The beginning of the end

I am often asked what signs I use to measure where we are in the crisis and whether it will get worse or better.

This next article posits the emergence of a new type of bond sold by the US that is not denominated in US dollars. This would be the equivalent of a road sign reading, “No bridge, 10 feet.”

Here’s the idea:

Japan economists call for US borrowing in other currencies
TOKYO - Japanese economists, increasingly concerned that the United States might seek to pay its enormous and growing debt obligations in a weakened US dollar, are looking to the possibility of US Treasuries being issued in yen.

Few truly appreciate what a gift, and exorbitant privilege, it has been for the US to be able to both issue and pay off its debts in the same currency. Compare this to a third world country forced to borrow from the IMF in another currency. In order to pay back the loan, they have to acquire whatever that currency happens to be. This means that they must run a positive trade balance of some sort or they may have to sell off key internal assets. Either way, a rigor is imposed on their actions that is missing for the US.

The US government needs to borrow at least US $1 trillion in the coming year, excluding the US Treasury's $700 billion plan to bail out the financial and other industries, said Kazuo Mizuno, chief economist in Tokyo at Mitsubishi UFJ Securities Co, a unit of Japan's largest publicly traded lender by assets. That amount is likely to grow as the US government continues to rescue failed parts of the economy and has to raise more debt - that is, issue government bonds, or Treasuries - to fund such rescues.

My comment here is that if Japan is already worried about $1 trillion in borrowing, wait until they find out about the $2 trillion in borrowing. A good understanding of the Treasury market funding cycle helps here too. Because it is not just the $2 trillion in new borrowing that must be accommodated. There is roughly $1.8 trillion in “roll-over” funding for past borrowing that must occur as well. These are enormous numbers that will vastly exceed total world savings next year, if my predictions about the downturn are correct.

Faced with the unprecedented growth of the US budget deficit and the prospect of an increasingly weaker dollar compared with the yen reducing the value of Treasury debt held by Japan, economists in Tokyo are calling for the administration of president-elect Barack Obama to issue US Treasuries denominated in yen and other currencies. The issuance of foreign currency-denominated US Treasures would reduce the perceived risk of holding the debt.

And that, my friends, was a call for the beginning of the end of the free ride. If (or when) the US is forced to borrow real money from other countries that it cannot simply print out of thin air, then it will have to work for it, like everybody else. This will mean that our trade balance must be, at worst, zero, or else our currency will constantly erode. While a weaker currency can help the exporters, it also means that the cost of external borrowing goes up, which can quickly morph into a borrowing spiral,where a weaker currency and more borrowing create the conditions for each other’s existence.

Unthinkable? Well, no, it’s happened before.

The idea of issuing foreign currency-denominated US Treasures is not new. The Jimmy Carter administration, buffeted by the two oil crises of the 1970s, sold "Carter bonds", denominated in German marks and Swiss francs, in 1978 to attract foreign investors into Treasuries.

“Carter bonds” they were called. And what will these bonds be called then?

"The US will be forced to issue foreign currency-denominated US Treasures in its hour of need," said Mizuno. "The US cannot finance its deficit by itself. The US financial system cannot survive without foreign investors. We will see 'Obama Bonds' in the future."

“Obama bonds." Interesting ring to that.

Right now this is all conjecture, but if or when the US begins to issue bonds in foreign currencies to fund its excesses, then this will be a road sign that the end of the old paradigm is upon us.

Caution: Bridge out

For now, I am keeping a close eye on this ‘trial balloon,’ as the denomination of US bonds in anything other than US dollars would be a tectonic shift for the US and for the global economic landscape.

This is a companion discussion topic for the original entry at

Hi folks, just some thoughts to aid discussion :wink:

Could this be a way out for the US? a ‘softer landing’ transfer of power rather than a hard collapse? Every cloud has a silver lining they say

Wouldnt it be coooool if the new pres name was Barack James instead?

Amazing to be watching the US empire crumbling here in slow motion! lets hope peace can prevail

and hey! dont be scared of having to work you guys, the rest of the world will help you, we have been doing it for years! Just cut back on the armies and guns and stuff, crazy big cars, 4 houses, plastic surgery ect ect

Can anyone lend me a yen?

