Uncle Sam Manipulating Bond Market

This entry was posted in Background_Info, Treasury, Wall_Street_Meltdown. Bookmark the permalink.

47 Responses to Uncle Sam Manipulating Bond Market

  1. Anonymous says:

    The dates seem wrong in pirates of the Carribean.

  2. Anonymous says:

    Eric,

    From the data that you provided there just doesn't seem to be proof that the demand for treasuries is dropping.

    For example, if one looks at the time line of treasuries sold between 2004 and 205 one will note that 4 (India, Australia, France and Netherlands) out of 27 Nation-states actually decreased their treasury holdings, all others it seems increased their holdings by (approximately) two times as much.

    Yet between 2008-2009 6 (Brazil, Mexico, Turkey, Norway, Thailand and Sweden) out of 32 Nation-states decreased their treasury holdings, while all the others (approximately) increased their holdings by 25%.

    Now a look at the BRIC nations treasuries holdings between 2008-2009, the most vocal about the devaluation of the dollar, shows that China increased their holdings from 506.8 billion to 801.5 billion, Russia 63.7 billion to 124.5 billion, India 10.3 billion to 38.8 billion and Brazil (the only negative holder among the BRIC) went from 151.4 billion down to 127.1 billion.

    This data seems to support what I been saying all along: the dollar is not going to collapse anytime soon.

    What I find strange is the mount of increased treasury holdings both China and Russia took on? Why would they do this, but yet talk about devaluing dollars and how much they are going to leave the dollar? Seems odd to me...

    Now one could say that most of their purchases were of treasuries of 6 months and 2 years. However, even given that they still are increasing their holdings.

    What I suspect is nations like China and Russia have a vested interest in ensuring that the American dollar does not totally collapse, despite what they may say.

    And the statements that they make can only be seen to cause fear for investors so that investors will either buy commodities (pushing their value up) or invest in their own economies (by convincing the investor their economies are safer).

    Yep, all these guys are playing a psy-ops game and you people are being taken for a ride, for with this data I can assure you that the collapse of the dollar will come in years, not months (as Eric has stated it would).

    And if they keep on buying treasuries at this pace, well, we may never see the collapse of the dollar at all.

    You people can think what you may, but if you're a seek of the truth you must ask yourself why their actions don't fit with what they are saying.

    And it's clear by what Eric has posted that their actions not only are at odds with what they say but also are the complete opposite of their rhetoric.

    The Anonymous Coward (aka The Dollar King)

  3. Natasa says:

    Quite good site with links and data about manipulations:

    http://www.chrismartenson.com/martensoninsider

    Interesting investigation site.

  4. lec721 says:

    Anonymous Coward stated above that he believes we will have a significant dollar devaluation in "years".

    So then, Eric's research is well-founded and his advice as far as what to do to prepare has been legitimate.

    I'd much rather be 2 years too early than 2 minutes too late.

  5. Numonic says:

    Anonymous, I'm going to refer back to my comment and the response you made to it in the blog "Treasury Auctions Disappoint Due To "Overwhelming Supply"" because it relates you your response in this blog and it also shows a misunderstanding of what's going on.

    http://www.marketskeptics.com/2009/07/treasury-auctions-disappoint-due-to.html

    In this blog there was a part where you quoted me trying to explain to you what is going on. Only you just took a part of my quote, assumed that was the crux of my argument and responded without acknowledging what I was trying to explain to you.

    Here is what I said:

    "Anonymous you clearly misunderstood what I said.

    While govt. is pumping dollars in to the Treasury Market to keep rates down and keep it liquid, other parts of the country that need liquidity are deteriorating and evaporating. Debt is deleveraging at a masssive pace even as the govt. is doing everything in it's power to stop it. Supply is decreasing more than demand is and will continue to unless we stop the debt deleveraging which is a beast that is eating up the supply of everything. As I said before the beast has a stomach for $1 Quadrillion worth of things and will continue to devour things untill the combined price of those things equals it's hunger desired capacity(which is over $1 quadrillion). This means we either have to feed this debt deleveraging beast over $1 quadrillion in physical Federal Reserve Notes or raise the price of things in the world to total over $1 quadrillion, just so the beast will leave us humans with something to live on. This is what I mean when I say a strong dollar means global starvation. I should say a "non-collapsed" dollar means mass starvation. The dollar and all fiat currencies for that matter have to devalue massively for this massive debt deleveraging to end. This massive debt deleveraging is starvation as it is causing the closing of massive companies and projects due to a lack of liquidity.

    Also i hope you know that China can't buy our debt if we're not giving them dollars through buying their stuff. If their exports are dropping(meaning they are not exchanging their goods for our Federal Reserve Notes), where will they get the Federal Reserve Notes to buy our treasuries. I hope you know that that is how it works. But that's not even the main issue. The reason treasuries default won't be because China and others stopped buying our treasuries, it will be because the printing presses can't print fast enough to make good on all the debt(including Treasuries) that is deleveraging(coming due)(at least not without Zimbabwe size bills). Other's buying our debt is nothing but a bailout to pull in Federal Reserve Notes to use to stop the massive deleveraging but that form of bailout is limited as it is dependent on exports(which exchange goods for our FRN and our FRN for our debt). If exports are falling, there are less FRNs going out for others to use to buy our debt. Not to mention all the past years of selling our debt that has pulled allot of those Federal Reserve Notes out of circulation. Which is why the Fed is printing like crazy, because there is hardly any Federal Reserve Notes out there to buy our debt with."

    The part in italics is the part you took and paraphrased and the part in bold is the part I was trying to help you understand.

  6. Numonic says:

    Your response was:

    "@Numonic

    "The reason [why] treasuries [will] default won't be because China and others [have] stopped buying our treasuries... [it will be because] exports are falling, [and that] there are less FRNs going out for others... to buy our debt."

    This seems to be the crux of your argument, and one which I personally don't agree.

    The reason I do not agree with this argument is because there are factors at play here that you haven't considered.

    For example, the American government has only spent a 1/8 of the stimulus money, so far, that was passed by congress to sustain and create jobs throughout America.

    The true opening of this flood of cash is not to start happening until sometime in September of this year, while peaking output of cash by middle of next year.

    This process should create the much needed liquidity for main street America, which should also increase demand for imports... at least within the short term (2 to 5 years)."

    I later responded in haste as i was in a rush saying:

    "And everything else you said makes no sense. When i say One Quadrillion dollars, does that just go in to one ear and out the other? Do you know what that number represents? Do you know what is going on? Do you know what the Plunge Protection Team is? Do you know that the printing presses are running at full capacity? You are talking non-sense.

