patrick.net

More on China, Japan and the dollar
http://www.reuters.com/article/2013/10/18/us-usa-fiscal-china-japan-idUSBRE99H06220131018

Gold Spikes 3% After Debt Ceiling Rises & U.S. Downgrade

Global sales of bullion bars and coins gained 78% in the second quarter, according to the World Gold Council, showing that demand actually accelerated.

http://www.zerohedge.com/contributed/2013-10-18/gold-spikes-3-after-debt-ceiling-rises-us-downgrade

More on the debt deal and the dollar http://finance.yahoo.com/news/debt-deal-done-dollars-demise-093534810.html

Schiff on why gold rallied after the budget deal.
Goldman Sachs said gold was a slam dunk sell after a budget deal got done-so far they have been wrong.
http://finance.yahoo.com/blogs/talking-numbers/why-gold-surge-just-starting-peter-schiff-183303452.html

Why the Dollar will ALWAYS be the Worlds reserve currency
http://finance.yahoo.com/blogs/daily-ticker/why-dollar-always-currency-world-161245233.html

Additional paragraphs added to end of original post
http://smaulgld.com/what-the-budget-deal-means-for-the-economy-real-estate-gold-and-silver/

anyone still think there is a real estate recovery?

Smaulgld,

Of similar sentiments. As ordinary citizens, doubt we have any influence, so just swim carefully amongst the sharks.

hanera says

Smaulgld,

Of similar sentiments. As ordinary citizens, doubt we have any influence, so just swim carefully amongst the sharks.

not much else we can do....

China diversifies away from dollar http://online.wsj.com/news/articles/SB10001424052970203753704577254794068655760

China held $1.28 trillion in U.S. Treasury securities at the end of July and Japan owned $1.14 trillion.

http://www.reuters.com/article/2013/10/18/us-usa-fiscal-china-japan-idUSBRE99H06220131018

APOCALYPSEFUCK is Comptroller says

Baby Beaver Having Lunch

http://youtu.be/AZO6ch_ocWg

Damn! Thought this was going to be porn.

Here is a question that none of the "our debt to gdp level is fine" crowd can answer. How will the US pay its debt when interest rates rise and how will it oay its unfunded liabilities? http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/18_Billionaire_Sprott_Asks_How_Will_People_Survive_Whats_Coming.html

smaulgld says

How will the US pay its debt when interest rates rise and how will it oay its
unfunded liabilities?

You never stop with the fear mongering and paranoia, do you? The government will pay it's debt the exact same way that it does now, or at any other time in the past.

Unfunded liabilities? That's the fear-mongering phrase that doom and gloomers use to imply that future payments/obligations aren't paid for, or budgeted for. Actually both are somewhat true because the budget for sometime in the future(5-20 years) and the revenue THEN hasn;t been recieved yet, along with the payment for the liabilities.

The "unfunded liabilities" nonsense is equal to saying that you missed your March 2018 house payment.

Hi upisdown and welcome back
Upisdown says:

I'm done with ya. Best of luck selling gold, I hope it works out for ya, and at least it's a legit way to make a living, even if the tactics are the predator-prey relationship type.

I guess the chinese are bluffing
http://www.dailymail.co.uk/news/article-2463136/US-debt-limit-default-mocked-China.html

Upisdown says
The "unfunded liabilities" nonsense is equal to saying that you missed your March 2018 house payment.

Not really - i don't count on paying my 2018 house payment by counterfeiting money and borrowing from the chinese

smaulgld says

I guess the chinese are bluffing

So what, their ownership of t-bonds will fall just as soon as the dollar flows and stockpiles diminish from us buying their junk. What else are they going to do with all the excess dollars?

Are the t-bond dealers required to paticipate in the bond auctions? Those t-bonds will be absorbed by others that buy them.

smaulgld says

Not really - i don't count on paying my 2018 house payment by counterfeiting
money and borrowing from the chinese

Really, counterfeiting? I think that the dollar and federal reserve are both legally and congressionally mandated part of our monetary system. Our monetary system is credit-based(and private banks/market dominated)and the Chineses choose to save in our currency(like numerous other nations)with the same opportinities as anybody else.

You claim that they aren't legal? And why would you want to go back to the 'golden rule' type of monetary system, whereas the people with all the gold rule, or make all the rules?

Upisdown says:What else are they going to do with all the excess dollars?

What they have been doing- diversifying OUT of the dollar and into gold and other currencies like I wrote in the original blog post

"Last week China entered into a $60 billion swap agreement with the European Central Bank with the intent of internationalizing THEIR currency."

"The dysfunctional monetary and fiscal policies of the United States are making its foreign creditors less comfortable lending money to it. China has been making arrangements to diversify its reserve assets away from the dollar. China recently has stepped up its acquisition of gold as either a hedge against its U.S. dollar reserves and/or to ultimately back its own currency by gold."
http://smaulgld.com/what-the-budget-deal-means-for-the-economy-real-estate-gold-and-silver/

Upisdown says Really, counterfeiting? I think that the dollar and federal reserve are both legal

I didnt say what the Fed does is illegal
What I wrote was in response to your analogy re the US unfunded liaility worry being like about how one might pay a future obligation, like a mortgage.
The way the US plans on paying future liabilities is by printing and borrowing
As an individual to pay my mortgage I cant print money as it would be counterfeiting and I dont have a credit line with the Chinese

smaulgld says

How will the US pay its debt when interest rates rise and how will it oay its
unfunded liabilities?

How did the government do it in the 1980's?

1970 to 2020: Interest Rates on National Debt

upisdown says

Really, counterfeiting? I think that the dollar and federal reserve are both legally and congressionally mandated part of our monetary system.

