Monday, July 27, 2009

The stupidity of this comment: "Bond market facing huge supply."



Week after week after week, you hear these TV commentators or other "know-nothing" economists and analysts talk about the "huge supply" of new Treauries that is coming and how that is going to cause interest rates to spike up.

One quick glance at the Treasury's Daily Statement will show you that so far this fiscal year...the Treasury has sold

$7.4 Trillion


of securities and interest rates are

Zero!


We're talking nine months, here, and nearly $8 trillion worth of sales and rates have done nothing but go down. And by the way...that's on top of the

$5.6 trillion they sold last year!



And...you guessed it...rates

have come down!!


When will these ninnies wake up???

The money to buy Treasuries comes from government spending itself and the monetary operations of the Fed! The added reserve balances that come about as a result of government spending or the Fed buying securities (to reduce interest rates) are merely swapped for an interest bearing account of the U.S. Government known as a Treasury. And the government pays interest on those Treasuries the same way it pays for everything else...by crediting bank accounts.

Please pass this along!

4 comments:

googleheim said...

EXACTLY

THE BANKS MUST BE CONTROLLING THE MEDIA AGAIN AS THEY GET 0% ON FED CREDITED LOANS WHILE THEY TURN AROUND AND JACK RATES UP ON CREDIT CARDS.

AND THIS IS THE REASON WHY WE NEVER BORROWED MONEY FROM THE CHINESE.

INSTEAD WE LOANED AND MADE AVAILABLE TO THEM OUR MONETARY SYSTEM INSTRUMENTS AND OUR CONSUMER MARKETS.

WE BASICALLY CREDITED THEM CREDITS AS THEY DELIVERED GOODS FROM THEIR CHEAP LABOR MARKET.

WE DID NOT BORROW FROM THEM AS IF THEY WERE RICH FISH READY TO LOAN SHARK.

Pentagron said...

Please explain for the naive: It would appear that the $7.4 trillion is money that the Treasury is taking in as a result of bond sales (public debt issuance). I don't see that this is money the Treasury uses to buy bonds. Aren't the bonds being purchased by investors and sovereigns? Thanks for the clarification.

Mike Norman said...

ARe you talking about redemptions? The Treasury redeems vast amounts of debt on a daily basis. So far this fiscal year the Treasury has redeemed $5.9 trillion of securities.

Some call this "rolling over" of debt. The point to remember is that all spendinng is done the same way: by crediting bank accounts. If someone wants to redeem their Treasury bond, the Treasury will credit the reserve account of that person's bank (and the bank will credit his checking account). He has the same wealth, just a different mix off assets. Before he had a debit in his checking account for the purchase of the Treasury, but he had a Treasury (asset). Now he has a credit in his checking account from the sale of the Treasury, but he no longer has the Treasury bond.

Investors all over the world--including foreign governments--buy Treasury securities. They are basically a savings account of the U.S. Governnment. The important thing to remember is that the spending is done first and this leads to an increase in reserves in the global banking system. Those reserves or a portion of those reserves are then exchanged for Treasuries. That's how they are "paid for."

Therfore, THE MONEY TO BUY TREASURIES AND TO PAY TAXES COMES FROM GOV'T SPENDING ITSELF.

googleheim said...

YES AND THE CHINESE CANNOT BE BLAMED FOR UNDERSTANDING OUR MONETARY SYSTEM BETTER THAN OUR POLITICIANS AND PUBLIC