    I'll respond better later."

    The point is you are wrong about how solvent the govt. is. The govt. is running the printing presses at full capacity and throwing money everywhere and it's still not enough to stop defaults and bankruptcies let alone thaw the credit markets. The govt. is trying to sell massive amounts of Treasuries in order to pull in Federal Reserve Notes to use to stop these defaults but as I said that means of getting FRNs is limited as it is dependent on 1. US imports and 2. the supply of FRNs held in circulation around the world. 1. imports will be dropping because of this depression we're in and 2. the amount of Federal Reserve Notes needed to stop defaults is far more than the world supply of FRNs which is why the Fed is forced to provide the needed FRNs and is doing so by printing them and buying Treasuries and all types of debt.

    I'm not surprised that more Treasuries are being bought, it's in no one's interest for the US credit markets to collapse because the US has the world reserve currency which means if their credit collapses it will effect all credit around the world. A collapse of the US credit market is a collapse of the global credit market. But just because it's in the interest of the world does not mean that it is in the control of the world. What you are witnessing is a loss of control of the credit market and the credit market is collapsing even as the world is trying harder than ever in history to save it.

  7. Numonic says:

    What you need to be watchful of is this chart:

    http://consumerist.com/340334/monthly-mortgage-rate-resets-2007+2016

    As you can see right now the credit market is getting a breather at this time in 2009, that
    coupled with the fact that the credit market has less stress because so many people's unemployment benefits have run out has increased the liquidity in the market, leaving the govt. with some cash to prop up the market which is the reason for this rally. But if you take a close look at the chart, you'll see by the end of this year and beginning next this US ship is headed straight for a huge iceberg, larger than the one we just crashed/blasted our way through with massive collateral damage. With this humungous iceberg ahead this fall/winter and talks of a bank holiday for this fall/winter the dollar looks sure to collpase sooner than you think.

    And contrary to what most people thought caused the rally in the dollar when the stock market was tanking, let me clear this up for you. The stock market dropping is not what caused the rally in the dollar so when the stock market drops again it doesn't mean the dollar and treasuries will rally. The reason the dollar rallied was because massive amounts of cash(from the Fed and investors) were going in to treasuries. That cash is practically gone now, leaving the Fed as the largest buyer of the debt. With the massive amount of debt destruction coming this fall and not as much liquidity as there was last year, the treasuries/dollar and stocks will fall together as the treasuries get defaulted on, which will be the reason for the runs on the banks and the bank holiday this fall/winter. This is not bullish for the dollar. This is supply destructive as companies/businesses and projects that have no access to liquidity will have to shut down. This lack of liquidity will raise borrowing costs. This decrease in supply will cause companies/businesses and projects to raise prices in order to meet the higher borrowing costs. The more severe the defaults, the more severe the rise in borrowing costs, the more severe these companies will have to raise prices or be forced to shut down.

    So the dollar collapse is sooner than you think. Not years but a mere few months.

  8. Numonic says:

    Anonymous said...

    "You people can think what you may, but if you're a seek of the truth you must ask yourself why their actions don't fit with what they are saying."

    I've answered this question before and I agree with you thatit is a psy-op but the psy-op is not to keep commodity prices up, what all this talk of selling Treasuries or dropping the dollar is, is talk to make people believe that the power of the dollar is in their hands. It's to make people believe that they have control over whether the dollar survives or not. The US comes in and tries to play the same game by saying it's not in their interest to sell the dollar and this back and forth make people believe that these govt.'s have control of the crises when the truth is neither of them do. You can't keep selling treasuries if there are no dollars to buy them with which is why China suggested redeeming bonds in their own Yuan currency. They know that they are running out of Federal Reserve Notes to buy treasuries which is why I said the selling of Treasuries is just a small part of the govt's solution to fixing the credit market. There only other solution is printing, this is their best tool but it is also limited. Most people can't fathom the thought that the printing press can't print as fast as the govt. wants/needs. The reason credit will collapse won't be because the govt. will let it, credit will collapse because the govt./Fed will have lost control of the credit market. Their best tool(the printing presses) at max capacity isn't enough unless larger bills are created(which will be done during the bank holiday) and even then the gave will be over. I don't have to tell you what happens next, all you have to do is look at Zimbabwe.

  9. Numonic says:

    I'm sorry one more last thing.

    Anonymous said...

    "And if they keep on buying treasuries at this pace, well, we may never see the collapse of the dollar at all."

    The pace that they are buying treasuries is decreasing as they are moving from long to short term, so if they keep on buying at this pace we'll see the dollar collapse allot sooner.

    And again the less we import from them, the less FRNs they will have to buy our debt with.

  10. Daniel says:

    Hi Eric & Numonic,

    Exactly how low will USD index be at this October-November?

    70? 72? 74? 76? or 80? 90?

    What is your prediction? Thanks for sharing.

  11. Anonymous says:

    @lec721

    "So then, Eric's research is well-founded and his advice as far as what to do to prepare has been legitimate."

    It depends if in fact things end up as you think they will be ;).

    ----

    @Numonic

    "The point is you are wrong about how solvent the govt. is."

    Lets make one thing clear: I never stated that the American government was solvent. Not one time did I say that, however, I did state they have more authority and tools then you guys give them credit for.

    Besides, take a look at this list, it's hard to argue against this when it comes straight from the horses mouth.

    I still contend though that the American government is not ready to give up and have many options left to them.

    "But just because it's in the interest of the world does not mean that it is in the control of the world."

    This is where you are wrong: America has the world by the balls and has ever since WWII.

    If you looked at that link above you would understand this saying, "you owe the bank a little the bank owns you, but when you owe as much as the bank has, or more, you own the bank."

    This isn't the only way America has the world by the balls.

    No, America's true grip on the world lies in its military might ;).

    Just think of all the Nation-states America has invaded or went in to overthrow the government since WWII.

    No nation in the world could match that, nor will they for a long time to come ;).

    "What you need to be watchful of is this chart..."

    Yeah that was an awesome graph and I thank you for showing it, now for the second time.

    But I think you will see that this fall when the stimulus money starts to be sent out (and thus liquidity will be brought back into main street) just how powerful the Feds are ;).

    And even though a lot of those resets may sill default, it will be only a fraction of what could have been if not for the stimulus.

    And lets not forget the plan that the Feds have on dealing with the toxic assets still to come... these guys can create new laws for the economy... and and make the impact of such event almost non-existent. Yes, these guys have that much power...

    "So the dollar collapse is sooner than you think. Not years but a mere few months."

    If you think this then you have surprise coming...

