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Dollar Debt Dump Underway

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Dollar Debt Dump Underway

Unread postby GHung » Tue 17 May 2016, 09:39:44

U.S. debt dump deepens in 2016

Central banks are dumping America's debt at a record pace.

China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March.

In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.

So far this year, the global bank debt dump has reached $123 billion.

It's the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon....


Image

Treasuries are considered one of the safest assets in the world, but some experts say a sense of panic about the global economy drove the selloff.

"It's more of global fear than anything," says Ihab Salib, head of international fixed income at Federated Investors. "There's still this fear of 'everything is going to fall apart.'"

Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China's economy rose and stock markets were very volatile.

In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value.

Also, as investors have pulled money out of developing countries, central bankers seek to replenish those lost funds by selling their foreign reserves........


More: http://money.cnn.com/2016/05/16/news/ec ... -stack-dom

Doesn't seem to bode well for the US Dollar hegemony.... Other repercussions?
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Re: Dollar Debt Dump Underway

Unread postby onlooker » Tue 17 May 2016, 10:00:19

As goes US and China so goes the world and vice-versa.
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Re: Dollar Debt Dump Underway

Unread postby vtsnowedin » Tue 17 May 2016, 10:38:33

So the central banks are selling off those bonds, Who is buying them?
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Re: Dollar Debt Dump Underway

Unread postby Tanada » Tue 17 May 2016, 11:10:17

vtsnowedin wrote:So the central banks are selling off those bonds, Who is buying them?


It is at the very bottom of the linked article,

f anything, demand is still high for U.S. Treasury bonds -- it's just coming from private investors. The yield on a typical 10-year bond is just 1.76%, which is very low.

"While central banks may be selling Treasuries to support their currencies, investors seek the safety of Treasuries at the same time," says Jeff Kleintop, chief global investment strategist at Charles Schwab.
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Re: Dollar Debt Dump Underway

Unread postby vtsnowedin » Tue 17 May 2016, 11:18:31

Tanada wrote:
vtsnowedin wrote:So the central banks are selling off those bonds, Who is buying them?


It is at the very bottom of the linked article,

f anything, demand is still high for U.S. Treasury bonds -- it's just coming from private investors. The yield on a typical 10-year bond is just 1.76%, which is very low.

"While central banks may be selling Treasuries to support their currencies, investors seek the safety of Treasuries at the same time," says Jeff Kleintop, chief global investment strategist at Charles Schwab.

I was looking for something a little more specific. Retirement funds? College endowments? Chinese millionaires etc.
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Re: Dollar Debt Dump Underway

Unread postby KaiserJeep » Tue 17 May 2016, 13:53:05

I think that recent events have inspired folks to believe that whomever wins the election for POTUS this November, the US debt will explode until Treasuries are useful only as TP.

I mean, look at the choices. Donald Trump has overextended himself and has more than one bankruptcy in his past. Clinton and Sanders are trying to outdo each other as they pander for votes, by promising to spend more than Obama.

Either way, the USA is going broke in the next 1-2 decades.
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Re: Dollar Debt Dump Underway

Unread postby misterno » Tue 17 May 2016, 14:34:35

GHung wrote:U.S. debt dump deepens in 2016

Central banks are dumping America's debt at a record pace.

China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March.

In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.

So far this year, the global bank debt dump has reached $123 billion.

It's the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon....


Image

Treasuries are considered one of the safest assets in the world, but some experts say a sense of panic about the global economy drove the selloff.

"It's more of global fear than anything," says Ihab Salib, head of international fixed income at Federated Investors. "There's still this fear of 'everything is going to fall apart.'"

Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China's economy rose and stock markets were very volatile.

In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value.

Also, as investors have pulled money out of developing countries, central bankers seek to replenish those lost funds by selling their foreign reserves........


More: http://money.cnn.com/2016/05/16/news/ec ... -stack-dom

Doesn't seem to bode well for the US Dollar hegemony.... Other repercussions?


I don't understand

If US debt is dumped this much howcome bond prices not going down and interest rates are not going up?

Something is wrong
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Re: Dollar Debt Dump Underway

Unread postby jedrider » Tue 17 May 2016, 16:23:21

U.S. interest rates CANNOT go up without crashing the economy and the housing market in particular.

Just saw the DVD movie "The Big Short" on the housing bonds failure in 2008. They had an explanation of how this is possible: Corruption or blindly ignoring reality, which really are the same thing if you are a banker.
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Re: Dollar Debt Dump Underway

Unread postby ohanian » Tue 17 May 2016, 19:30:26

jedrider wrote:Just saw the DVD movie "The Big Short" on the housing bonds failure in 2008. They had an explanation of how this is possible: Corruption or blindly ignoring reality, which really are the same thing if you are a banker.


The (corrupt) market can remain irrational longer than you can remain solvent

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Re: Dollar Debt Dump Underway

Unread postby jedrider » Wed 18 May 2016, 00:03:50

Like Oil Prices. Yep.

