Monday, September 14, 2009
Are Foreign Purchases of U.S. Treasury Bonds Being Faked?
Everyone knows that the American government is gaming the market for treasury bonds to some extent.
For example, the government has itself bought some U.S. Treasuries.
Some writers, such as Rob Kirby and Ellen Brown, go much further, alleging that Bernanke and the boys have also used hedge funds in the Cayman Islands to secretly buy huge sums of U.S. treasuries using dollars printed by the Federal Reserve, while pretending that independent "Caribbean banks" are doing the buying. See this, this and this. I have no idea whether or not they are right.
Perhaps most dramatically, Keith Fitz-Gerald (Contributing Editor to Money Morning, Investment Director of the Money Map Report and editor of the New China Trader) - who has seemed like a very level-headed guy in the past - is now claiming that the U.S. government has recently changed the rules so that the Fed can itself buy U.S. treasuries but claim that the buyers are foreign:
The U.S. Government wants the public to believe that China, Japan and Europe are still happily buying U.S. debt to fund the American economic turnaround. The only problem is - they're not...If Fitz-Gerald is right, then the story that China was a net seller of U.S. Treasury bonds for the first time ever in June takes on added significance. And the claim that China's bond purchases have increased recently loses credibility.
The reality is that the Treasury changed the way U.S. debt is accounted for when purchased on the open market. U.S. debt selling on the open market can be considered as having been sold to "foreigners" even if the purchaser was the Federal Reserve! Voila! A sleight of hand by the U.S. Government, and China and Japan can appear to be buying debt while at the same time selling debt.
It is obviously important to quickly either debunk or verify Fitz-Gerald's claim. Can anyone at Treasury or one of the relevant market makers tell us one way or the other?
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Matthew Goldstein of Reuters is the source for that theory. Also see the comments on this Tyler Durden (Zero Hedge) blog post for the details of the reg change.
ReplyDeletehttp://www.reuters.com/article/bondsNews/idUSN2425368520090624
http://www.zerohedge.com/article/who-buys-treasury-securities-auction#comment-68201
Could you please lend a hand to those of us who are just starting to read about this? What's this about "stealth monetization"? HOW? I'm trying to sift truth from Ron Paul / gold bug chatter, and I'm just in over my head. I suspect a lot of people are. One theory says the Treasuries market is being played. Another theory says that the Fed's creation of bank reserves out of thin air props up both Treasuries and equities at the expense of the dollar. Then there's the Bloomberg lawsuit alleging "off balance sheet" Fed transactions to the tune of 5 trillion.
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aGq2B3XeGKok
Can you be cajoled into laying out exactly what mechanisms are at work here, and how it all ties into deflation/hyperinflation/exchange rates? You'd be doing regular Joes a huge favor, even if it's gloomy. (Just go easy on the doom.)
Here's the most substantive stuff I've seen, from Chris Martenson, Tyler Durden:
http://www.chrismartenson.com/blog/fed-buys-last-weeks-treasury-auction/23880
http://www.chrismartenson.com/martensonreport/shell-game-how-federal-reserve-monetizing-debt
http://www.zerohedge.com/article/what-does-ever-increasing-tendered-accepted-treasury-ratio-portend
Thanks!
Martin
When a government does this,they're really close to "game over".
ReplyDeleteI think it's great,we can get to the other side of this storm and hopefully form "a more perfect union" like the constitution demanded.
It is not the 'Government'!
ReplyDeleteMartin, I'm not sure why you wouldn't associate Ron Paul with truth, there's a good reason people refer to themselves as gold bugs.
ReplyDeleteA big part of this answer is that foreign Central Banker are placing their own countries deeper in debt to buy US treasuries.
ReplyDeleteCheck it out: http://www.chrismartenson.com/blog/dollars-treasuries-and-indebtedness/26572
When this all comes down, if Ron Paul and the gold bugs prevail and substitute the air drop we have now with a gold based media of exchange, we're all in deep peanut butter. With gold backing the exchange media, there's less than 1oz ($1000) per trader. Any one with that much in a savings account has used up their share. The economy would immediately be strangle.
ReplyDeleteWhen it all comes down, we must move to a medium of exchange governed by the natural relation governing all mediums of exchange:
DEFAULT = INTEREST + INFLATION.
This medium should be managed by monitoring DEFAULTs and balance them with INTEREST collections so as to assure INFLATION is always zero.
This relation is no more subjective than the relation FORCE = MASS * ACCELERATION.
It is a fact ... not a theory.
Todd Marshall
Plantersville, TX
Todd, that might be a fact for you and your commie planner friends, but people on the ground need stability, not some other cooked up scheme of usury. The buck is dead and won't be backed with anything anyway. Society will have to go back to precious metals one way or another. As you will find if you read some Murray Rothbard, the amount of metal in circulation is irrelevant and if you think about it for a moment your proposed central planner commie system of benign monitoring of a money supply is achieved naturally through the use of precious metals. These do not and cannot just evaporate like cheque book money and the various "investment instruments" cooked up by the boyz to replace simply saving gold and silver. Through proper auditing and respect for private property the market does not follow the boom and bust cycles imposed by power. Of course you won't like that fact, because it upsets your theory that we need a nice government man to look after inflation.
ReplyDeleteandy
The Gov. buying its own debt is akin to pulling yourself up by your bootstraps,or creating something out of nothing.At what level of depravity will these criminals go to prop up their bogus fiat money ponzi scheme.Bernanke is not only breaking financial laws,but a few physics laws as well.
ReplyDelete"It is obviously important to quickly either debunk or verify Fitz-Gerald's claim. Can anyone at Treasury or one of the relevant market makers tell us one way or the other?"
ReplyDeleteSure they will. After gaming the market and committing massive FRAUD the Treasury Dept will now step forward and admit the fact that it's MANIPULATING information to the American public.
You must be stupid, stupid, stupid.
Anonymous said:
ReplyDelete"Sure they will. After gaming the market and committing massive FRAUD the Treasury Dept will now step forward and admit the fact that it's MANIPULATING information to the American public."
I'm looking for a whistleblower, not an official spokesman.
Lets see the gov an the federal reserve put 2-3 trillion in an thay can get 10X that in return so easy. With perfectly legal way. Just by making a deposit into any failing bank. With the rule of simple fractional banking. then the bank can lend this out to who ever they want.
ReplyDelete"Can anyone at Treasury or one of the relevant market makers tell us one way or the other?"
ReplyDeleteAre you kidding me? Will the criminal voluntarily admit his crime?