    The worst that is going to happen to the US, in the short term, is that it will experience a lost decade (maybe two). A time where there isn't much growth in the gdp and the government has to spend like crazy to get things back on track.

    =======

    Anyways, this isn't a complete response and it lacks a lot, but...

    It's that I'm tired and need sleep, I haven't eaten much today and feel like shit, but I wanted to give my thoughts on your comments - after I just read yours.

    To be continued...

  12. Numonic says:

    Anonymous, maybe my replies are too long but before asking questions please try to read my entire reply because in it I said:

    "With the massive amount of debt destruction coming this fall and not as much liquidity as there was last year, the treasuries/dollar and stocks will fall together as the treasuries get defaulted on, which will be the reason for the runs on the banks and the bank holiday this fall/winter. This is not bullish for the dollar. This is supply destructive as companies/businesses and projects that have no access to liquidity will have to shut down. This lack of liquidity will raise borrowing costs. This decrease in supply(of things like food and such I'm refering to) will cause companies/businesses and projects to raise prices in order to meet the higher borrowing costs. The more severe the defaults, the more severe the rise in borrowing costs, the more severe these companies will have to raise prices or be forced to shut down."

    And like I said many times before people will choose a collapsed dollar over starvation.

    Collapsing the dollar and credit for that matter will bring an end to the massive debt deleveraging that is destroying the supply of things. This debt deleveraging is destroying the supply of things by causing companies that don't have the liquidity to have to shut down. When we end the deleveraging, companies will not have to worry about borrowing costs anymore.

    I hope I don't have to say this again because people keep asking that same question.

  13. Numonic says:

    Anonymous said...

    "Lets make one thing clear: I never stated that the American government was solvent. Not one time did I say that, however, I did state they have more authority and tools then you guys give them credit for.

    Besides, take a look at this list, it's hard to argue against this when it comes straight from the horses mouth.

    I still contend though that the American government is not ready to give up and have many options left to them."

    You keep contending that America has many options but you have yet to name one. Tell me what other option is there when there is massive debt coming due other than to sell bonds/debt, print Fed Notes and/or default on the debt? I've explained how selling bonds/debt is limited in a world where imports and exports are decreasing(where are the buyers of our debt going to get the Fed Notes to buy the amount of debt needed to pull the amount of Fed Notes we need to pull in to cover all the debt coming due?), I've explained how printing is limited as the printing press can not print as fast as the debt is coming due(at least not without Zimbabwe size bills) and I explained how default is death to the banking system. So tell me what other options are there?

    Anonymous said...

    ""But just because it's in the interest of the world does not mean that it is in the control of the world."

    This is where you are wrong: America has the world by the balls and has ever since WWII.

    If you looked at that link above you would understand this saying, "you owe the bank a little the bank owns you, but when you owe as much as the bank has, or more, you own the bank."

    This isn't the only way America has the world by the balls.

    No, America's true grip on the world lies in its military might ;).

    Just think of all the Nation-states America has invaded or went in to overthrow the government since WWII.

    No nation in the world could match that, nor will they for a long time to come ;).

    I don't think you understood what I said. I said that even though it is in the best interest of the world and even though the US has the world by the balls as you say, it is no longer in the control of the world or the US. The US needs X amount of Federal Reserve Notes and there is only 2 ways to get those Federal Reserve Notes, 1 is by selling debt and 2 is by printing the paper currency. These two options are limited mainly by the amount of dollars that is needed as that amount is far larger than the total amount of Federal Reserve Notes around the globe and when coming due will come due in amounts larger than the printing presses can handle(at least without Zimbabwe size bills). So without Zimbabwe size bills being created the US faces massive defaults. The purpose of selling debt is and always was to keep the banking system solvent. We would be from China with our Fed Notes, and China would give us those Fed Notes back in exchange for our Treasury/Agency debt. Without this cycle the US would have to print massive amounts of Federal Reserve Notes but by selling debt, the printing presses didn't have to run as much as the ones buying our debt was the source of the needed Fed Notes. But now that the dollar has been stretched so thin because of the enormous amount of debt, that ponzi scheme called credit is over. Now we have no choice but to print as the debt coming due is far more than the available Fed Notes around the globe. Only printing moves allot slower than electronic and with the size of debt coming due, the printing press can only succeed with larger bills being created.

  14. Numonic says:

    That link you posted does nothing but support my point. All of that is massive debt, now all you need to do is find the total amount of Fed Notes in circulation around the world and you will see that there isn't enough to cover the massive debt the govt. needs to sell.

    I think you got the saying wrong. The saying I know is "If you owe the bank a little, you're in trouble but if you owe the bank allot the bank's in trouble". But that's pretty much the same thing. But that has nothing to do with whether or not these holders of our debt have the capability to keep this system going. You seem to assume that as long as the US govt. wants these nations to continue buying our debt that these nations can continue buying our debt. But the only reason these nations were able to buy our debt is because we gave them the Federal Reserve Notes in exchange for their goods/services, they inturn took those Fed Notes and bought our debt with it. If trade is crashing, how will these nations get the Fed Notes to buy our debt with? Not only that but in order for the US to sell the amount of debt that we need to sell, trade should be increasing more than it ever has, let alone decreasing. That means our importing should be increasing at world record rates in order for us to be able to sell the debt that we need to. The exact opposite is happening. Trade is crashing. China isn't threatening to stop buying our debt, it can NO LONGER buy our debt as it is running out of Fed Notes and like I said before, which is why it was suggesting having the bonds redeemed in their own Yuan currency which is more liquid than the dollar. Which is also why they are buying short term debt instead of long term debt as they're in need of Fed Notes to keep this ponzi scheme going since getting Fed Notes through trade is failing because of the crash in exports. The more exports fall the harder it will be for these nations to continue to buy our debt as they will have no means of getting the Fed Notes that is needed to buy the debt. And the game will be exposed for what it is a ponzi scheme as the last and only buyer left will be the Fed with it's printing presses. And honestly there is no difference between selling debt and printing Fed Notes because both are for the purpose of obtaining Fed Notes and the purpose of obtaining Fed Notes is to stop defaults. And both these means of obtaining Fed Notes have limits. The printing presses limit is the amount of $100 bills it can print/second and the limit in selling debt is the amount of Fed Notes in circulation around the world. So even if the world wanted to buy all the debt the US needed to sell, it couldn't because there is not enough Fed Notes in the world to buy that much debt. And even though these Fed Notes will not be in circulation as they will ALL be going to stop defaults, the massive supply destruction brought on by the lack of liquidity will be destroying supply just as bad as if Zimbabwe size bills were flooding the streets.

