The Treasury Bond Market Interpetated
The market for U.S. Treasury Bonds is receiving more attention recently. The value of the dollar tends to drop when long-term Treasury bonds decline in price. The March 2009 report of the Fed's Flow of Funds shows that there is $14.5 trillion outstanding in mortgage-backed securities, agency securities and Treasury securities.
Many countries invest heavily in our country's debt as an investment and China is the top holder of U.S. bonds. Several top economists believe that if the purchase of U.S. bonds by China were to stop, the U.S. interest rates would increase to make our debt more attractive.
The actual value of U.S. Treasury securities is increasingly being focused upon because of out-of-control governmental spending. China wants assurance that their assets will be safe; if the question of U.S. credibility would arise, they may likely liquidate some of their U.S. assets to cover themselves.
If foreign countries refuse to buy U.S. debt, the U.S. Treasury's only other option is to buy Treasury securities, thus increasing the money supply in a dramatic fashion. Interest rates would have to rise in order to attract investors. And, inflation would occur after the Federal Government habitually purchases T-bills. Currently, the Fed has used much money to purchase mortgage-back securities to the tune of $500 billion.
In a normal economic environment, higher interest rates would be associated with the central bank as they try to cool off inflationary pressures associated with an expanding money supply. However, with less demand for Treasuries, higher interest rates to attract buyer demand is the only viable recourse. Yet higher interest would only push an already declining economy, deeper in the hole. Higher interest rates mean a greater burden on the populace resulting in more mortgage defaults and negative pressure on consumer debt.
Washington's record breaking Treasury offerings to fund the deficit and the Fed buying the debt through its spinning out of dollar bills is staggering. The floodgate opened by the U.S. Treasury is pushing bond yields higher. Bill Gross, of PIMCO told Bloomberg, "The market is beginning to wonder who is going to be buying these bonds."
A nation who spends in an out-of-control way can eventually destroy itself. A famous economist believed that inflation was a disease which could destroy a society if it wasn't stopped.
China remains the #1 holder of our nation's debt. Economist Milton Friedman warned that the fate of a country could not be separated from ''the fate of its currency''. High inflation and high interest rates are not comforting to an already fragile global economy. The increasing debt boosts bond yields at the same time that the government's budget deficit is not putting on the brakes. - 23196
Many countries invest heavily in our country's debt as an investment and China is the top holder of U.S. bonds. Several top economists believe that if the purchase of U.S. bonds by China were to stop, the U.S. interest rates would increase to make our debt more attractive.
The actual value of U.S. Treasury securities is increasingly being focused upon because of out-of-control governmental spending. China wants assurance that their assets will be safe; if the question of U.S. credibility would arise, they may likely liquidate some of their U.S. assets to cover themselves.
If foreign countries refuse to buy U.S. debt, the U.S. Treasury's only other option is to buy Treasury securities, thus increasing the money supply in a dramatic fashion. Interest rates would have to rise in order to attract investors. And, inflation would occur after the Federal Government habitually purchases T-bills. Currently, the Fed has used much money to purchase mortgage-back securities to the tune of $500 billion.
In a normal economic environment, higher interest rates would be associated with the central bank as they try to cool off inflationary pressures associated with an expanding money supply. However, with less demand for Treasuries, higher interest rates to attract buyer demand is the only viable recourse. Yet higher interest would only push an already declining economy, deeper in the hole. Higher interest rates mean a greater burden on the populace resulting in more mortgage defaults and negative pressure on consumer debt.
Washington's record breaking Treasury offerings to fund the deficit and the Fed buying the debt through its spinning out of dollar bills is staggering. The floodgate opened by the U.S. Treasury is pushing bond yields higher. Bill Gross, of PIMCO told Bloomberg, "The market is beginning to wonder who is going to be buying these bonds."
A nation who spends in an out-of-control way can eventually destroy itself. A famous economist believed that inflation was a disease which could destroy a society if it wasn't stopped.
China remains the #1 holder of our nation's debt. Economist Milton Friedman warned that the fate of a country could not be separated from ''the fate of its currency''. High inflation and high interest rates are not comforting to an already fragile global economy. The increasing debt boosts bond yields at the same time that the government's budget deficit is not putting on the brakes. - 23196
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