russia+China gonna hit US with nuclear strike, where N.Korea trigger the massive invasion to the south. US will strike with Nuclear, giving China excuse to strike at US with Nuke. don't know how this is gonna hold water though?
02-25-2016 11:53 PM
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rudebwoy
rudebwoy Away
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Post: #48
RE: USA heading into a depression.
^I listen to those guys on YouTube as well.

They make it sound like the mess will start soon.

Our New Blog:

http://www.repstylez.com
02-26-2016 10:23 AM
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Dr. Howard Away
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Post: #49
RE: USA heading into a depression.
(02-25-2016 11:56 AM)rudebwoy Wrote:  Business is the worst since the 80s recession.

http://www.zerohedge.com/news/2016-02-25...-year-lows

I think the US depression is currently a lot more variable state to state than it was in 2008.

The first piece being that some places really haven't recovered yet from 2008 but are slowing down again. I think of California and Arizona as examples. Wisconsin is another good one, that was on its way up after 2008 but has been knocked back down again, and is now taking the diaspora from even worse off Illinois, which was taking the even more worse off from Indiana.

Here in the southeast, despite the national economic news, things are really good. People are moving into Tennessee steadily and the news is full of job fairs, plant expansions, plant openings. The legislature is trying to figure out what to do with a tax surplus that was beyond projections.

I think as the economy at the national scale slows down further you are going to see certain states really start to bottom out, but not every state. Likely candidates for collapse are those that were already wounded gravely in 2008, like Michigan and New Jersey. We saw the same thing in the 1930s great depression, it was hard all over but not an equal shit show...thats why people migrated to california.

I think Trump can do damage control, but not 'save' things. Like cutting off a leg with gangrene to save the whole body from infection. It will be rough for many people, especially the 'legs' that are federal gov't employees.

Why do the heathen rage and the people imagine a vain thing? Psalm 2:1 KJV
02-26-2016 11:27 AM
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Handsome Creepy Eel
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Post: #50
RE: USA heading into a depression.
(02-25-2016 03:52 PM)NASA Test Pilot Wrote:  Why does the bond auction not fail causing a solvency crisis? The bond auctions never fail because there are always buyers present. The auctions are oversubscribed and designed not to fail. The primary dealers are required to bid but that is never a problem as they act as intermediaries to sell the bonds to various clients. If the primary dealers cannot sell their inventories the Fed can step in and soak up the demand.

The Fed has been doing this and their balance sheet is increasing. The Fed can technically do this to infinity. As infinity is approached confidence is declining and a greater risk premium is desired. If a sufficient risk premium is not provided, investors exit. That is what is happening with nations now. They are selling their hoard of US Treasuries that have been accumulated. The Fed continues to purchase them. What if the Fed purchases all of them (hypothetically) from every country? Nothing, right up to the point where that sovereign country says, I no longer want your US Treasuries for my goods and services. Instead I want X. If the US does not have X, it will either do without the goods and services (shortages) or it will domestically produce them. Otherwise it will go obtain X and trade it with the other party (nation).

I suggest that under the guise of the AIIB and NDB such as system has been initialized and it is independent of the SWIFT financial system. X will be something like a gold back trade note. Not a currency or gold standard system. If you want one of these notes, transfer something (your independently audited gold) to location Y and you will receive the gold trade-notes and you can trade them between the participating countries (entities). The current system could then be circumvented. If the US wants to play, it will need to pay, but not with their current dollar. I suggest that they will then pay with another form of the dollar (to be initially backed by resources still in the ground) that will be created (and devalued) to be used only within the (domestic) US while the international dollar (current dollar) is revalued in comparison to X or on the basis of X.

If the US continues to run a deficit, who will accept the bonds to pay for the extra spending and how will the current debt be repaid? Not the foreign countries, they sold their bonds and now they want X. The Fed can accept the new bonds that the Treasury creates to pay for the deficits and the debt, but the Fed will not pay itself interest. The citizenry will pay the interest through the continuous devaluation of the new (domestic) currency and the people will become more impoverished.

Technically the bond system does not need to default, it is transformed and revalued.

We are getting around this now to maintain the confidence of the bondholders because the US Treasuries do not show up in US Fed accounts and a dichotomy is created. Global USD accounts are dropping and the dollar is getting stronger. If the fundamentals indicate that if the world is bailing on dollars, then the dollar cannot get stronger. Yet, the US dollar is getting stronger on the FOREX, therefore the world cannot be bailing on the dollars (this is the logical fallacy known as affirming the consequent.) The media is not telling the public that these bonds are being redeemed so that the illusion can be propagated.

The drop in the reserves does not support the narrative of a strong dollar. Therefore something has to be done to put reserves back into the system. The manner in which the US Federal Reserve puts it back into the system is through the Reverse Repo´s (repurchases) where they sell short term government securities to the dealers in exchange for cash and therefore reserve accounts are supported. These sales are not congruent with zero interest rates. These sales are congruent with Fed tightening, therefore you have the illusion of tightening to support the sales. It is about supporting a false narrative. The dollar is strong and the world is not abandoning the dollar. My understanding is these sales are over $200 billion per day. So why has a collapse not happened? It is because we are continually lied to and the confidence of people is maintained. The stories continue to change and new financial products (in addition to the ones previously mentioned) are invented to mask what is happening. I would put forth that the collapse is happening now and is a slow burn that is accelerating. Watch for signs in more and more countries, not just Venezuela and Argentina. Friends in Canada and many other countries are becoming concerned as the price of basic goods is increasing at an alarming rate. Canada is not Zimbabwe.

I am suggesting that to disguise the return of foreign treasures, the DOT under the aegis of the Exchange Stabilization Fund (ESF) is soaking up the bonds. Recall that the Fed creates an account and there is a level of transparency. With the ESF there is NO transparency. The bonds are purchased from what I will now term as a ´Dark Pool Account (DPA).´ The DPA is off the books. When the bond enters the DPA it appears as if debt just magically disappears. The problem becomes if all of the debt magically disappears and the US debt goes to zero, the former buyers of the treasuries will realize that the system does not function as they were led to believe and will lose confidence in the dollar. The ESF is operated at the discretion of the Secretary of the Treasury, it follows no laws and is accountable to no one. The original 1934 mandate of the ESF is to defend the value of the US Dollar. The Fed through the Federal Reserve Bank of New York is a front for the ESF.

Normal analysis is not sufficient when the puppet masters are engaging in sleight of hand. I am of the opinion that some of the puppet masters really believe that they can outsmart the market and I think the smartest of them understand that the time of reckoning is coming, they are simply experimenting with the system and will pass on whatever they learn from this manipulation down to the future generations of puppet masters to then be applied well into the future on that unsuspecting generations after you and I are have departed. Furthermore, they will use this opportunity for yet, another (greater) purpose (at least in their deluded minds).

Thanks for this dissertation... you've shed a lot of light on stuff I have never understood before.

This is what my face looked like when I finished reading your post:

[Image: r7iHqPC.png]
02-26-2016 12:01 PM
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