  15. Numonic says:

    As far as the military issue. What I have to say is, there was a time where I took that story of the reason we went in to Iraq was because Saddam was trying to sell the oil for Euro's instead of US dollars. This may have been true for some time as the US bullied countries in to accepting the dollar but that can't work now as it is not a choice or a possibility as I've explained that there is a shortage of Fed Notes and the US can't force countries to buy their debt, if those countries don't have what is needed to buy the debt with(Fed Notes).

    I still think you don't fully see the scope and magnitude of this "crisis". You never mention the $1 quadrillion in derivatives. It seems almost as if you don't believe that there is that much debt. You have some sort of blind faith that the Fed has some sort of magical powers that will end this "crisis". I say blind because you can't really say what that solution is.

    You say things like "And lets not forget the plan that the Feds have on dealing with the toxic assets still to come... these guys can create new laws for the economy... and and make the impact of such event almost non-existent. Yes, these guys have that much power..."

    You're assuming these guys have power beyond logic and reason. You're in fantasy land.

  16. Numonic says:

    Daniel said...
    Hi Eric & Numonic,

    Exactly how low will USD index be at this October-November?

    70? 72? 74? 76? or 80? 90?

    What is your prediction? Thanks for sharing.

    In a crash the index would have to move down allot, otherwise it would just be a dent, not a crash. I expect the index to fall hard, by half or more than what it is now. Crashes don't happen over long periods of time, a crash is instant. You're in you're car driving and get in to a serious accident and your car goes from mint condition to absolutely totalled in a very short time. That is a crash and that is what will happen.

  17. Anonymous says:

    @Numonic

    "You keep contending that America has many options but you have yet to name one."

    I have named a few notably through law changes and though military might, but there is more I just need to find the time to compile my thoughts and sources...

    "I've explained how printing is limited as the printing press can not print as fast..."

    I disagreed with this when you first stated this and still do... lets look:

    "the amount of dollars that is needed as that amount is far larger than the total amount of Federal Reserve Notes around the globe and when coming due will come due in amounts larger than the printing presses can handle..."

    ... "Without this cycle the US would have to print massive amounts of Federal Reserve Notes but by selling debt, the printing presses didn't have to run as much as the ones buying our debt was the source of the needed Fed Notes..."

    "Only printing moves allot slower than electronic and with the size of debt coming due, the printing press can only succeed with larger bills being created."

    What you fail to understand here is that very little dollars, or treasuries are printed for international use (buying goods, services or treasuries).

    So you using this as an argument detracts from your claim...

    "You seem to assume that as long as the US govt. wants these nations to continue buying our debt that these nations can continue buying our debt."

    As it stands right now no one is forcing China, Russia or India to double and even triple their treasury holdings in one year (as the article Eric posted shows:

    "...between 2008-2009... China increased their holdings from 506.8 billion to 801.5 billion, Russia 63.7 billion to 124.5 billion, India 10.3 billion to 38.8 billion..."

    These are the numbers you have to refute with your claims, and stating that they will not keep doing this seems a little to late when they do the complete opposite of what they state right here and now.

    The fact is they will keep buying, and for many years to come.

    "Trade is crashing."

    Sure it is, but that is not the only source of why the world needs to hold dollars...

    Do you know how many barrels of oil are traded a day and from that only two nations in the whole entire world will not accept dollars (Iran, and Venezuela). So in order to keep buying oil the vast majority of the world needs to keep buying dollars...

    Also, in the entire world, who do you think exports more food then any other nation? That is right, America...

    And guess what... the world, in order to receive our food, will need to buy dollars...

    These are just two examples, there are other smaller examples, like military technology for instance...

    "What I have to say is, there was a time where I took that story of the reason we went in to Iraq was because Saddam was trying to sell the oil for Euro's..."

    This fact was true and the means of reason for it still exists today as it did then...

    If you think things have changed on this you are dead wrong, for America is a modern day empire and the history of empires shows that when its power or economy is threatened it responds with war.

    EVERY TIME.

    "You never mention the $1 quadrillion in derivatives."

    The reason that I don't is simple: No mainstream news source has covered it... and if you think Goldseek is in anyway non-biased then you have are going to be shocked what the true future is going to bring.

    Anonymous Coward

  18. Daniel says:

    @Numonic,
    Do you think current commodities price hike is a bubble?

    Copper price rise from $3000 to $6000 in just a few months, while there are actually very few industrial demand.

    Will commodities (excluding agricultures) crash in the near future? I know you are thinking about USD hyperinflation, but will these inflation factor big enough to justify this huge price rise in mining commodities?

    Thanks.

  19. Anonymous says:

    @Anonymous

    "The Collapse Of The US Dollar ($USD$)

    http://investorshub.advfn.com/boards/board.aspx?board_id=15007"

    If this is what these people here read, wow...

    For real, that site is nothing but conspiracy theorists claiming to have "knowledge".

    I mean just look at this.

    Wacko!

  20. stibot says:

    @Numonic: it is known CBs around the world print "quite enough". Have you read Entering the Greatest Depression in History...
    More Bubbles Waiting to Burst
    , also articles by Ty Andros are interesting.

    So.. I can even imagine dollar's collapse while USD index stay flat.

    I'm not telling it is going to happen, but: if CBs print their currencies to buy USD (all digital), they can buy treasuries then. It is hard to imagine they need to have FRNs to buy treasuries.

    Your point is such scenario not possible since lack of FRNs is inevitable, because of leverage on FRNs/digital money?

  21. Anonymous says:

    Now we all know why the US is so fucked. Dreams of the perpetual money machine... they'll (have to) keep buying...

  22. Anonymous says:

    @Numonic

    "You never mention the $1 quadrillion in derivatives."

    I went on a search to find where you keep pulling one quadrillion in derivatives after I posted my reply to you last night...

    I found this site called the ISDA, or the International Swaps Derivatives Association.

    The existence of this entity revolves solely around researching, reporting and assessing risks associated with derivatives.

    Now from their data it's clear to see why no mainstream media outlet has picked up on this so called one quadrillion in derivatives.

    Why, because the truth is that it's far less then one quadrillion - in fact it's less then half that!

    Numonic, I think the time has come to admit that your argument as to why not only will the dollar collapse "in a mere few months" but also in general is built on a house of cards.

    A house of cards that instill fear, which make people do irrational things.

    And thus anyone taking advice from you on investing - woe to them, and woe to you!

    But I'm sure you will ignore this warning, as you have all the others...

  23. Numonic says:

    I don't know where to start...

