Saturday, March 27, 2010

Thinking Aloud

US Gov is going to need a buyer of Treasuries

There is a chance that the whole spectre of deflation is something that is encouraged by the inflationists (not the chicken little ones)--the real inflationists who want to default on the US debt by debasing the currency.   The inflationists want the fear of deflation to be well popularized so that they may continue unobstructed with increasing the money supply (inflation).  

This also allows other interested parties to promote and approve various other programs that allow them to get better control over aspects of Governement that they find will be in their financial (and need for power) well being.  Health care for instance. 

Now back to the treasuries.  Hillary Clinton has come out a month ago with the statement that the national debt is a national security issue, effectively linking it so that we can have yet another "war" on something.  

How about this?  To "protect our debt", and to protect "the people" from yet another financial crisis....the government will take over all the 401K, IRA, even some Roth, and whatever else can be cast into a pot of having "tax reduced or tax deferred status".    After all in this time of war, war to protect our debt, against the Chinese who can try to crush the US by selling off their treasuries, those who have benefited from government allowed tax beneficial investment should now be willing to "help", in fact it will be a law, called something like "the Patriot Strong Dollar Support Plan" PSDSP.

Now the technicalities--do they give you treasuries straight up for your stocks at current values?  You know, Bernanke and team are not stupid.   That thing they pulled off with the Currency Default Swap in which they "drained the Swamp" of almost $600B in, well, money supply in Feb 2010 actually played out in the US's benefit in a big way since the dollar rallied in the same time period..   They are not dumb, just desperate.

OK so they don't just trade you treasuries with a promise to swap them back at a later date at the current prices, because they would have to give you a heck of a lot more stock back down the road, then they would be receiveing now.

So, they take the value of your stock, secure the treasuries they give you with your stock, and of course lock the stock so you can't sell it, because after all it is securing the treasuries against the external threats to our national security.   Whallah!  The "Debt has been protected"

In this Bizzarro world that we live in, land of the broken clock, truth is twisted 180 degrees.   You protect assets, not debts.  Financial gimmickry of the shell game money changers have made this switch on a number of grounds.  They are pretending that debts are assets.

This will not end well.   Prepare as best you can.

And check out this ratio.   Corporate debt is being considered less risk than US treasuries.
And watch the TED spread, which in simple terms is a measure of risk that banks see in lending to other banks.
And finally, personal income falling while prices are rising, 'nuff said.

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Insightful and Useful Comment!