Why can't I have a printing press? I am legal as well and the credit I inject with my increased personal spending is only going to benefit the economy!

smaulgld says

What they have been doing- diversifying OUT of the dollar and into gold and
other currencies like I wrote in the original blog post

Again, so what. The Chinese are doing whatever is good for China, for whatever reason, of which nobody in the USA knows, but makes assumptions.

Nice chart
What happens to the cost of US interest payments when rates rise because the demand for treasuries drops and the fed had to print more money to buy what the chinese dont buy?

Upisdown says
Again, so what. The Chinese are doing whatever is good for China, for whatever reason, of which nobody in the USA knows, but makes assumptions.

Agree I wouldnt care except they fund 25 percent of all US spending
If they stop lending where do we get the money?

smaulgld says

The way the US plans on paying future liabilities is by printing and
borrowing
As an individual to pay my mortgage I cant print money as it would
be counterfeiting and I dont have a credit line with the Chinese

Yes, the Fed Res advances credit, and the government sells t-bonds to finace that credit, of which the private dealers get paid for their part of the transaction, and private parties get a VERY secure(at least until recently because of the teabag morons) albeit low rewarding(because of the very low risk)asset.

You just admitted that you can't run your personal finances like the federal government can, so why do you want the federal government to run their daily/monthly/yearly operations like you and be totally constrained by incoming revenue only????

smaulgld says

As an individual to pay my mortgage I cant print money as it would be
counterfeiting and I dont have a credit line with the Chinese

And you don't pay interest for that credit either, or would you? Not to mention the high risk for you versus the government.

smaulgld says

What happens to the cost of US interest payments when rates rise because the
demand for treasuries drops and the fed had to print more money to buy what the
chinese dont buy?

Again, what happened in the 1980's? The treasuries will succumb to market prices, and that whole mandatory participation thingy by member banks too.

Upisdown says "You just admitted that you can't run your personal finances like the federal government can, so why do you want the federal government to run their daily/monthly/yearly operations like you and be totally constrained by incoming revenue only????"

Because I dont believe in a fantasy world where a government can print and borrow as much as they wish without adverse consequences

smaulgld says

Agree I wouldnt care except they fund 25 percent of all US spending
If
they stop lending where so we get the money?

The last I saw was that the Chinese was the biggest foreign holder of treas., and it was about 11% of the total. Show me something more up to date if you have it, please.

Where did the money come from for the other 75% of the treas., Ronald McDonald?

Ill pull full chinese bond holdings later for you
Right now the chinese hold $1.3 trillion in US treasuries which is larger than the US annual budget

smaulgld says

Because I dont believe in a fantasy world where a government can print and
borrow as much as they wish without adverse consequences

Fantasy? You explain that to the MILLIONS of people and entities that buy TRILLIONS of dollars of treasuries daily/weekly/monthly.

They are ALL wrong and you, and only you, are right?

There is no way to down play the significance of china (and Japan) as creditors
Without their buying, holding and rolling over their US bonds the US faces much higher borrowing costs- most of which will go to pay off the exisiting chinese and Japanese bonds

smaulgld says

Ill pull full chinese bond holdings later for you
Right now the chinese
hold $1.3 trillion in US treasuries which is larger than the US annual
budget

Thanks, but the total dollar amount and proportion to the budget is immaterial, as to the total %age of all the treas.

Upisdown says "Fantasy? You explain that to the MILLIONS of people and entities that buy TRILLIONS of dollars of treasuries daily/weekly/monthly."

I take no comfort in the safety in numbers argument
Thousands got on the titanic believing the ship was unsinkable

smaulgld says

There is no way to down play the significance of china (and Japan) as
creditors
Without their buying, holding and rolling over their US bonds the
US faces much higher borrowing costs- most of which will go to pay off the
exisiting chinese and Japanese bonds

Are they truly the creditors, or are they buying an asset?

What do you call it if I or Goldman Sachs(or any hedge fund, pension fund, or 401ks) buys treas., is it still loaning money to the government?

Upisdown says
"Are they truly the creditors, or are they buying an asset?
What do you call it if I or Goldman Sachs(or any hedge fund, pension fund, or 401ks) buys treas.?"
Excellent question
Let's say the a creditor who lends money and gets a bond in return is both creditor and owner of an asset.

Owning an asset doesn't take his creditor status away
So lets say the bond is an asset. As an asset it must be valued.
If the par value of a bond is $1000 and it pays 1pct interest its easy to value the asset on one's balance sheet as being worth $1000+

If however the issuer becomes impaired and the repayment of interest in a timely fashion is called into question, or worse the repayment of principal, the value of the "asset" drops

When a credit asset becomes impaired the creditor/asset holder becomes far more of a creditor as he seeks to receive at least some portion of his money back

smaulgld says

Let's say the a creditor who lends money and gets a bond in return is both
creditor and owner of an asset.

But is the federal government really a creditor? The government is selling a marketable asset. Yes, in normal debt(asset) sales the issuer is a creditor, but does not have the ability to endlessly finance(sell treas) their operations because of the limited assets, but the government does.

Upisdown says
But is the federal government really a creditor? The government is selling a marketable asset. Yes, in normal debt(asset) sales the issuer is a creditor, but does not have the ability to endlessly finance(sell treas) their operations because of the limited assets, but the government does.

Yes they are a creditor and if you like they are selling an asset whose value is based on their ability to repay principal and interest

T-bonds unlike corporate bonds are not backed by anything other than the government's promise. If a corporation defaults you get a decent place in the bankruptcy line (unless you were a GM bond holder) to try and get some of your money back

If a government defaults you have no claim on its assets. You are 100 % out of luck. Just like the people who owned dollars and bonds issued by the confederacy- they lost 100pct