The Zero Interest Rate Corner, Costs and Isolation 2010 :: The ...
Think isolation. Think monetization. Think trapped. Think Catch-22, no remotely viable option. Think motive for propaganda. Think end of the road in a gigantic US Treasury bubble, in the process of discredit. Think last resort of monetization, due to the absence of bidders at US treasury auctions. Think pressure like a vise. The USGovt is in a great big bind and chooses not to discuss it. As European nations ponder the plight of sovereign debt default, the United States compares an order of magnitude worse from deeper insolvency. A default closer to home is considered unthinkable. So was a broad mortgage market breakdown. So was an endless housing decline. So was an insolvent broken banking system. So were consecutive $1 trillion federal deficits. All were forecasted here.
BOND BOYCOTT LED BY CHINA
Call a spade a spade! The Chinese, trade partner turned adversary, have been in boycott of US treasury Bonds for a year. While still a significant creditor for USGovt debt, it also stands as the primary adversary in the movement to displace the US Dollar from its global reserve currency, a veritable throne of privilege. Arabs and Chinese are mentioned consistently as the most important creditors for official USGovt debt. Something of note happened in 2006 and 2007. The Japanese stopped adding to their US treasury Bond holdings. The slack was taken by China. Now something has happened again. China has stopped purchasing the US treasury debt securities. The United States has been set up for acute risk in funding its debt. The response is clearly to be a greater dependence upon the printing press, as the USGovt will be forced to finance its debt through monetization, perhaps almost exclusively. This is the closest one might ever see of a major industrialized nation engaging in behavior best described as Weimar-like. And US economists reward its chief monetary mechanic with a national award! We witness the ultimate in moral hazard, even its celebration.
