Bond Market

[cottonpicken]

Just read the math on us government interest rate
exposure.

If qe is pulled back and rates are alowed to normalize
and if they say move up 1% a year for the next 5 years
interest expense goes from 360billion to 1.5 trillion.

They may jawbone all they want but i wouldnt bet
against this program ending anytime soon,if ever.

So the question is when do bond investors dump and
what do they buy?One hell of a big pool of capital to
be deployed.

[cottonpicken]

And if say that happens....

Gdp takes a big hit
Tax revenues go down
Government programs are cut to the bone
Further weakening gdp
Further weakening tax revenues
Further cutting programs
Banks are to levered to take the hit and start
collapsing(i wish i was the guy that got to apply the
stress tests)
No funds to support to support fdic
Over levered households start collapsing
People with funds capitalize and buy assets for
pennies on the dollar

Or.....
Fed continues bond buying and expands its balance
sheet
All pograms remain funded
Checks still go out
All asset classes rise in value
Goods and services dramatically rise in value
Austerity/sequestration what ever term the are using
this week,is hidden under the guise of inflation

Like my son says-choose your pick

[ColevilleH2S]

I think they have gone too far down this
road to ever turn back. Like you say,if
the market quits buying American bonds
who's else will they buy. The US is too
big to fail, they know it, and the bond
buyers know it. Printing will go on
forever, and it will all work well,
until it doesn't.

[ado089]

As long as bond markets remain strong it
means that capital isn't being put to
work in economic growth. Commodity
weakness and low velocity of money
suggest that inflation is unlikely to
happen anytime soon. That dooms day
scenario might happen despite
governments attempt at QE.

[cottonpicken]

Detroit just declared bankrupcy, people somewhere
are taking a 17 billion dollar hit holding that debt.

[ado089]

I think that is the beginning to your
answer cotton. How many $17 billion
debts need to be wiped out, coupled with
huge corporate deleveraging does it take
to make QE irrelevant?

[cottonpicken]

Thats the question,if detroit could self fund via
qe,would it?And would the value of detroit bucks go
up or down?-not worth a continental-what the hell is
a continental?

[ado089]

I guess the point is that Detroit
couldn't print its way out of it's debt.
It won't be the last, it's among the
first of dozens to come. At $17 billion
a pop that destroys money supply real
quick. The same will happen in Europe
and Japan. The worst will be when Chinas
shadow banking market starts seeing
debts default as their housing bubble
collapses and infrastructure spending
normalizes.

[ajl]

No government willing allows interest rates to rise ever. Rising rates
get forced on them. That is why rates rose in the 1980's mainly then
because consumer price inflation was rampant. We have avoided consumer
price inflation this time by exporting it to Asia but the gig is up now.

[SASKFARMER3]

Detroit only has 700000 people left in the city. ITs Bankrupt!

[SASKFARMER3]

What happens when Ontario and Quebec declare Bankruptcy!

[ajl]

The really great thing about US state and municipal bankruptcies is
that it will be confined to the pensioners and other hangers on of
that municipality. When Ontario goes bankrupt AB and SK will be
bailing it out because of the equalization formula. As big a mess
that the US is in we are in far worse shape in the long run.

[cottonpicken]

At the end of the day the debt HAS to be
restructured,aka default,via inflation or right down or
a combination of both.

Pain coming down the pipe,just wonder what its
going to look like.

[parsley]

Perhaps when China refuses to loan any more
mint to the USA, won't Obama bow and
negotiate a credit line with Saudi Arabia? With
conditions. Pars

[cottonpicken]

From what i have heard china and everyone else
stopped a while ago the fed is buying the debt(qe)
(moneization)(@printing money.com),to **** with
yield curve and keep the game going.i'm in a hell of a
pill mood.