    Anonymous first of all the mainstream media has mentioned the derivatives in even quoting the president mentioning the derivatives.

    Second, do you really think the mainstream media is a good source of news to be checking. You're giving them credit as if they weren't blindsided by this depression and are still in denial to this day with all this green shoots talk and ignoring the fact that the reason "their" unemployment numbers went down was because of unemployment benefits running out while at the same time recognizing that unemployment benefits ran out but refuse to put two and two together.

    Third, I can't see how you can say the govt. has the means to fix this credit crises after we watch them make unprecedented moves for the past 2 years and only see the credit crises get worse.

    I don't know what to say. I guess we are just going to have to agree to disagree.

  24. Numonic says:

    Stibot at the base of this credit crises, the main point is that there is a shortage of Federal Reserve Notes. It doesn't make sense to say someone defaulted on an electronic transaction when the only thing required for an electronic transaction is for the number keys on a keyboard to be pressed. There is no shortage of people that can use a key board. There is a shortage of Federal Rederve Notes and that is the basis of this credit crisis and I hope no one asks the question i've answered over and over again, "isn't that bullish for the US dollar?" because I've already answered that question, in this blog article and in other Eric blog articles, but if you're too lazy the answer is NO. The point is the Fed is doing everything in it's power to make Federal Reserve Notes more available and is failing. This is the basis of the credit crisis. This is the only logical way to explain it. I can understand it no other way. Also the only way I understand for these foreign nations to buy our debt is if they have the FRNs to do it, if they don't I don't understand how they could purchase our debt. We do not sell our debt for other currency, we sell it for our currency. If we sold our debt for other currency, we would have just as much foreign savings as those other countries who bought our debt have. The way I understand it is that China has a glut of it's own currency backed up in reserves from all the years of voluntarily contracting credit. That glut of it's own currency came from the exchange rate when their exporters swapped the FRNs we gave them for their own currency and because of the peg, they had to print allot of their currency every time they swapped it for US currency. After swapping the US currency for their currency, their govt. would use those FRNs to buy US debt, sending those FRNs back to the US. This is how I understand it. They do not buy our debt with their currency, they buy our debt with our currency. They receive our currency through trade. If trade is falling they receive less and less of our currency.

    I mean why would everyone make a big deal of China suggesting redeeming/trading US debt in their currency if this was already being done?, the reason is because it is not being done and it can't be done for 1. this would make the dollar look worse as it will prove the dollar is not as liquid which is why this isn't being done and 2. the debt was for US dollars not Yuan. You can't just change promises, if I promise to pay you in dollars, i can't go ahead and give you Yuan.

    I've already explained the purpose of selling debt in my last reply.

    If people want to ignore me then go ahead, like i said we'll all prosper with this credit collapse only some will be ahead of others.

    Oh and for the record Anonymous, I am not with those conspiracy theorists who believe that the govt. or anyone but the free market is trying to destroy the dollar. I'm one that believes the govt. is doing everything in it's power to save the fiat currency and credit. The govt.'s and central banks of the world would love nothing more than the years we've had with credit running smoothly to continue on forever. What's stopping that is not the govt., it's the free market. And the end of this isn't bad for the world, only bad for the banking system. And the banking system is bad for the world. What I am watching are those same people that those conspiracy theorists say are in control, loose control. So those conspiracy theorists should be celebrating, instead they're in the slave mentality of thinking if the banking system/fiat currency has a problem then they too have a problem. Like I said before the "Massa WE Sick" syndrome. These so called "elite" also push the false idea that the collapse of the banking system/fiat currency is the end of the world. Nothing can be further from the truth, because the collapse of the banking system/fiat currency is freeing the world from poverty and starvation. So I'm celebrating, you will to, only I see ahead while you don't.

  25. Anonymous says:

    @Numonic

    "I can't see how you can say the govt. has the means to fix this credit crises..."

    First of all I never stated that they can fix it...

    No, what I stated is that they can prolong the inevitable to a time that is more to their (maybe everyone's, or maybe not) liking.

    That is why America will most likely see a a lost decade (or two) or even a WW before the dollar collapses into ashes.

    "... do you really think the mainstream media is a good source of news to be checking..."

    I think it's important to balance news sources...

    For example, I don't watch television, nor to I listen to radio and also I don't just consume American news sources.

    But in every single one of the sources I use are seen as legitimate news sources around the world.

    Then there are those sources that are not, but list their sources.

    And then finally, for me legitimacy - even among well established sources - must depend on what I personally know, researched and understand.

    I take nothing at face value...

    "... the mainstream media has mentioned the derivatives in even quoting the president mentioning the derivatives."

    This should have given you ample time to find a legitimate source where big0 stated "one quadrillion in derivatives".

    If you can find that for me (a legitimate source) then I will believe...

    "... there is a shortage of Federal Reserve Notes..."

    Please give me the drugs you are taking, so that I too can escape from realty....

    "The point is the Fed is doing everything in it's power to make Federal Reserve Notes more available...

    They must be good drugs because now you're contradicting yourself...

    Why, because as you stated:

    "It doesn't make sense to say someone defaulted on an electronic transaction when the only thing required for an electronic transaction is for the number keys on a keyboard to be pressed."

    Yes, strong drugs indeed and with their use (or maybe abuse) comes a disconnect with reality.

    "... the collapse of the banking system/fiat currency is freeing the world from poverty and starvation."

    If in fact things will happen as you think they will happen this optimistic view on of the outcome of this problem will most likely occur long after you have died.

  26. Numonic says:

    Anonymous, I'm not contradicting myself, you still confuse the creation of credit/debt(electronic) and the creation of Federal Reserve Notes(tangible/physical). Credit is created with the push of a key on the key board, FRNs are printed and takes the tangible assets it uses and time, allot longer than me typing 1,000,000,000,000. Do you understand that I can type "1,000,000,000,000" allot faster than the printing press can print one trillion Federal Reserve Notes? Obviously you don't, or you refuse to accept that we still use these tangible notes.

    I'm done. I give up, preach your propaganda. i don't know what's wrong with you.

  27. Anonymous says:

    @Numonic

    "... you still confuse the creation of credit/debt(electronic) and the creation of Federal Reserve Notes (tangible/physical). Credit is created with the push of a key on the key board, FRNs are printed..."

    Am I the one confused here? I'm not so sure...

    Look again:

    What you fail to understand here is that very little dollars, or treasuries are printed for international use (buying goods, services or treasuries).

    So you using this as an argument detracts from your claim...

    "I'm done. I give up..."

    Why, I think we both are making progress... ;).

  28. Anonymous says:

    Pirates , Parasites ,Printers , its all one giant Ponzi .

