??? What curious who do you think is the biggest currency manipulator ??? i know who China and Japan are but you do not think so lol ,
Seriously ask your self who are the top 2 countries USA owes money to ???? and what do you think would happen if tomorrow China dumped all your treasuries ?? and i mean all of it ?? Would USA recover China is already dumping treasuries ,, but hey i know USA will look at the central banks as a savoir
It isn't the end of the world, just a portent of what can happen when the biggest buyer of America's biggest export -- its IOUs denominated in dollars -- stops buying.
That would leave the Federal Reserve as lender of last resort to the U.S. government to fill the gap left by its biggest creditor. Think this Zimbabwe style of central-bank monetization of an unsustainable government debt can't happen in one of the world's major industrialized democracies? Well, it may be starting in Japan.
But more recent Treasury data show China has been selling Treasuries outright. And while the markets have been complacent to the point of snarkiness, MacroMavens' Stephanie Pomboy thinks that's wrong. Unlike other Cassandras, she's been right in her warnings -- notably in the middle of the last decade that the U.S. financial system was dangerously exposed to a bubble in U.S. real estate. Hers was a lonely voice then because everybody knew, of course, house prices always rose.
As for the present conundrum, there's an $800 billion gap between the $1.1 trillion the Treasury is borrowing to cover the budget gap and the roughly $300 billion overseas investors are buying, Pomboy calculates. Banks, corporations and households have been doing little to fill that gap, preferring higher-yielding securities, so "it would appear the heavy lifting has been done by long-only bond managers extending duration and specs rushing to cover their shorts," she writes.
But Pomboy has little doubt that the Fed will step in to fill the gap left by others. In other words, debt monetization, a fancy term for printing money to cover the government's debts, which in polite circles these days is called "quantitative easing."
"Having pushed interest rates to zero, launched QE1 and QE2, there's no reason to believe that the Fed is going to allow free-market forces to destroy the fragile recovery it has worked so hard to coax forth now. And make no mistake, at $800 billion, allowing the markets to resolve the shortfall in demand would send rates to levels that would absolutely quash this recovery…if not send the economy in a real depression."
But her real concern is a bigger one. "The Fed's 'need' to take on an even more active role as foreigners further slow the purchases of our paper is to put the pedal to the metal on the currency debasement race now being run in the developed world -- a race which is speeding us all toward the end of the present currency regime." That is, the dollar-centric, floating exchange-rate system of the past four decades since the end of Bretton Woods system, when the dollar's convertibility into gold was terminated.
So all you need to do now is pray and get ready for the major american crash that is coming