This week is critical. With over $200 billion in bonds or 2/3 of what China can lend in an entire year most years, it could set the stage for a lot of things.

If the bond sales appear to go well, then the dollar may rally and bring the markets down since there are no real fundamentals except the falling dollar behind the rising markets (unless you count hope a miracle will turn things around).

There isn’t anything the government can do regardless of who is in office that will change things much until we get debt under control and that will take years. That is why even the President is saying it will be a couple years before unemployment comes down below 10%. Some doubt it will drop below 11% for a couple years once it rises to that level.

But, U-6, at 16.5% is the key because it reflects tax revenue potential. As long as it is in that range, we don’t have enough tax revenues for cities, states and entitlements. We will have $2 trillion deficits when there isn’t even a trillion to lend us until the global recovery is up and running. Many believe that this global growth currently being seen is all due to the emerging nation’s stimulus spending and that it will fade.

11 other nations, according to the IMF, need $8.2 trillion on top of the $2 trillion we want to borrow. That means we compete for loans when there isn’t even enough for what we want.

Doesn’t the fed just buy them up when the market won’t?

If they do, it devalues the dollar and makes our import prices go up, esp. oil that goes up about $4 for each 1% decline in the dollar. The supply glut has helped a little, but it won’t be enough if the FED starts buying more.

That is why I believe this video of Grayson grilling Bernanke is so important. I believe Bernanke does know where the $500 billion went. It went to buy our debt.

52% of debt purchases has been by central banks? With their own problems, stimulus spending, borrowing, where are they finding money to buy our debt with? Maybe from $500 billion currency swaps to hide the monetization of debt so the dollar doesn’t fall even more?

JanPaul

Related Posts:

• If money is moving OUT of equities, and the market goes UP……….hmmmmm
• Barrack gold announce today they are buying gold back to bring their leverage down as has another major gold miner.
• Diminishing returns from stimulus demand forward programs. At U6 unemployment of 16.5% in bs BLS and closer to 20% in reality, a tax credit is only going to stimulate so much demand.
• The latest issue of Forbes has an article titled: Ponzi in Peking: China Meltdown - Be Very Scared.
• No one questions why the dollar is set to raise.

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