    Numonics said
    “You seem to assume that as long as the US govt. wants these nations to continue buying our debt that these nations can continue buying our debt. But the only reason these nations were able to buy our debt is because we gave them the Federal Reserve Notes in exchange for their goods/services, they inturn took those Fed Notes and bought our debt with it. If trade is crashing, how will these nations get the Fed Notes to buy our debt with? Not only that but in order for the US to sell the amount of debt that we need to sell, trade should be increasing more than it ever has, let alone decreasing. That means our importing should be increasing at world record rates in order for us to be able to sell the debt that we need to. The exact opposite is happening. Trade is crashing.”

    I am not confused i think.

    Trade is not the problem The US prints paper and exchanges it for real things so no worries there.

    The US doesn’t pay for its goods by exports, it tradesw to borrow
    money so it can make a “profit” = to all US companies dividends and fees for a Goldman Sach brand paper recirculating machine at the fed paper it uses it uses to bet on paper derivitives and stuff.
    Its as simple as that -I think?

    New figures for 2007 show that dividends paid out were $785.8 billion. Meanwhile, the trade deficit was $731 billion and net capital inflow was $768 billion. The Economic Report of the President explains that foreigners financed the trade deficit…

    Amerikans gained over $2500 per persyn from the trade deficit. The rest of the world delivered over $2500 per Amerikan on average in 2006 without any goods or services in exchange. In other words, just by living off its dollar bubble parasitism or trade deficit parasitism, the United $tates lives in the top half of the world. See Maoists @

    http://mimdown.wordpress.com/2009/08/09/economic-report-of-the-president-2009/

  29. Numonic says:

    Anonymous, just because you're not reading my replys, doesn't mean others aren't. So I will not repeat myself. I've already explained the "FRNs are only used in a small number of transactions" issue. 1% of 1 trillion is larger than 1% of 1 billion. That's all I have to say. Refer back to my explaination of this the many times I've explained it to you and others.

    Anonymous said "The US prints paper and exchanges it for real things so no worries there."

    What are you doing? Why are you constantly ignoring my response to this statement? I've already explained the printing presses can't print as fast as the govt. needs it to(without larger bills). The govt. needs the printing presses to run faster than it ever has in history to get the FRNs(paper) to stop the massive defaults taking place. You can ignore me all you want but what I've been typing to the same statements you keep making are still there. I will not repeat myself again, especially not to you whom I've repeated myself over and over again many times.

  30. Daniel says:

    @Numonic,
    I have no idea about printing press, but I really wonder, if government current printing press is not enough to print necessary FRN, why not buy more printing machines?

    The idea of not enough machine to print money sounds very strange to me..

    US has plenty of printing machine manufacturer right???

  31. Numonic says:

    Daniel they are doing that. When I was buying some silver one day, the store owner was telling me how they are printing FRNs in other parts of the world. The point is even with all these printing presses, it's still not enough to print fast enough.

  32. Anonymous says:

    1. When Fed monetize treasury debt, they don't need to print paper FRN. They just need to digitally enter the numbers, because the treasury will deposit the money before spending them anyway.

    Paper FRN is needed only when the private party who received Govt spending cashes the money from a bank, which is much delayed and he is not likely to cash out all the money he received.

    2. In terms of outside buyers, it's true that BRICs have less FRN to buy treasuries due to shrinking exports, but global private investors/banks/funds will pick up the supply if they perceive less inflation than you do.

    3. Even for the BRICs, treasuries only account for less than half of their FRNs. They can increase the treasury percentage even without receiving new FRN from export. Funding US is like a fiscal policy they are taking domestically because US customers are customers for their domestic industries.

    4. Yes there are a lot of treasury debt maturing, but that would mostly rolled back by current holders. Only new fundings needed to be addressed. However we have seen that the 2009 funding is pretty much (2/3) done, and with GDP picking up along with tax revenue, additional funding would be in an even easier market than first half 09.

    Each of these arguments can invalidate your (and Eric's) FRN and dollar crash theory. Address each if you could.

    Another Anonymous.

  33. Numonic says:

    Another Anonymous,

    When you ask yourself, why is California issuing IOUs? What answer comes to mind?

    When you ask yourself, why did this bank go bankrupt? what answer comes to mind?

    When you ask yourself, Why has credit tightened? what answer comes to mind?

    When you ask yourself, what are the bailouts bailing out? what answer comes to mind?

    The only logical answer I can come up with is that there is a shortage of Federal Reserve Notes.

    I'm just trying to think logically here. I'm not using any cliches.

    A bailout in my understanding is a stoppage of failure. Well failure to what? to use the computer at the Bank of America on the corner to add a few extra zeros to Joe Sixpack's saving account? No, last time I check, the banks had no problems with their computers or the people operating them, so there's no need for some one from the Fed to come in and stand over one of the bank tellers shoulder to use his fingers to press some keys on the key board, or do it from where ever the Fed stays and use a network communication to access the computers in that bank and add zeros to Joe Six Packs savings account. On top of that I haven't come across any reports of people mysteriously finding their savings account with more money, nor has there been reports of people mysteriously finding less money than should be in their savings account and then later(after teh bailouts) finding their account balance back to what it should be. No I haven't come across any of those reports.

    Hmmm. So what can this bailout(stopage of failure) be bailing out? Could it be that so many people with the access to these physical Fed Notes through their digital bank account and Fractional Reserve Banking that has been practicing Zero Reserve banking for some time caused there to be a shortage of these Fed Notes in comparison to the amount of people with access to these Fed Notes?

    ***Huge Sarcasm***

    Naaaah, how could that happen, it's not like we use Fed Notes at all anymore. I mean when's the last time anyone has ever seen a Feseral Reserve Note, didn't the govt. ban people from using those? Oh so FRN's are still used, oh but only in a small percentage of transactions. So what if the economic boom increased the number of people using those minor transactions. So what if 1% of 1 trillion is more than 1% of 1 billion. So what if the number kept growing, the percentage stayed the same and that's all that matters right? I'm a math wizard! So it can keep growing up to 1% of 1 quadrillion, it doesn't matter because it's still just 1%. So the problem can't be a shortage of Fed Notes and I laugh at anyone suggesting it is.

    What do we need Fed Notes for, when we sell our debt, the debt is a promise to pay absolutely nothing. When they say we borrow, it doesn't mean that we are borrowing the Fed Notes from others(i.e China), it means we are borrowing nothing and promising to pay back nothing. Oh but wait, if we're borrowing nothing and promising to pay back nothing then how is it that debt is defaulting? Oh no! my world is crashing, this is too difficult to understand, you know what I'm just going to keep repeating the same cliche "the bailouts are digital, the bailouts are digital, the bailouts are digital". Yes, hey other's are doing it, even though it makes no sense, I'll keep saying it.

