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Date Posted: 13:14:24 07/05/13 Fri
Many thanks for your comments. Divergence of opinion welcomed since it polishes my thoughts.
Failure of the bond auction as detailed is already happening regularly. I am not in contact with the world very much so I don't know what the current numbers are but the Fed is buying well over the new issue, probably about 120% this year. So you are right about that. However having said that, 1) I needed a kind of trigger point that most people could understand, and 2) my forecast when I started learning to write in 1993 was that the bond market would be the trigger, whether that be out of Europe, Japan or the USA. Currently the bond market is between a rock and a hard place.
One evidence of that is the mere fact that the US is buying more bonds than it issues. Somebody (China et al) is dumping. They don't want to hold more USD or bonds. My own estimate is that China has dumped about $1 trillion in the two years 2011/2. They had US trade surpluses of about 280 billion per or 560 total. PLUS the % of their reserves in USD dropped by 11% from 65% to 54%, about another half a trillion.
Moreover, With all the hoo haw about the last raising of the US debt ceiling OR THEY WOULD DEFAULT, how can the US not default on a larger amount if they would default on the smaller amount?
Then we have central bankers declaring that they are going to keep interest rates low, near zero. That is simple jawboning. 10 year rates have gone up from 170 to 240 or nearly 50% in the last 8 months They can't control rates, just influence them. Suddenly Bankers are saying rates can't remain low forever. Not a word about their godlike powers for controlling rates. Now a 70 point increase in rates doesn't make a whole lot of practical difference, however if they did have a real control, that wouldn't have happened. All it indicates is that they are beginning to lose control, and unless they can find a magical solution, we are firmly in an endgame. Admittedly, they have been muddling through with remarkable success, but anything that can go wrong, will.
There are very many more technical reasons the bond market is between a rock and a hard place, but too long to go into here
Good luck to you and yours
Please do continue to discuss here and or get the word out about the novel. It is my hope that someone will read it and not be blindsided as the poor tourists on the beach in Thailand were by not recognizing the Tsunami until it was too late in the novel.
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