Our Treasury Bonds Made Plain
The market for U.S. Treasury Bonds is receiving more attention recently. The value of the dollar tends to drop when long-term Treasury bonds decline in price. The March 2009 report of the Fed's Flow of Funds shows that there is $14.5 trillion outstanding in mortgage-backed securities, agency securities and Treasury securities.
Foreign countries are heavily invested in U.S. debt as an investment with China being the first holder of U.S. bonds. More than a few economists believe that if China stops buying them, the U.S. economy would face ever increasing interest rates to make U.S. debt more attractive.
With the current out-of-control spending and huge deficit in government, U.S. Treasury securities' real value is the focus of more and more attention. China wants to make sure that their assets are safe, and if there is any question that U.S. credibility is in doubt, the option to liquidate some of their U.S. assets is more likely an option.
If other nations do not buy U.S. debt, the only other option is for the U.S. Treasury to buy Treasury securities and, thus, increase the money supply dramatically. In order to attract investors, rates of interest would have to rise. As what happens when the Federal Government begins to habitually buy Treasury bills, inflation will soar. In the current climate, the Fed bought over 500 billion dollars in mortgage-back securities.
Normally, high interest rates is associated with the central bank as the government attempts to ward off inflationary pressures that come with an expanding money supply. Yet, there is less demand for Treasuries and the only other viable option is to have higher interest rates to entice buyer demand. Unfortunately, higher interest rates would only further decline the economy. As the result of higher interest rates, a greater burden is placed on the citizen which results in an escalation in mortgage defaults and more consumer debt.
The record-breaking Treasury offerings out of Washington along with the Fed churning out dollars bills is incredible. The floodgate pushed open by the U.S. Treasury is making bond yields soar. Economists are beginning to wonder who will be purchasing these bonds.
A nation who spends in an out-of-control way can eventually destroy itself. A famous economist believed that inflation was a disease which could destroy a society if it wasn't stopped.
China remains the #1 holder of our nation's debt. Economist Milton Friedman warned that the fate of a country could not be separated from ''the fate of its currency''. High inflation and high interest rates are not comforting to an already fragile global economy. The increasing debt boosts bond yields at the same time that the government's budget deficit is not putting on the brakes. - 23200
Foreign countries are heavily invested in U.S. debt as an investment with China being the first holder of U.S. bonds. More than a few economists believe that if China stops buying them, the U.S. economy would face ever increasing interest rates to make U.S. debt more attractive.
With the current out-of-control spending and huge deficit in government, U.S. Treasury securities' real value is the focus of more and more attention. China wants to make sure that their assets are safe, and if there is any question that U.S. credibility is in doubt, the option to liquidate some of their U.S. assets is more likely an option.
If other nations do not buy U.S. debt, the only other option is for the U.S. Treasury to buy Treasury securities and, thus, increase the money supply dramatically. In order to attract investors, rates of interest would have to rise. As what happens when the Federal Government begins to habitually buy Treasury bills, inflation will soar. In the current climate, the Fed bought over 500 billion dollars in mortgage-back securities.
Normally, high interest rates is associated with the central bank as the government attempts to ward off inflationary pressures that come with an expanding money supply. Yet, there is less demand for Treasuries and the only other viable option is to have higher interest rates to entice buyer demand. Unfortunately, higher interest rates would only further decline the economy. As the result of higher interest rates, a greater burden is placed on the citizen which results in an escalation in mortgage defaults and more consumer debt.
The record-breaking Treasury offerings out of Washington along with the Fed churning out dollars bills is incredible. The floodgate pushed open by the U.S. Treasury is making bond yields soar. Economists are beginning to wonder who will be purchasing these bonds.
A nation who spends in an out-of-control way can eventually destroy itself. A famous economist believed that inflation was a disease which could destroy a society if it wasn't stopped.
China remains the #1 holder of our nation's debt. Economist Milton Friedman warned that the fate of a country could not be separated from ''the fate of its currency''. High inflation and high interest rates are not comforting to an already fragile global economy. The increasing debt boosts bond yields at the same time that the government's budget deficit is not putting on the brakes. - 23200
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posted by X - Men @ 2:52 AM
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