    *** End of Gross Sarcasm***

    However we have seen that the 2009 funding is pretty much (2/3) done, and with GDP picking up along with tax revenue, additional funding would be in an even easier market than first half 09.

    ROTFLMAO

  34. Anonymous says:

    Numonic,

    Well, I do think a central bank/govt is different from a private bank or municipal in terms of ability to monetize (part of the) debt digitally while private banks/locals need 100% FRN.

    Btw I just want some discussion here so don't think that I am trying to argue or anything. Everyone has some good views to learn from.

    Agree on that or not, what's your view on each of the other three points? I thought they were valid aren't they? If not why?

    2. In terms of outside buyers, it's true that BRICs have less FRN to buy treasuries due to shrinking exports, but global private investors/banks/funds will pick up the supply if they perceive less inflation than you do.

    3. Even for the BRICs, treasuries only account for less than half of their FRNs. They can increase the treasury percentage even without receiving new FRN from export. Funding US is like a fiscal policy they are taking domestically because US customers are customers for their domestic industries.

    4. Yes there are a lot of treasury debt maturing, but that would mostly rolled back by current holders. Only new fundings needed to be addressed. However we have seen that the 2009 funding is pretty much (2/3) done, and with GDP picking up along with tax revenue, additional funding would be in an even easier market than first half 09.

    Thanks for your input.

    The Another Anonymous

  35. Numonic says:

    Another Anonymous said...

    "2. In terms of outside buyers, it's true that BRICs have less FRN to buy treasuries due to shrinking exports, but global private investors/banks/funds will pick up the supply if they perceive less inflation than you do."

    The global private banks/funds are just as insolvent. Everyone is leveraged to the hilt in US dollar denominated debt.

    "3. Even for the BRICs, treasuries only account for less than half of their FRNs. They can increase the treasury percentage even without receiving new FRN from export. Funding US is like a fiscal policy they are taking domestically because US customers are customers for their domestic industries."

    First of all, the point is not how many FRNs they have, the point is how many FRNs is needed to stop this debt destruction/default/credit crunch. It seems that you are saying that the BRIC nations have FRNs in reserve. They may still have some but it's not enough. Remember, the purpose of selling US debt, is so that those FRNs(which are used to buy the debt and the reason we call it "borrowing" as there is the idea that those FRNs we get from selling debt will be returned to our creditors in exchange for wiping out the debt) can be pulled back in to the US in order to stop defaults, keep all US dollar denominated debt liquid and keep the ponzi scheme called credit running smoothly. This is not happening and selling debt has it's limits as those BRIC nation's FRN reserves run out(if they haven't already from all the past debt that was sold over the years). The govt. has a better chance getting the FRNs it needs through printing than selling debt as the option of selling debt to obtain FRNs is limited by the amount of FRNs in circulation. But the printing press is also limited as the debt deleveraging is electronic and moves faster than the creation of the tangible/physical FRNs. This is the reason the bubble bursted, because electronic money(debt which include treasuries) moves/grows faster than physical money(FRNs). This is also the reason the reserve ratio was brought down to 0. Those reserves had to be used as taking the time to print to keep the reserve ratio at 10% would pause the ponzi scheme and lead to debt defaulting and unwinding, that would damage the banking system but it was only inevitable that the banking system would crash as it could not last much longer with a 0 reserve ratio. Bringing the reserve ratio to 0 just prolonged the life of the banking system but it did not save it from it's inevitable destruction.

  36. Numonic says:

    "4. Yes there are a lot of treasury debt maturing, but that would mostly rolled back by current holders. Only new fundings needed to be addressed. However we have seen that the 2009 funding is pretty much (2/3) done, and with GDP picking up along with tax revenue, additional funding would be in an even easier market than first half 09."

    I've replied to this with a ROTFLMAO. This is funny because of how false it is. You paint a rosy picture and all I have to say is the debt problem is only getting worse and will be allot worse by the end of this year and in to the next few years. I see a crash at the end of this year. This won't be a wear and tear ride, i see a head on collision that brink the dollar from it's wear and tear path to a completely totaled state. To assume that the govt./Fed can hold this together for even up to another few years is to totally ignore why the bubble bursted in the first place. The bubble bursted because the govt./Fed could not keep up with the speed credit was moving, even after they pulled all stops(bringing reserve ratios to 0) the bubble still bursted. Now they are pulling all stops as they did during the expansion(brining Fed Funds Rate to 0), nothing has changed. The fact is credit(electronic) moves faster than physical money(FRNs). The bubble has busted and debt is being destroyed. The only option left as selling debt and printing fails is to create larger bills. It is in my understanding that this is how all hyperinflation starts. Zimbabwe didn't just wake up one day and decide to print a one billion dollar bill, it did it for the same reason we(US) are about to, to stop defaults but the only reason why this method has taken so long is because the govt./fed know this is the last and final option and that this is not even really an option but a solution to stop global starvation by stopping the massive debt from engulfing the world, so instead of starvation people choose to raise the price of their depleted resources that was taken away from the massive debt deleveraging as it is doing now causing companies/stores/businesses and projects to stop and close down. If this were allowed to run it's course, it would put the world at a stand still. There would be no reward for any work as the all the fruits of labor will be engulfed by the massive debt deleveraging. This is why a credit collapse is a good think, it stops the poverty and starvation and turns the world from a bunch of consumers to a bunch of producers and allows producers to reap the fruits of their labor. Producing is encouraged with the absence of credit. With credit people are discouraged from producing as all they have to do to get what they want is borrow it and then borrow to pay for the loan and on and on which is known as a ponzi scheme and that is what credit is. A paper currency is worthless, as the commodity value of the paper is worthless. Had the currency been silver/gold, one could exchange the silver and gold for goods and that silver/gold could be used in industrial machinery to help produce more. The paper currency does not help produce anything, it just helps consume more. It has turned the world from a world of producers to a world of nothing but consumers. This is the effect of socialism as one is discouraged from working/producing as they see others recieving the same or even more than those who work/produce.

    Wow, just like me with my long rants.

  37. Anonymous says:

    A lot of good points.
    Though the effect on dollar during a private sector deleveraging may not be right.
    But let me think about it a little bit more.

    AA

  38. Anonymous says:

    Numonic,

    Deleveraging of govt liabilities could be bearish on dollar, either through defaulting or monetizing.

