China is bailing out of US Treasury paper (ZH reports).
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I can’t imagine this is going to matter one way or the other, frankly. Among the many factors at work, US budget deficits have PLUMMETED due to the QE-driven recovery in nominal GDP, so the need to issue more debt is going down. If anything as the Fed constantly flirts with being too tight basically all the time, there could be scarcity of zero-risk vehicles like Treasuries. If the 10-year yield does rise from its current ultra-low level of 2.2%, it would be because growth prospects had improved.
dantealiegri Reply:August 27th, 2015 at 5:07 pm
this problem is much more complicated than that. Do everyone a favor and comment like an adult.
There has been no obvious change in behavior of USG that shows the situation not becoming more encumbering.
Kgaard Reply:August 27th, 2015 at 5:16 pm
Then you must be long gold I presume?
michael Reply:August 27th, 2015 at 5:34 pm
I wish it were that simple,
Kgaard Reply:August 27th, 2015 at 7:16 pm
Well let’s get some markers down then. Who wants to make a prediction on where the 10-year yield will be in a year? Where gold will be? Surely if the end is nigh somebody will want to go on record predicting a 4% 10-year yield and $1500 gold in a year?
Izak Reply:August 27th, 2015 at 10:42 pm
Another day, another bet that Kgaard offers up that no one has the stones to take.
Less sure. Seems more like they’re moving Treasury notes because that’s the most liquid asset they’ve got and they desperately need money for their own Plunge Protection efforts.
In the current bearish scenario, whoever sells US treasuries, I think there are hundreds of buyers ready to buy.
Orthodox Reply:August 28th, 2015 at 1:57 am
China’s selling treasuries makes people want to buy treasuries and send the yuan down more, forcing China to sell more treasuries.
The dollar death hyperinflation crowd is pointed in the right direction, but they plotted from cycle bottom to cycle bottom and forgot the U.S. dollar moves in an roughly 18-year cycle (1985 peak, 2002 peak, ~2018 peak?) 1992, 2008 and ~2020s bottom.
Dollar death was greatly exaggerated, if only because global central banks will do anything to keep the current system going including PBoC. If the dollar goes first, the global system goes up in flames at once. Instead, the system will die from the outside in, basket cases like Turkey go first, U.S. dollar has its crisis last.
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I’m agree with Kgaard, there maybe no immediate consequences. China sells US treasury to support falling yuan, according to Blomberg. Same time, they are getting out of US influence, ready for next round of currency war. QE works for US very well indeed, but question is who will be holding the bag at the end.
Skilluminati Reply:August 28th, 2015 at 1:57 pm
Offhand? Emerging markets and the same herd logic institutional “investors” who bought up on REITs and bottom-tranche CDO effluvia.
Agreed with Orthodox above re: topography of collapse – outside in.
Ok if you must know I have taken a small position in the junior goldminers when they re bottomed the other day i estimate them to be 50% below book, The thing is its really all very hard to predict how this thing will play out. Its not always rational even if its not manipulated.I hate conspiracies and gold bugs but I think possibly gold is being manipulated certainly everything else is to some extent. so one could lose a fortune before its all said and done.even if one were correct but we are so intricately connected now its really kind of hard to predict how it will all work out, its not clear what china actually want certainly they lie about their stats and are probably in negative growth, did the US engineer a oil collapse did it think about the implications for the petrodollar does the cathedral want a strong dollar will they change their minds or something more pressing come up. Theres 1.2 quadrillion in credit default swaps out there a lot of them tied to FX and interest rates, theres a BIS bail in plan in place, theres Europes in slomo collapse. so sure today maybe a path seems evident but if you think overthe past several years there have been some rather unpredictable outcomes.
Kgaard Reply:August 28th, 2015 at 2:38 pm
Well one basic mistake in all this is that Europe is not at all in slow-motion collapse. In fact it’s expanding. Once the ECB stopped listening to the hard-money heads and started doing QE (start of this year) the economy began expanding nicely.
China is a live issue. That’s the one thing on the board that worries me. But I don’t see it as particularly gold positive. It might be yuan-NEGATIVE but that doesn’t mean anything vis a vis the US$ price of gold …
michael Reply:August 28th, 2015 at 3:02 pm
I would disagree about europe a breakup is still in the cards for any number of reasons, demographics are catastophic, debt unsustainable, the center will not hold and their economy is not expanding not even germany
I agree im not particularly big on gold because well who knows what its worth it depends how its viewed and been historically viewed and how things its valued against change i could see it becoming a crisis store but i can see that not happening, for now mine stocks seem cheap with gold up a bit and petrol down a lot and miners beat up , but they are as volatile as metal and who knows took a flyer.Its been interesting seeing flight to the dollar this year, makes a case for first movers to qe,
Dots Reply:August 30th, 2015 at 3:27 am
“a breakup is still in the cards”
I agree. Tsipras called an election before an apparently silly electorate, and ECB has a record of flinching just when inflation gets perky
That was easy!
snorlax Reply:August 28th, 2015 at 6:34 pm
To be a little less glib, while you could make yourself a very rich man by betting against every ZeroHedge prediction, it is true that the Chinese central bank is selling off a lot of dollar-denominated assets. You might have heard about their recent currency devaluation. Nothing earth-shaking (well, any more than the monetary policy of the world’s second-largest economy otherwise would be).
SVErshov Reply:August 28th, 2015 at 8:36 pm
truth is a cheap. I have orange peels, 3 computers and two keyboards on my desk, that is a truth. ZH reports highly accurate if you know where to look at. In June-July he exactly predicted all what is going on know and timing was quite accurate too .
every major central bank seems to b easing via open market operations
hi debt and deflation r fairly common, in most places, so some devaluation seems sound
long UST, long Seattle metro area
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