Interesting read.
I can’t help but wonder if other countries will try go further with this, say a decoupling the buck from commodities.
If they do I wonder if they will wind up on the same dead end street as John F and Bobby.

This was on This is even scarier than Chris’ rabid skunk problem imho!


LOUIS — A St. Louis city leader frustrated with the police response to rising
crime called Tuesday on residents to arm themselves to protect their lives and

Alderman Charles Quincy Troupe said police
are ineffective, outnumbered or don’t care about the increase in crime in his
north St. Louis ward. St. Louis has had 157 homicides in 2008, 33 more than last
year at this time.

"The community has to be ready to defend
itself, because it’s clear the economy is going to get worse, and criminals are
getting more bold," Troupe, 72, said Tuesday.

Troupe said that when he and residents
approached a district police commander last year, they were told "there was
nothing he could do to protect us and the community … that he didn’t have the

Police did not immediately return requests
for comment. Chief Dan Isom told the St. Louis Post-Dispatch he understands
Troupe’s frustration but doesn’t support citizens arming themselves.

Carrying guns, he said, is not a "recipe for
a less violent community."


i think with the correct marketing strategy the yen backed bonds will work.

here is my strategy. it is all about marketing to the sheeple. the sheeple are hopelessly addicted to tv esp sports. one of the most recognized names in all of sports in the u.s. is barry bonds.

many people on the right like to call obama "barry"

the problem with "obama" bonds is you have to start from scratch with name identification.

if you call the bonds "barry bonds" people will get the connection immediately.

a superstar who hits homeruns on a scale greater than anyone in the history of the world. he did it thanks to the wonder drug steroids. the sheeple do not care how it got done just so long as they got to see history being made. never mind it is the end of the innocence it is performance that counts. we simply must do something.

barry needs to do it quickly tho before the steroids oh i mean koolaid wears off

Bartt wrote:

"Can anyone lend me a yen? "


Actually, I thnk that should be:

"Once I built a tower

And now it’s done.

Buddy, can you spare a yen?"

[Ed: Gobbledy-gook removed]

I’m really sorry about the above comment - I didn’t realise we couldn’t post directly from word etc! I tried editing it etc but I can’t take out the word embedded bits :frowning:

Anyhow - what i wanted to post was:


The ‘beginning of the end’ or the 'Beginning of a New Beginning? :slight_smile:

Whilst many the world over dislike America for it’s foreign policies and
greed I for one take no pleasure if it all turns pear-shaped and civil unrest
results. Lots of innocent people get caught in the turmoil when that happens.

To see America actually
having to pay its way will be interesting, it could also force America
to learn to negotiate on an equal footing in the world stage instead of
pointing a gun. To add value instead of adding force would be good.

Lets hope the enemies that the US has created can understand that it was
capitalism and the greed of that system that caused this and not the actual
average American citizen, who are no different to anyone else in the world and
just want to get on with their lives day by day.

My sincere hope is that capitalism does indeed fall but that people band
together to work on a new system that will be fair and equitable to all - much
like the principals that America was founded upon but seems to have lost along
the way (note: I am also pointing the finger at us here in Australia as well -
we are headed down the same greed highway too).

We feel your pain in more ways than one…




I have been listening to Naomi Klein - very interesting stuff indeed. Let’s
hope the capitalist factions don’t try and apply the principals that she
describes here amidst the turmoil!


EDIT: grrr - it still doesn’t work even when I used the paste from word option :frowning:

Hey Joe,

You may have really "Hit" on something here! (LOL)

We can all relax! The bottom’s in!


NEW YORK (Reuters) –
Legg Mason's star stock-fund manager Bill Miller said on Wednesday the "bottom has been made" in U.S. equities and that the Federal Reserve should consider purchasing stocks and junk bonds to pull the United States out of the financial crisis.

Speaking at Legg Mason’s annual luncheon for media, Miller said that
all long-term investors believe that stocks today are cheap.


Oh, wait…


Miller told Reuters on the sidelines that his funds "performed far worse than I would’ve predicted we would" this year.