    But deleveraging of private liabilities should be dollar bullish because 1. FRN has increased purchasing power as money multiple is lower (money creation through credit is reduced) 2. Private parties demand FRN from capital market to pay back debt. When there's shortage of FRN, FRN value grows.

    Please share your views.

    AA

  39. Numonic says:

    Another Anonymous,

    I don't believe this. Why do you insist on making me repeat myself?

    Do you know that the question of whether it is bullish/bearish for the dollar if the FRN is in shortage has been brought up many times in this blog article alone?

    Do you know that I've answered it many times?

    Do you know that I've refused to answer it but gave in and said that I would do it one last time for the lazy.

    Then you come in and bring it up again. I'm sorry but this is tantamount to the reason Eric deleted the other Anonymous replies.

    I'm sorry, I'd rather type all of this than give the answer to that question again.

    Please reread my replies from this and other Eric blogs, it answers all the questions you just brought up in your last reply.

    Eric was right, it seems some of you people are not reading and just replying. The man has made so many other blog articles answering your questions over and over and yet you still ask the same questions. Please read the replies in this article in entirety and also search for blog articles regarding your questions. It's very easy and I assure you all your questions have been answered many times.

  40. Anonymous says:

    Numonic,

    I read your comments above, and I saw what you were saying there.

    Your main view is this (let me know if it's not): US debt is a ponzi scheme and it's getting too over the years -> need massive deleverage, at amount over $1000T -> this deleveraging will be at an extremely fast rate, and the Fed can't print FRN as fast -> default

    I agree that the US debt is a ponzi scheme and need deleveraging. But the key point here is that the deleveraging has been going on for almost two years, and last year it was at a huge rate. The Fed was fast enough in the past two years (though it wasn't easy). Why would you think they can't be as fast going forward? Now the deleveraging has slowed a lot. Why would you think it would accelerate again by the end of the year?

    Deleveraging is driven by collaterals. Housing prices backing the loans already dropped 40% in many states; Hedge funds already reduced leverage to levels not seen in many years; Dealers, like MS, already reduced leverage by half as well. I agree that they will continue to delever and there's much more to go, but the speed could be slower than the three months post Lehman, couldn't it?

    AA

  41. Numonic says:

    The reason the deleveraging will get worse is because of events that are about to happen like what is in this graph:

    http://consumerist.com/340334/monthly-mortgage-rate-resets-2007+2016

    And the fact that ammunition has run out. All stops have been pulled and nothing has improved. The only reason the stock market is rallying is because as you can see in that graph, we are in a period where credit is getting a breather and the fact that unemployment benefits are running out which is also a breather for the credit market(less people with access to the credit market). Come the end of this year and in to the next few years(despite the rise in unemployment benefits running out) credit will take a worse hit than it had in the last couple years. Without the ammunition there was last year, debt will take a huge hit. I believe a hit so hard that will cause bank runs and force the govt. to declare a bank holiday.

    There is still allot of leverage in the market, we are not even halfway through the deleveraging. You see one of the false ideas people have is that since we've made record breaking losses, they feel it can't/won't get much worse. But it will and the numbers show it.

  42. Numonic says:

    Oh and Anonymous I'm going to go ahead and explain again how a shortage of FRNs is bearish for the US dollar.

    It seems when ever people consider the fact that dollars are going to be in huge demand, they only consider the customer and not the producer/seller. These producers/sellers will be in huge demand of dollars too and if they can't get it through borrowing, you know how they will get it? Through raising prices. Now tell me is raising prices bullish or bearish for the dollar? It's bearish. And the more in shortage the FRN is the more prices will rise until those prices can be subsidized through credit. If companies don't raise prices, they won't have enough money to afford the rising borrowing costs and will be forced to close down and this is supply destructive. If we continue to maintain a strong dollar all companies/businesses/stores and projects will be forced to shut down. This is why I say a strong dollar = starvation. I don't believe people(who by the way are in control of prices and are only influenced by subsidies) will choose starvation over a collapsed dollar. Because those subsidies(credit) will no longer be there to influence the people to not raise prices people will choose to raise the prices on their depleting resources than watch it get eaten away by the massive deleveraging. Fiat money/credit collapses and gold and silver are recognized for their industrial properties in a world that is moving from major consumers to major producers and the value of those metals sky rocket. The world moves from major consumers to major producers and poverty in the world is decreased. Because of the large world population, this doesn't take as long as some people think it will, but it happens fairly quickly. Majority of the world prospers but those who saw this coming and stocked up on physical silver/gold before the credit collapse prosper first.

  43. Anonymous says:

    I know that chart. Actually I have been using that chart for many months since I saw it from the original CS report.

    However, please know that for Jumbo, Agencies, and most of the ALT-As, as Libor (the base for rates after reset) has been much lower than before, interest rate reset doesn't increase mortgage payment much now. For some loans, the reset rate (Libor + margin) is even lower than the current rate.

    The most problem comes from Option Arm/MTA loans when they recast. But interestingly, the banks that have large MTA portfolios (such as WB, now WFC) have raised more capital and already delever more than average banks for this.

    Also in general, deleveraging is also a function of the speed of change (not just the absolute level) of asset price index. You can see housing prices index dropped pretty fast last fall/winter. The speed is slowing. Though housing prices need to go lower, they shouldn't go to nothing.

    So while there will still be a large impact from Option Arms and some non-agencies loans, it should be smaller than last winter. Even the deleveraging speed picks up some due to a market correction (currently overbought at 18PE) and rates recast, the deleveraging is likely to be slower than the six months post Lehman.

    Thoughts?

    AA

  44. Numonic says:

    Well i don't know much details but I know housing isn't the only problem but I'm hearing that the deliquencies in the debt coming for reset is greater than that of the Sub Prime. Plus the massive debt that was racked up was not from real estate alone. Allot of it was from derivative bets and a whole bunch of other debt. I just feel that what's coming due this fall and early next year will be the last straw for the credit market. I definitely don't feel like this will be able to be drawn out for more than another year. I see things more worse now compared to last year.

  45. Anonymous says:

    The most likely refinance problem would start from high yield corp and CRE loans. So I do watch closely, especially on the transition rates (the rate of moving from one delinquency bucket to another, which generally leads aggregate pool delinquent rates).

    So far the refinance market is stable, and I expect it to continue though there will be some ups and downs going forward. Not saying that what you expect is impossible. I am open to such possibities, but so far it's not the base case based on the math I did.

    Nevertheless, we should monitor the credits closely for changes.

    AA

  46. Anonymous says:

    I am also waiting for Eric's main article that he's writing. Want to see his views.

    AA

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>