Erik,
The same trend is happening in markets throughout the world, even in pissant- countries like mine in Costa Rica. I spent two hours with bankers this morning and the trend is the same: private sector debt/credit markets are dead. Practically the only borrowing going on is with government debt. Imagine a scenario where ALL the money only has ONE place to go: government debt, because that is the scenario we are currently rapidly approaching. Now, if someone can give me a good reason why TPTB would bother meddling with bonds issued by a no-name country, please let me know what that is. CR government 10 year bond, in dollars mind you, currently trading at 5.7%!!! The only reason it’s 1.7% higher than the US is because it’s emerging country debt but come on, why do you think it’s that low? It’s not because Goldman is HFT-ing Costa Rican bonds, LOL! It’s because money has NO PLACE ELSE TO GO!!! It’s the same throughout the world.
The scary part is that the only reason to buy bonds right now is because the price is going up and there will be another sucker to sell them to later. It’s certainly not because of the “fundamentals” of miniscule returns. Feels a lot like 2005-2006, when you bought a house because obviously it would go up and there would always be a sucker paying more to sell it to. We all know how that ended.
The SDR is an international reserve asset created by the IMF in 1969 to supplement to existing reserve assets. An SDR allocation is a distribution of SDRs to members by decision of the IMF. A "general" allocation requires a finding by the IMF that there is a global need to additional liquidity. Members and prescribed holders may use their SDR holdings to conduct transactions with the IMF.
New Zealand's allocation of SDR has gone from 141,322,000 as at July 31, 2009 to 804,497,747 as at August 31, 2009
Could the US be considered by other governments, and especially its creditors, “too big to fail”? The US may still be able to command more debt as one of the world’s first super-powers, with capability to destroy the world many times over, and currently the defacto world currency. Thus, a spiral of lending and borrowing until the other governments realize this cannot go on forever and accept the consequences…
They’ve taken on more debt to meet obligations, and more debt for infrastructure, but that trend pre-dates last year’s collapse. My point is, our bonds are also at very low yields and the glaring reason why is because private sector options for investment have decreased astronomically.
The first poster said it right ;)… Think about it … would it be very hard for the Central bankers to negotiate between themselves that everybody will print and they will buy each other toxic stuff… Think also like Chinesse CB, hmm… why dont we print money just to buy US treasuries, we have to buy them anyway otherwise we lose our 1T already invested…
The only thing is how to make it so that it does not show up into the real economy… oops easy… give % on bank reserves, so the bank stuck it with us when they get ty’s to shore up thier balance sheets…
see win-win…
and ofcource they dont have full control, so some of it will spill up , right… commodities are up even that we still have demand destruction…
The question is how long they can do that…
May be until they are ready to introduce two-tier money system SDR on top of $,euro,yen, pound and may be 10% gld or so…
problem solved, all around the world tax payers are stuck with paying the whole mess with future inflation, as long as they can intorduce the inflation slowly over time, everything goes the old way…
Long term China is in trouble, to continue to prop up the US deficit would bleed them dry. The only intelligent course of action for the Chinese is to quietly convert as much of their paper into hard assets. The US government is silent on this matter, not ignorant, but complicit in a plan to move Americans into a global currency. Gold and silver have value and will be taken from the population to aid in the creation of a new credit system. No more guns, no more freedom of press/speech, etc. Americans will become the property of the Federal government.
Per the Treasury Auction Results pages (for example, the one linked here) a $60B Note was tendered, but not quite $20B was accepted. Isn’t this a disaster? Same thing with the other Notes and Bonds. Someone please explain why this is not headline news that even MSM cannot ignore.