For the year, Miller’s flagship Value Trust (LMVTX.O) fund was down 59.7 percent as of Tuesday, compared to a 41 percent decline in the reinvested returns of the S&P 500 index, according to Lipper Inc., a unit of Thomson Reuters.

Performance over the year-to-date, one-, three- and five-year periods
for Value Trust put it at the bottom of the barrel among its peers,
Lipper data shows.


Okay… maybe not so much :frowning:



This might be good that finanally someone can put a stop to the Federal Reserve banks and our treasury czar. The US economy is and has been sick for a long time and the banksters have been gaming the global markets while we are set up for a major fall.

How can any economy that runs huge trade deficits and budget deficits ever be considered healthy? And none of our leaders will dare mention either, as if these fundamentals will go away if they can "jump-start" our markets and debt.

My prediction - as long as the federal reserve theives are allowed to prey on our nation, we will be in financial chaos. END the FED!




An interesting scenario will be before the government once non US currency is required to pay the bills.

Another country not so long ago had a similar problem.

Iraq had a large financial deficit to Kuwait but it also had a really large army (compared to Kuwait) sitting on Kuwait’s border too. I guess the answer to the problem was simple for Sadam Hussan in the end and he rolled in the troops. However I doubt he ever expected the massive backlash from other parts of the world culminating in the current Iraq war we have today.

Given that history repeats and the United States owes/will owe a lot of money to the gulf states (Saudi Arabia especially) then I expect we will see some military "debt reduction" strategies emerge in the future. I can’t see any country that would take up the moral mantle to fight the USA to stop another "war on terror" or what ever excuse is given to 1. remove the outstanding debt and 2. secure an energy future.

So when will the troops be pulled out of Iraq ?, seems to me that there may be a more pressing agenda to just leave them there for a little bit longer.

Call me cynical, only time will tell :slight_smile:


I had that problem too.
One more to the left is paste as plain text. Works for me :wink:


Chris said: "For now I am keeping a close eye on this ‘trial balloon’ as the denomination of US bonds in anything other than US dollars would be a tectonic shift for the US and for the global economic landscape."

And if the Japanese won’t let us get away with counterfeiting their money, we have another plan: The Century Bond (100 Years)

And with its issuance, Bernanke’s helicopter can be put to immediate use after the dollar drops are over: he can use it to search for the end of the yield curve…


Oil’s under $45 in case no one noticed. VERY bad sign.

I totally agree with Chris. Iceland (and borrowers in eastern europe) got into deep trouble because they started borrowing money in euros and swiss francs - currency that their central bank doesn’t print. This exposes them to exchange rate risk. Once the USG goes down that route, it really is the beginning of the end. I mean, it’s a good thing in some sense, because it will impose real discipline, but the party really will be over. Next people will want to be repaid in gold, or grain, or lumber, or farmland. And then where will we be?

Now isn’t this as if zeigeist wrote a perfect prediction of events? So how will the king george play out? I hear some people are saying Obama doesn’t have a valid US birth certificate - suppose they will try to claim him not a US citizen?



I don’t know, I see stuff like this and wonder if the U.S.A. would ever allow a gold standard - or another country to depeg the buck to oil or any commidity. I kind of think that if we can’t print we can’t empire…
Kind of makes me think another WW might not be out of the question. If we loose our right to print I think it is plausable that these guys would be crossing the Chesapeake bay. We, after all, have made quite a few friends out there.
What are your thoughts?


Dec 03, 2008

Goldman Sachs, meanwhile, sold $500 million in three-year floating-rate notes under the TLGP. It is part of a larger note offering being sold in euros, according to Bloomberg News. That makes Goldman the second U.S. lender to issue debt in the currency under the TLGP, according to the wire service. The notes are being priced to yield 45 basis points more than the benchmark mid-swap rate, the report said, citing a person who declined to be identified before the sale is completed.

Last week, JPMorgan Chase raised about $2.8 billion from guaranteed bonds denominated in euros and pounds. In addition, Wells Fargo plans to issue three-year fixed- and floating-rate bonds, according to a regulatory filing. And GE Capital plans to sell three-year fixed-rate notes, according to a filing.

Well, so much for the dollar.

Banks aren’t stupid. What do you think their view towards the dollar’s value is down the road?