Comments on Market Skeptics: Understanding The US Treasury Market

Mr. deCarbonell Thank you for the math examples c...

2009-07-09T09:18:03.954-07:00

Mr. deCarbonell

Thank you for the math examples clarifying your earlier point.

Based upon your examples, you seem to believe that an extreme devaluation is possible. I agree that this is possible though I am uncertain as to how probable it is.

In any case, suppose your extreme example were to occur,

531,019 / .0.001 = 531,019,000 (98.9%)

You have stated that the U.S. could not print its way out of such a situation. I tend to agree. However, what is the alternative?

Do you believe that the U.S would default on its obligations, or in other words, declare insolvency?

Jane said... Suppose you are right, TIPS is only ...

2009-07-08T20:01:58.884-07:00

Jane said...
Suppose you are right, TIPS is only 8% from total treasury.

Lets say USD drop 20%, 8% x 1.2 = 9.6% only.

This only add up 1.6% of debt burden. Isn't it? How bad is this??

Sorry, the way you are calculating it is a little wrong. See examples below.

1) Lets say USD drop 20%.

531,019 / .8 = 663,774 (10.1%)

2) Lets say USD drop 93.3%. (See the Fed is planning 15-Fold increase in US monetary base)

531,019 / .0.0667 = 7,965,285 (57.4%)

3) Lets say USD drop 99.9%. (See The Nightmare German Inflation)

531,019 / .0.001 = 531,019,000 (98.9%)

Jane The same exact question came to my mind as I...

2009-07-07T17:37:40.469-07:00

Jane

The same exact question came to my mind as I read the paragraph dismissing those who state that the U.S. will print its way through this problem.

In addition, even though TIPS will raise U.S. obligations when inflation eventually hits, and I agree with Mr. deCarbonnel that it eventually will, this only means a bit more printing to cover the increased obligation. Granted, this may in and of itself further drive up inflation and devalue the dollar, but the extra - inflation increase/dollar devaluation - will be slight due to the small amount of TIPS on the market.

My question is not meant to minimize the severity of the ongoing situation. It is only to agree that there appears to be a flaw pertaining to this particular statement.

The Fed seems to think it has an almost limitless ability to increase the money supply. I will never again under-estimate them on this.

This caveat aside, good piece.

I look forward to Mr. deCarbonnel’s reply.

20% is not exactly a currency collapse. I'd expect...

2009-07-07T06:59:02.063-07:00

20% is not exactly a currency collapse. I'd expect more along the lines of a minimum loss of 50% in a few months in Eric's scenario, and far more over time. Re: Ben Franklin's will be cheaper than charmin's 'brazilian rainforest toilet paper' americans use right now.

Suppose you are right, TIPS is only 8% from total ...

2009-07-06T20:28:13.270-07:00

Suppose you are right, TIPS is only 8% from total treasury.

Lets say USD drop 20%, 8% x 1.2 = 9.6% only.

This only add up 1.6% of debt burden. Isn't it? How bad is this??

Thanks for your great work. I am of the opinion t...

2009-07-06T19:56:03.714-07:00

Thanks for your great work. I am of the opinion that TIPS will be defaulted first in a currency devaluation situation.
I ahve been reading for about 1 month, love the content.