patrick.net

The Fed is buying depending on which source you believe between 50-90% of the newly issued treasuries-that should put the problem in perspective

It's like you read my mind

Nice article and podcast.

Thanks-when is that question going to be asked of bernanke and can he answer it?

You never answered if I can publish some of your stuff on my site?

You never answered if I can publish some of your stuff on my site?

I did! please do

robertoarias:"the treasuries will simply sell at (likely) slightly higher interest rates"

I think the rate will be significantly higher- we saw how rates on the ten year jumped a full basis point on the mere threat of taper.

robertoarias: "carry on with your normal nonsense." "Bullsh*t" "ridiculous as most of your nonsense"

hard to argue with that!

robertoarias "Likely, it will depend more on the world economy at that point, specifically europe and china."

True but they have already scaled back their purchases My point is that the Fed has become THE market for treasuries and if they pull out there may not be enough willing buyers in the amounts that the Fed has been buying at the rates it has been paying.

the taper really hasn't been priced in -when it seemed tapering was a sure thing-the ten year jumped one point! that's when we saw Bernanke and the rest of the fed presidents backpedal

Thanks.

I had asked on another thread, you may have missed it.

smaulgld says

The Fed is buying 90% of the newly issued treasuries-that should put the problem in perspective

This is misleading. I would like to know what the actual percentage is. On a quick search I can't find it. Since 2009, or taking any longer period, such as all of 2012, or july 1, 2012 to july 1, 2013, is it even over 50% ?

I'm not saying that it's not a problem if it is 50% or if we even know how much rates would have to go up to sell all our debt securities.

It's always going to be that you can make a more compelling argument, when you are as honest and accurate (and not misleading) with your numbers as possible.

thedailypr-i answered on another thread!

Here are a couple of sources, but I didn't find great data. I know that 90% is way off though.

Yes, I know you said "up to 90%" which is kind of like saying nothing except suggesting something misleading.

http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106

http://www.motherjones.com/kevin-drum/2012/09/fed-really-buying-three-quarters-all-treasury-debt

Marcus"This is misleading. I would like to know what the actual percentage is. On a quick search I can't find it. Since 2009, or taking any longer period, such as all of 2012, or july 1, 2012 to july 1, 2013, is it even over 50% ?

I'm not saying that it's not a problem if it is 50% or if even know how much rates would have to go up to sell all our debt securities.

It's always going to be that you can make a more compelling argument, when you are as honest and accurate (and not misleading) with your numbers as possible."

Here you go

http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html

Frightening isn't it?

AGain, I get it. When you said "up to" 90% it wasn't a lie.

Just misleading.

http://www.motherjones.com/kevin-drum/2012/09/fed-really-buying-three-quarters-all-treasury-debt

http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106

dailypr- my response was on the "what does the initial jobless claim report really mean" thread. http://patrick.net/?p=1228021

---------------------------------------

Dailypr"Hey SMAULGLD, do you have an article you would like me to publish on my site www.thedailypr.com and link to you?

You can email me at thedailypr@yandex.com

I would like to share links.

Your site is awesome."

Thanks
take whatever you want with attribution
Like your news aggregator site!

Marcus "AGain, I get it. When you said "up to" 90% it wasn't a lie.

Just misleading.

http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106

http://www.motherjones.com/kevin-drum/2012/09/fed-really-buying-three-quarters-all-treasury-debt"

Its not misleading- you cited two links that predate the bloomberg link I used.

Here is one from feb 2013 saying its 75% http://www.zerohedge.com/news/2013-02-07/feb-2013-fed-will-buy-75-new-30y-treasury-supply

Even if its just 50% there is a huge amount of treasuries that have to be bought each month if the Fed doesn't buy them.

I am questioning who will and at what price.

smaulgld says

WIthout QE How Will The Government Fund Itself?

I vote we rent out senators and house representatives as sex slaves to the highest paying, most depraved and sick individuals.

There is something else that needs to be covered, it's kind of the elephant in the room.