[Doomers will love the movie "The Big Short". All about believing the truth amongst institutional denial.]
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Re: Dollar Debt Dump Underway

Unread postby vtsnowedin » Wed 18 May 2016, 08:09:29

jedrider wrote:U.S. interest rates CANNOT go up without crashing the economy and the housing market in particular.

Just saw the DVD movie "The Big Short" on the housing bonds failure in 2008. They had an explanation of how this is possible: Corruption or blindly ignoring reality, which really are the same thing if you are a banker.
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Re: Dollar Debt Dump Underway

Unread postby misterno » Fri 20 May 2016, 17:26:41

If US debt is dumped this much howcome bond prices not going down and interest rates are not going up?

Something is wrong
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Re: Dollar Debt Dump Underway

Unread postby shortonoil » Sat 21 May 2016, 20:55:12

"Something is wrong"

Against the US GDP of $17.3 trillion, $123 billion is 0.0071%. Peanuts. Against the US total asset value of $577 trillion it is nothing. We are now in the era of return of capital, not return on capital. Investors from around the world will go where ever they think money is the safest. The wealthiest nation on earth is a good place to start.
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Re: Dollar Debt Dump Underway

Unread postby misterno » Tue 24 May 2016, 17:32:54

shortonoil wrote:"Something is wrong"

Against the US GDP of $17.3 trillion, $123 billion is 0.0071%. Peanuts. Against the US total asset value of $577 trillion it is nothing. We are now in the era of return of capital, not return on capital. Investors from around the world will go where ever they think money is the safest. The wealthiest nation on earth is a good place to start.


That is not what I said

I said if people are dumping US bonds, then how come I am not seeing bond prices going down and interest rates going up?
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Re: Dollar Debt Dump Underway

Unread postby Outcast_Searcher » Thu 26 May 2016, 19:24:07

misterno wrote:
shortonoil wrote:"Something is wrong"

Against the US GDP of $17.3 trillion, $123 billion is 0.0071%. Peanuts. Against the US total asset value of $577 trillion it is nothing. We are now in the era of return of capital, not return on capital. Investors from around the world will go where ever they think money is the safest. The wealthiest nation on earth is a good place to start.


That is not what I said

I said if people are dumping US bonds, then how come I am not seeing bond prices going down and interest rates going up?

Clearly the net demand for US bonds isn't decreasing materially, or you would be seeing the prices going down (i.e. not very much of the bond market universe is dumping treasury bonds).

I recently read an editorial on Bloomberg about how the US should be selling 50 or even 100 year treasuries, since interest rates are low. Here's a link:

https://www.bloomberg.com/view/articles ... -than-ever

"Good deal for the taxpayers, if those can be sold in quantity at very low interest rates, but who in HELL would want to buy such things in quantity at very low interest rates, given how little effort the US is making (or seems likely to make in any decade near term) to pay off its growing debt?", I thought. However -- this is an indication of how bullish the overall market for US treasuries is. As another indication, the market expects US inflation to only be roughly 1.75% over the next decade.

I haven't liked the idea of holding long term US treasury bonds since way back in the 90's when they were yielding 6%. So far, events I've been concerned about like possibly resurging inflation haven't materialized. (I sure as hell wouldn't touch them now yielding under 3%).

With the markets, it's about actual net supply and demand (which can turn on a dime given significant good or bad news). It's not about how some group with a viewpoint thinks about what some subset of buyers or sellers is doing.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Dollar Debt Dump Underway

Unread postby Outcast_Searcher » Thu 26 May 2016, 19:45:04

Speaking of a mess which could potentially tip the confidence in long term bonds, at least short term, if it goes south in a big way on July 1st, is Puerto Rico debt.

On July 1st, there is about $2 billion due on such debt, much of it in the general obligation bonds, which are SUPPOSED to be P. R. constitutionally required to be paid off before anything else, including services for the citizens of P. R.

Given the statement made by the P. R. governor today about the intent NOT to pay about 85% of what is due on the G. O. bonds, and that P. R. is about $70 billion in debt with an economy spiraling down -- and the mess the US congress is making at coming up with a "solution" by July 1st, I took a 1.8% haircut today vs. what I could get on July 1st if all were well. (Figuring as the news gets worse and worse, that a bird in hand is much better than hoping things work out well. The bonds I held are supposedly insured, but given that I'm not sure how many months/years I might have to wait for entities to sue each other or try to get out of paying off on the insurance -- I'd rather not play that game.)

http://www.bloomberg.com/news/articles/ ... t-proposal

The $9.1 billion spending plan unveiled Monday allocates $209 million for interest payments on commonwealth debt. That’s just 15 percent of the $1.39 billion of principal and interest that Puerto Rico owes from its general fund in the fiscal year starting July 1, including $1 billion for general obligations, according to Luis Cruz, the island’s budget director.


