US Treasuries hit by biggest sell-off since Lehman collapse

[snot]

"US Treasuries suffered their biggest two-day sell-off since the collapse of Lehman Brothers, following a torrid month that has seen borrowing costs for western governments soar.

"Germany, Japan and the US have all seen their benchmark market interest rates rise by more than a quarter in the past month while the UK’s has risen by nearly a fifth."

More at http://www.ft.com/cms/s/0/e550f996-0304-11e0-bb1e-00144feabdc0.html#axzz17aGxpYRN

[aquart]

1. Golly, I wonder why they think we're insolvent.

Could it be because we are?

[MadamAB]

2. 14 trillion dollar economy says we are not...

ooooh wait, I forgot, our President is incapable of standing up to Republicans.

My bad, we are!

[glitch]

3. Only a matter of time, and that time just got shorter. Welcome to DU! nt

[MadamAB]

5. Thank you kindly...

This is why I am furious at Obama-nothing in my life will change with the deal...but I hate giving into bullies, I hate having the helpless harmed and I REALLY HATE people who want to destroy things for the joy of doing so.

Plus, it makes it harder for Dems to get elected and well, I live in Arizona. 'nuff said.

[nadinbrzezinski]

8. Let me add that welcome mat

:hi:

[MadamAB]

10. I needs to wipe my feet carefully. :)

[glitch]

9. I like you already :) Hang in there re: Arizona. nt

[RKP5637]

13. Welcome!!!

:hi:

[aquart]

12. Welcome to DU.

May your brief stay be a happy one.

[Hardrada]

17. Who rattled your cage?

[MadamAB]

24. Sounds like a backhanded compliment.

[Skink]

4. Obama is kind of wishy washy.

sorry for crashing the world. ;-)

[BzaDem]

6. Everyone knew for months that the tax cuts were going to be extended and not paid for

so I have trouble believing that this has anything to do with solvency. Demand in today's 10 year bond auction was actually better than most people were expecting.

[WCGreen]

7. They are selling in order to get better yields from higher bond rates over seas...

[lise]

20. you may have a point there

about the higher return on overseas bonds.

Bernanke getting on TV Sunday night (60 Minutes) and lying to the whole world about printing money probably didn't help either.

[OlympicBrian]

11. Read the Fed's most recent beige book, inflation abounds

Plus the increased risk of default on US state and EU bonds. Contagion!

[BzaDem]

14. Actually, inflation is decreasing, and we are perilously close to deflation.

http://krugman.blogs.nytimes.com/2010/12/05/disinflation-confirmed/

[lise]

15. that's the Fed's new definition of Inflation since the 90's

when they threw the price of food and gasoline out of the equation.

You know, so they could claim prices are not rising when anyone who goes to the grocery store or gas station (which is everyone) can clearly see they are.

Fed counts stuff like Home Prices. Home Prices are going down (as they *should*) so "Oh Noeeesz!" DEFLATION!!

If it's bad for the banks (loans not being repaid), it's Big Bad Boogeyman Deflation.

If it's bad for Regular Joe American (food and gas inflation), well that's just too bad because the Official Meme is that there "Is No Inflation".

During the 70's (when food was still included in the Inflation Figures), Women were marching and protesting in front of Grocery stores over high Food Prices.

This time around ? nothing...nada.

Fed says there's "No inflation", so there's no inflation.

Krugman isn't helping.

[BzaDem]

16. Krugman's helping a lot more than the people who claim we are experiencing massive inflation.

Inflation is a general rise in prices. Not a rise in prices for one specific commodity. Under your definition, we would be experiencing massive inflation if some oil-rich country collapsed.

[lise]

21. my thinking is:

as the Fed and Congress trashed the dollar by throwing Trillions at Wall Street for Bailouts, this led to a rise in prices because:

The US Dollar is the world's Reserve Currency.

Which means Oil (which runs just about every aspect of every economy now) is priced in US dollars.

When we devalue the Dollar (by borrowing $$$ that we can NEVER repay), it takes more Dollars to buy a Barrell of oil.

Therefore, the price of oil goes up.

Once that happens, the price of nearly everything goes up, because nearly everything is shipped around and the price of shipping depends on the price of oil.

So the price of Feed and Fertilizer goes up which leads to rise in price of veggies and meat, etc etc. Then further price rise to ship it to market.

