H -- he's not a timer, and folks who aren't need to make that point very clearly.

Doesn't mean his outlook is wrong. Folks like him who look at longer term fundys --- ask Gary Shilling -- are often early. And that makes them wrong for trading purposes. Timing is everything, and that's the harder ballgame.

My point ... don't judge folks calling out fundamental macro outlooks on their timing, unless they actually profess to be timers.

PS -- no one is skewering Kyle Bass around here on JGBs and Japan ... but he also isn't calling for it NOW even though he's playing it now as a tail position (and rolling it over and over).

Interesting discussion here. One point to add though on the notion that we could just selectively default on those treasuries held by the Chinese - that could get very messy as who knows what bonds they hold directly or indirectly through offshore proxies like the UK or Hong Kong ... you'd have to be able to account for bonds on an individual CUSIP level, not to mention the fact that China has almost certainly contemplated this scenario and has prepared a counter strategy.

By some accounts China is already dumping there treasuries and we all know who probably bought them ... that would be your favorite wall street prong polisher Ben Bernanke.

Which brings up another interesting scenario ... once Ben owns most of the treasury market, what is to stop the US from simply defaulting on those bonds and let the Fed take the hit? That's one way to effectively shrink their balance sheet.

Pieter
That's right
"inevitable" does not mean "imminent"
Timing has not been Schiff's forte,
Which is unfortunate for his investors circa 2008, but it doesn't make him wrong; he has been correct on a lot.

Hi Zappa,

The chinese can't sell their Treasuries. It will destroy their manufacturing base. China wouldn't care if we ripped them up. They would have to take in ass and buy some more USTs the next morning when the window opened.

Contrary to popular belief they are not fueling our consumption by lending us money. Peter Schiff is dead wrong on his investment thesis. It's the complete opposite, China buying treasuries allows them to be competitive. Just like Japan in the 80's. They are shorting their own currency and the fundamentals are working in the opposite direction. Just in case you think our politicians are opportuntistic dumbasses the chinese are worse. I believe the Chinese politicans are throwing their own populace under the bus to enrich themselves. And the carnage will be epic.

I think its just the American pastime to always think we are the worst of the lot.

Crzymorse, it was perpetual check for a long time, except it won't end in a draw:

China knows the US can't pay them back.

And that eventually the government will hyper-inflate to dilute the debt, which will make their holdings worth-less. OTHERWISE what will this government possibly do? Follow Karl's recommendations? I think not. More war is likely, so the world can see the might of the US military so they shut the hell up about the worthlessness of their debt.

Meanwhile the Chinese aren't sitting around eating dimsum, they are carefully knocking off their debt a little bit down at a time, buying up other assets around the globe, establishing Renmimbi exchanges with as many countries as possible, and trying to get out of this game--before a run begins.

Drkshapiro - I frankly don't think they care about the debt (outside of the political propaganda). It was never a check or a loan it was a way to prop up their economy. It was mutually convenient for both countries. China can't sell. It's toxic waste for their economy, the benefits were harvested and the toxic waste remains. They boxed themselves into a corner and will kick the can as long as possible.

I'd agree with you if the consumer could continue to buy their plastic crap. Despite the consumers we saw bashing down Walmart's doors, overall consumer debt increased 4% last quarter.

This is a symbiotic relationship, but one half is near death. In that case the other symbiot moves on to find a new host or they die.

Looking through all the coomunist bull**** from China, they are the ones in a lot worse shape then they let on. I think the US will move on.

Interest is the value of money. If you have a zero interest rate policy you are setting the value of money at 0. Why aren't all assets going up in price because of this? Because people already know that things are overpriced and eventually the principal will need to be paid but there are few productive assets left that guarantee you a profit after you pay back the principal, even with 0%.

So essentially we are nearing the end game where money has no value. By value I mean, it can't make anything profitable happen. It's merely paper that you borrow one day, and give back the next. It has no energy.. The government needing to go into debt is proof that the money cannot generate even its own value back in productivity. The economy is a beach ball full of holes being keep inflated only by continuous and monumental money pressure.

Where will this end? Even if the money supply doesn't increase, the number of goods and services available to the public will continue to diminish as producers stop producing for lack of profit.

And why should I bust my ass with real work for money that a banker can have for free? Sorry, I'm not doing any more than necessary unless I get paid in something tangible, that I can keep, that I can hide from the Free **** Army when it comes demanding at gunpoint, its "fair share" of my work while it sat on its ass watching Honey Boo Boo. And I have it easy, a mental desk job. Just imagine the people who actually do hard manual labor. They must really be fuming, or stupid.

Let's see, more money being created, and this chart shows U.S. GDP relative to the entire world:

http://www.theburningplatform.com/?p=444....

Quote:

"inevitable" does not mean "imminent"

Nor does it mean "In your lifetime".

schiff is full of it. The world depends on the future of the dollar in order they all have money. It might be a joke, but if you think of it deeply and connect the dots, you will see. Once they followed Breton Woods, it was in. If they deflated the dollar or didn't increase debt, the world financial system and system of debt payment would collapse. If you don't think so, look at 2008.

Mann, yes Schiff is full of it. If the Fed backed off and let the "market" decide reality bond yields rate would goto zero or lower IMO. The asset prices in Europe if marked to market would tank but Europe has not done that yet. IMO it is a wait and see game and Europe has to decide on how this should be done. The USA and UK have backed up the BS with bull**** bailouts, well Japan and etc. as well, Also you can defend or go the other side Japan vs GDP savings. The UE with 17 countries ya good luck with that. In the long term only deflation and defaults and math can fix any of this in a debt backed currency system.

Crzymorse - I agree that China's main purpose in buying treasuries was to keep their own currency low and maintain a price advantage in manufacturing, if that is your main argument.

However nothing lasts forever. The size and significance of the US economy relative to the world has been shrinking for at least a decade now. There were some good charts on zerohedge in this article:

http://www.zerohedge.com/news/2012-11-28....

We've gone from 31% of world GDP to 21% in a decade. Meanwhile China has gone to 10.5% from 4%. Other countries like Brazil and Mexico are outpacing us as well.

There is no reason the Chinese can't sell their cheap crap to Mexico, India and Australia and make up the difference in lost US consumption. Sure this process cannot happen overnight, but it is already happening slowly. I am pretty sure that China can slowly back away from the Bretton Woods system and they are already laying the groundwork.

I enjoyed the justified slam at the end against the worshiped "peoples billionaire" (BS) Warren Buffet.

More data about America's decreasing economic significance versus Asia:
http://www.atimes.com/atimes/Global_Econ....

Karl, or anyone else, is there a website that keeps track of the amount of the world's debt that is denominated in US Dollars? All I've heard is percentages, in some cases, as high as 90%, but that was years ago and I'm wondering at what rate that number is coming down.

Yes, yes, yes. But, even if we don't have hyperinflation, why do you tolerate ANY inflation? Why are you holding any of your wealth in dollars besides enough to deal with any immediate liquidity needs? Why are you holding your wealth in something that is tracked, and trackable (embedded RFID)? Why aren't you holding at least half of your liquid wealth in assets that move in the opposite direction as the dollar to balance its movements?

Quote:

Why aren't you holding at least half of your liquid wealth in assets that move in the opposite direction as the dollar to balance its movements?

And what would that be?