The budget proposal is a signal that instead of earlier attempts to find cash to meet general obligation deadlines, the administration is now focused on paying public workers and programs before bondholders, said Daniel Hanson, an analyst at Height Securities, a Washington-based broker dealer.
Debt Service
“This is a pretty strong statement that they’re not going to even try to pay anymore,” Hanson said. “In some ways he’s threatening bondholders and saying ‘come and sue us.”’


(Prior to this, the comments of P. R. officials indicated that the G. O. bonds would be paid in full -- implying they should at least be safe for the short term. Suddenly announcing plans to renege on 85% of the interest owed for the top tier of debt in just five weeks is a rather dramatic departure from that stance).

I don't mind taking plenty of risk over time on stock holdings -- but I expect long term rewards to be roughly symmetrical to the extent of the risk I am taking. I just don't see much upside to the mess in P. R. This "go ahead and sue me" attitude, OTOH, has a banana-republic ring to it.

With all the questionable US debt, municipal and otherwise, worst case scenario could result in a number of dominos tipping over, and things getting ugly enough to result in a panic, at least for awhile.

I'll just say I screwed up on this one (about 1% of my investment portfolio). When I bought these about 4 years ago with a very nice yield, I didn't expect things to degrade for P.R. this badly until years from now, if ever. Oops.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Dollar Debt Dump Underway

Unread postby Revi » Tue 31 May 2016, 08:17:38

Don't feel too bad. I got these utilities that were supposed to be good from my retirement broker. She said that they were for those who were "risk averse". I pictured them as similar to the utilities on the monopoly board. Get 4x roll of dice, etc. It turned out that they were mostly Enron and I lost over $1000. A fool and his money are quickly parted. The painful part is that I could have lived a month or two on that. C'est la vie.
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Re: Dollar Debt Dump Underway

Unread postby Outcast_Searcher » Tue 31 May 2016, 12:33:16

Revi wrote:Don't feel too bad. I got these utilities that were supposed to be good from my retirement broker. She said that they were for those who were "risk averse". I pictured them as similar to the utilities on the monopoly board. Get 4x roll of dice, etc. It turned out that they were mostly Enron and I lost over $1000. A fool and his money are quickly parted. The painful part is that I could have lived a month or two on that. C'est la vie.

I appreciate the comment.

No, I don't feel bad about losing a little money at all. That happens with investments if one diversifies, and as long as one is careful enough to keep the word little accurate, it's not a problem. (For me this was roughly a 1.8% loss on 1% of my net worth, or a .00018% loss on my net worth. So that's roughly a $180 loss per $million of net worth). That makes 2008, for one example, a walk in the park.

What bothers me is the principle of the thing. That the governor of Puerto Rico can completely change the rules (or credibly threaten to) for bonds that are supposedly fully protected by the constitution of Puerto Rico, simply by saying (I paraphrase here): phuck ewe, we refuse to pay what we owe.

The reason I mentioned that here is that on top of all the US debt, the debt of places like Greece and all the poor to terrible quality muni debt, truly (IMO) represent a big problem and risk for the financial system's stability, and there are so many potential triggers to start a problem that it makes the mess highly unpredictable.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Dollar Debt Dump Underway

Unread postby Outcast_Searcher » Tue 31 May 2016, 12:48:41

Revi wrote:Don't feel too bad. I got these utilities that were supposed to be good from my retirement broker. She said that they were for those who were "risk averse". I pictured them as similar to the utilities on the monopoly board.

I've been there. From decades of the school of investing common sense by the way of learning from my mistakes:

Brokers are just salespeople. They're basically useless. Note that they don't necessarily put any of THEIR money at risk on their recommendations.

I've seen too many times where promises of favorable tax treatment, etc. were later denied by the IRS, making a "good" investment a bad one. The brokers lose zero when this happens.

As a friend who was a professional investor pointed out to me said, the only investment deals brokers offer (like real estate limited partnerships, etc) are the bad deals. The brokers and their companies take the good deals, and offer the bad deals to the clients.

True story: For about a decade when I had a full service broker (before the deep discount brokers and the internet became common), I had an honest broker and got a good discount. This was our agreement:

1). Never call me with advice or tips. If you want to lose my business, the fastest way to do that is to pester me about buying or selling stocks I have no interest in.

2). I'll do all the research and take all the risk. What I need you to do is accuately write order tickets, and always submit my orders PROMPTLY (instead of letting them sit around on your desk while taking another call).

3). I'll respect your time and you'll earn plenty of commissions in total, and you never have to worry about being blamed for my investment choices (and losses). In exchange, if in doubt about pushing something on me, see item 1.

We got along fine. I only had to remind him and threaten to fire him once.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Dollar Debt Dump Underway

Unread postby penury » Fri 17 Jun 2016, 11:58:37

Why are prices of bonds not going down or interest rates rising? It could be that the FED is buying a minimum of 90 per cent of the bonds thru their primary dealers, while prohibited from buying directly the FED has what they call POMO when they purchase back bonds from primary dealers and this makes everything legal. Check the amount owned by the
Fed, I believe at last count it was over 18 trillion dollars.
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