At what point will the Feds do something about the US$….

[Deal Hunter]

Nothing to worry about. As long as the US Dollar is the world’s reserve currency, there won’t be a mass dumping of US treasuries. Us Americans will always dutifully pay our taxes – that’s why the “full faith and credit” of Americans is nothing to sneeze at.

Now, what we should be worrying about is any indication that oil will decouple from the US Dollar. If the world decides it wants to buy and sell oil with anything else, like Euro or Yuan, then it spells trouble of the US Dollar.

Still, I wouldn’t worry. You know what happened to the last guy who tried to sell his oil with Euro……… and you thought it was because he was responsible for 9/11. LOL.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Author]

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