The fed is backstopping MULTI TRILLIONS upon MULTI TRILLIONS in derivatives from the big banks. What happens if there is a margin call they cannot cover?

robertoaribas says

the treasuries will simply sell at (likely) slightly higher interest rates

Exactly! When the government stops buying treasuries, there's absolutely no reason why interest rates will skyrocket. It doesn't matter that China has stopped buying treasuries now. There's always someone else that will

I mean, why wouldn't someone buy treasuries at such a low rate and lose money from inflation. Am I right? Why shouldn't someone put their hard earned money into a losing asset at a low rate. It just makes so much sense. I don't understand why someone would think rates would rise very high if the government stopped buying 90% of treasuries. After all, people just like to lose money. They will line up to buy those treasuries at a low rate.

Nothing will change after QE stops. Things will keep going exactly as they are.

I am not worried.

Nothing will change.

Ever.

smaulgld says

Its not misleading- you cited two links that predate the bloomberg link I used.

I agreed that it's hard to find good data on a quick search.

But the links I provided talk about how much of all debt is purchesed by the fed, and not just a record breaking single auction.

Up to 90% ?

If some readers perhaps infer that the fed is buying somewhere close to 90% of our debt issues, does that bother you ?

Do you even understand the distinction ?

Marcus"Here are a couple of sources, but I didn't find great data. I know that 90% is way off though.

Yes, I know you said "up to 90%" which is kind of like saying nothing except suggesting something misleading.

http://www.moneynews.com/Headline/fed-debt-Treasury/2012/03/28/id/434106

http://www.motherjones.com/kevin-drum/2012/09/fed-really-buying-three-quarters-all-treasury-debt"

I changed the comment above to:

"The Fed is buying depending on which source you believe between 50-90% of the newly issued treasuries-that should put the problem in perspective."

I was using the Bloomberg reference for my 90%-thanks for providing others.

The problem remains as start as ever irrespective of a 90% or 50% purchase number by the FED

By the way, the quote feature is really not that hard to use, but you might find also knowing how to do cut and paste and a few other really basic word processing tasks useful.

dAILY pr "There is something else that needs to be covered, it's kind of the elephant in the room.

The fed is backstopping MULTI TRILLIONS upon MULTI TRILLIONS in derivatives from the big banks. What happens if there is a margin call they cannot cover?"

There are so many ways this can go wrong. This grand QE experiment has caused more systemic risks than the benefits of a few part time jobs and a mini housing bubblet and a "recovery"

I don't even know if 50% is correct for a low end of the range. Mother Jones thought 3/4 was ridiculous, but they didn't put a number on what it actually is.

marcus says

By the way, the quote feature is really not that hard to use, but you might find also knowing how to do cut and paste and a few other really basic word processing tasks useful.

I know but I don't like to see the html when I am responding.thanks so I cut and paste

waiting_for_the_fall

Correct. Indeed China and other investors are really pissed off that the Fed is hogging all those treasuries for themselves.
They are waiting for the day that the treasury stops buying whatever percentage it is that they are buying because the less the Fed buys the more they can buy.

NOTHING will interfere with this RECOVERY not even tapering of QE or cessation of the program

marcus says

I don't even know if 50% is correct for a low end of the range. Mother Jones thought 3/4 was ridiculous, but they didn't put a number on what it actually is.

The Fed is buying an enormous amount $45 billion in US treasuries a month.

We can do our own math.

Multiply $45 billion times 12 months and you get $540 billion annually. I think they said the deficit because of Fannie mae payments, the sequester and tax increases will be about $680 billion this year.

So that would make the Fed the purchaser of 80% of the annual debt.

If the deficit were a trillion it would be 54%.

so 50-80% this year

And of course mother jones didn't put a number on it -at the time they were gleeful of their coup on catching mittens in his 47% comment.

We have above come up with a non politically motivated number-54-80% for 2013 and have a bloomberg number at the end of 2012 (post mother jones) of 90%
The point remains- the Fed is buying a boat load of US bonds and who will pick up the slack when they stop buying?

smaulgld says

The point remains- the Fed is buying a boat load and who will pick up the slack when they stop buying?