Same goes for all commodities: paper, crayons, socks, food ,gas. Everything.

This is pretty consistent with what has , in fact, happened ever since the first big Bailouts back in '08. Prices for everything I buy has gone up over the past few years.

Congress has borrowed too much money and that has led to a trashing of the dollar which has led to more dollars needed for one barrell of oil which has led to price hikes in everything over the past few years.

[BzaDem]

22. "Once that happens, the price of nearly everything goes up"

Except the price of nearly everything is NOT going up. In fact, inflation is declining towards 0%.

Your theory is wrong because your basic premise is wrong. Printing money does not on its own cause inflation. Printing money only causes inflation when people SPEND the money (driving demand, and therefore price, up). If the Fed dropped 5 trillion from helicopters onto lawns across America, and people simply stock it away in banks (who put it in Treasuries), prices won't go up by one dime, since demand for products isn't going up at all (by definition).

Prices would only go up if people start spending, and aggregate demand rises. But if that happens, the economy is by definition improving. The reason our economy is in such bad shape is due to a collapse of demand, so improving demand by definition improves the economy. Once the economy is recovering on its own (through increased demand), the Fed can withdraw all the liquidity it put into the system and raise interest rates to prevent inflation.

[lise]

25. well...

where I live, everything *has* gone up in price! (Except houses)

The newspaper is a fraction the size it was three years ago... and more expensive.

A can of tuna is fewer ounces and costs more. Bread...fugedaboudit.

Ditto paint, ditto mailing costs, ditto gas, ditto sunglasses ditto candles,ditto incense, ditto, ditto ditto.

Some things, like clothing are not only more expensive but also so badly made now (cost-cutting measure, I'm sure) that it feels smarter to buy second hand - justt because it's better quality and lasts longer!

Either I live in an unlucky place -or you live in a very lucky one!

[lise]

23. ha! BzaDem

I just realized that yeah, you're right. Under my definition, we *would* experience Inflation if a huge Oil Producing Country collapsed. In that case, it would lead to a scarcity of oil which in turn would make it more "precious" and therefore more expensive.

So yeah, you're right.

But there's another, easier way to make oil more expensive, even though it is not any scarcer than it was yesterday.

And that is devaluing the currency that people use to buy it.

So that what could be bought yesterday with One dollar, now takes Two dollars.

that's what we're doing now, IMO.

[BzaDem]

26. True, oil does become more expensive if we devalue our currency.

However, I think many people (including Krugman) think a devalued currency is a GOOD thing right now, since it makes US products much more attractive for people in other countries to buy.

So basically, devaluing has 2 effects. It makes our products more attractive for other countries to buy (good), but it makes other countries' products (oil) more expensive for us to buy (bad). I think the economists think though that in the end, the good effect from the former outweighs the bad effect from the latter.

However, irrespective of all that, my main point was that the Fed's actions are not destroying the dollar. Much of the dollar's value on world markets has to do with the day to day drama in Europe. It has a little effect, but it isn't that pronounced.

[lise]

27. yeah, I know

that that is the meme used by the Fed and many of these MSM economists:

"A devalued dollar is Good fo the Economy because it makes our products cheaper for others to buy."

The problem I see is that 1) We no longer manufacture that many products

and 2) there is a severe downside for the Poor in a devalued dollar because the price of everything goes up.

So I'm siding with the poor and (increasingly) those becoming poor (former Middle Class) when I say " to heck with Inflation and bring on REAL deflation in the prices of all things.

Of course, to someone like Krugman or Bernanke or all our Congrescritters, the fact that bread has doubled in price the past two years is negligible.

When you have a million bucks to throw around, you don't really care when bread is priced at 5 bucks a loaf. Or that a pair of socks now costs twice as much and, on top of that, falls apart twice as fast.

As I see it, the "Hidden Inflation" thing works fine for the rich, but is absolutely brutal on the rest of us.

So I wish they'd give it a rest.

BzaDem, thankyou for this conversation. It's interesting to bat around the pros and cons of this problem that effects so many of us.

[mmonk]

19. Part of the problem is that wages have stagnated and/or declined.

With employment relatively high and wages declining, there isn't much inflationary pressure.

[OlympicBrian]

18. Did you read the beige book, end-to-end? nt