Going Once, Going Twice…

Purely by coincidence, I read this prediction by commenter “doughboys”…

‘Exit from American investments’ is poorly phrased Justin. When the Chinese will not buy American at this fall’s debt auction (approximately 2 trillion dollars worth will be auctioned off) they will be swapping the $1.5 trillion US dollars they now hold for other assets before the value of the dollar falls like a rock. They will buy copper, gold, steel etc.
When China exits the Treasury auctions the Fed will step in and ‘monetize’ the debt by printing dollars to buy debt inflation will accelerate certainly beyond anything seen in US history because countries and companies/banks will rush to spend all the dollars they have been sitting on since ‘the big print’ started last fall (the Fed has printed and loaned some $14 trillion since then). Inflation has not appeared since the money has not been ‘spent’ (see PPI) in the traditional sense) yet.
When you reach into your wallet to pay for a small pizza in the near future pulling out a $100 bill and the driver looks perturbed because you haven’t tipped him remember this post.

… just prior to reading this news report regarding the U.S. Treasury:

The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government’s burgeoning budget deficit.
It was the second lackluster showing in as many days, convincing analysts that the stellar results of debt auctions just a few weeks ago were a fluke and that Thursday’s $28 billion seven-year offering could suffer a similar fate.
Under the weight of the ballooning deficit, the government has raised auction volumes and analysts now wonder whether the strain on the market is showing.
“Obviously everyone is inferring that tomorrow’s won’t be good either,” said James Combias, head of government bond trading at Mizuho Securities USA in New York. “Maybe you will see more interest tomorrow but I think the increase in the auctions and the size of them may be starting to have an effect. These are very large auctions.”
Demand for the five-year notes was below average, measured by the bid-to-cover ratio of 1.92, the lowest in almost a year.

Perhaps it would be prudent to finally learn how to make fire by rubbing two sticks together.

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Warrington Faust
Warrington Faust
14 years ago

Back, about 15 years ago, when Japan was still a powerhouse (they sank under “toxic mortgages” too, Tokyo was mortgaged for more than the entire United States. Banks collapsed, etc); they decided to teach us a lesson. They delayed their bid at a big treasury auction until the last few minutes. They just wanted to give us an idea of what would happen if they didn’t bid.
It seems very few Americans realize how dependent we are on foreign buyers. They keep us afloat.
In times of anticipated inflation investors flee to “goods”.

doughboys
doughboys
14 years ago

The Fed bought $6.5 billion of these.
Hello Domino’s? Yes, I’d like the special 2 small with one topping for $100, 30 minutes? okay

Tom W
Tom W
14 years ago

Weimar.
Zimbabwe.
Obamaville.
Hope + Change = Hyperinflation.

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