There will be buyers, the question is how much does the price change (interest rates increasing) to sell that much.

marcus says

smaulgld says

The point remains- the Fed is buying a boat load and who will pick up the slack when they stop buying?

There will be buyers, the question is how much does the price change (interest rates increasing) to sell that much.

That's right! That is the question and can we afford to pay the additional interest.
This is what I have been thinking long and hard about. The problem is really staggering no matter if its 50%or 90%.

Marcus-BTW-my guess is the solution they will use is that the US citizens will end up buying the treasuries from their retirement accounts http://smaulgld.com/funding-the-government-without-the-fed-and-quantitative-easing/

The funding of the US government is a bigger issue than what happens to the real estate or stock markets-they always go up and down

I don't think the US could afford the market rate that is why I am thinking they would mandate 401K purchases of T-bonds at a rate set by the US government that they could pay, say 3%

they could mandate a percentage of the 401K to be in tbonds-a percentage that would increase each year as their borrowing continued to grow

"How will the Government fund its self with out QE3?"

Oh deer, where do I begin?
First of all, the Left has been patting them selves on the back, for the last 6 years, claiming that they made a profit from every money sack, dump truck delivery to the Wallstreet banks.

Please tell me that they've been depositing that money into bank that has the "REAL" money!

OR!

There was no profit after all and like with this administration, everything they claim is LIE!

smaulgld says

they could mandate a percentage of the 401K to be in tbonds-a percentage that would increase each year as their borrowing continued to grow

https://www.youtube.com/watch?v=xhf49cq7a-Y

Blurtman says

smaulgld says

they could mandate a percentage of the 401K to be in tbonds-a percentage that would increase each year as their borrowing continued to grow

https://www.youtube.com/watch?v=xhf49cq7a-Y

I really think so...

.CaptainShuddup says

"How will the Government fund its self with out QE3?"

Oh deer, where do I begin?

First of all, the Left has been patting them selves on the back, for the last 6 years, claiming that they made a profit from every money sack, dump truck delivery to the Wallstreet banks.

Please tell me that they've been depositing that money into bank that has the "REAL" money!

OR!

There was no profit after all and like with this administration, everything they claim is LIE!

Its a misnomer to say the government makes investments.

Investments are made without concern for political outcome or votes, but to make profit.

When the government SPENDS money occasionally they want a return- as in a bail out (GM)or subsidy for green energy(Solyndra). This is not really investment but political favors or crony capitalism

Usually government investment is nothing more than spending money on entitlements to secure votes.

smaulgld says

Usually government investment is nothing more than spending money on entitlements to secure votes.

That's exactly how I view Quantitative Easing.

The Fed has provided a vehicle to create these huge cash reserves in corporations, and the wealthy.

I think though that as the Fed winds down the economy will improve by the next set of elections, and the Democrats are hoping to look like heroes.

"David Losh
smaulgld says

Usually government investment is nothing more than spending money on entitlements to secure votes.

That's exactly how I view Quantitative Easing. "

Yep- QE is corporate/bank welfare that tosses in some money for the government for "general welfare".

Basically QE allows both parties to feed its constituencies without having to ask for tax money to do so.

David Losh says

Democrats are hoping to look like heroes.

Provided everybody's chaffed asshole heals by then.

CaptainShuddup says

Provided everybody's chaffed asshole heals by then.

I think the people here, and on many blogs forget that for most Americans this last down turn ruined them financially.

Smug little assholes brag about the moves they made to take advantage of the down turn, but for most Americans they will either hold tight, or spiral down into poverty.

That growing middle class that China is so proud of is what was hit hardest in this country; enter the Green Party.

I'm personally amazed that people put the government on trial when it was the corporate structures we have that did the exploiting.

Using the Green Party as an example they are against the government setting medical insurance policy, but don't see the medical insurance industry as the problem that needs to be reigned in.

People are blaming Fed policy for the economic crash, but give the bankers a free pass, as though these thieves are some sort of American icons.

We'll see what kind of show the Democrats trot out, but after the Mitt Romney fiasco I don't see Republicans getting much traction.

QE was a good game to play, and a better game to get rid of.