Chinese Buying Mattresses for US Dollars

On 12/30/09 a curious thing happened-- US Treasury T-bills were auctioned at an interest rate payable of 0.0%. And if you don't find that odd, let me tell you that about $5Billion worth of these things were sold! Furthermore, this information was not considered newsworthy enough to be reported in the media.

Don't believe me? Click here: http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20091230_1.pdf

Why would anyone give the US Government $5B so that they can get the same $5B back at maturity?
(1) US Citizens feeling patriotic and lending Uncle Sam some walking around scratch?
(2) Financial institutions being forced to buy T-Bills whether they want to or not?
(3) Things will be so bad in 2010 that just getting your money back will put you ahead of the game?

This is the equivalent of putting your money in a mattress.

In these times, perhaps it is best to turn to the largest single holder of US dollars and debt-- the Chinese government to see what they are doing.

Here is what I found in the WSJ (12/29/09):

"BY JAMES T. AREDDY
SHANGHAI—A group of financiers is trying to put a U.S. mattress maker now under bankruptcy-court protection into play by encouraging Chinese bidders to top an already arranged offer for Simmons Bedding Co., according to people involved in the effort."


Somehow I feel these two items are connected...

What befalls autumn bees

In the Northeastern United States, bees get very impatient and aggressive in the autumn.

I thought they were angry for having been born just before winter -- with a very short life time left.

However, science tells us that the aggressiveness stems from a growing shortage of quality food with impending onset of cold weather. This personality change makes them more likely to sting and swarm if provoked in the smallest way.

Money is the food of governments. It is the “mother’s milk” of politics. Did you notice that governments are now acting like autumn bees? Everything is a crisis. No time to read the legislation—just pass it! The taking of money and demand for legislative financial favors is at its pinnacle. What can’t be taken from the people will be printed.

As the money supply increases, the quality (value) decreases. Like bees with no honey, governments see the end of money.

But unlike autumn bees, what will bee-fall our hive?

To learn more about bees: http://en.wikipedia.org/wiki/Bee

To lean more about governments: http://en.wikipedia.org/wiki/Atlas_shrugged

Where Have All The Pictures Gone?

Remember my post of March 1, 2009 showing all the media coverage of economic based social unrest? http://tedbits.blogspot.com/2009/03/coming-to-city-near-you.html

Since then there has been nothing. What do you think? Did everyone suddenly get happy? Is there Censorship? Does the press not cover riots and protests anymore?

Something happened to the people of the world during March 2009...

It is not that there aren't things for people to be upset about, they are just not taking to the streets or, if they are, the pictures aren't getting out:

2009.12.06 Radio Liberty: "Workers at Russia's Molot arms plant haven't seen their salaries in nearly six months. Unable to meet payroll, management has resorted to passing out food parcels to its increasingly angry and desperate employees." "This is partially related to the devaluation of the ruble and the accompanying rise in inflation. The buying power of workers has fallen approximately 40 percent. We don't see this situation improving."

2009.12.09 AFP: "GENEVA (AFP) – Unemployment in Switzerland soared to a five-year high ..." "The Swiss government said last week that it would halve from next year its quotas of permits for workers from outside Europe in a bid to curb unemployment."

2009.12.07 Washington, D.C. - infoZine - "The global financial crisis is having a devastating impact on families in emerging Europe and Central Asia, with the risk of the region giving back a fifth of the poverty reduction gains of the past decade, according to a new World Bank report. By 2010, there could be over 10 million more poor people in the region, and close to an additional 25 million more who were almost middle class but now just above the poverty line with the potential of losing their homes, jobs, and basic services."

2009.12.07 New York Times - "BANGALORE, India — In the United States and Europe, people worry that their well-paying, high-skill jobs will be, in a word, “Bangalored” — shipped off to India."

2009.12.08 The Vancouver Sun - "Financial markets tumbled on Tuesday as credit rating agencies slashed Greece and Dubai government-related debt and contemplated the potential debt rating downgrades of the United States and U.K., as both countries struggle to deal with large fiscal imbalances and accumulated debt that have resulted from the global crisis. "Anybody who thinks we are through this credit collapse is delusional," said David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto. "It is ongoing."

2009.12.09 Bloomberg - "Greece’s socialist government, elected in October, plans to cut the budget deficit to 9.1 percent of GDP next year from 12.7 percent this year. In contrast, Ireland’s Finance Minister Brian Lenihan will announce plans today to cut spending by 6 percent in the face of the worst recession in Ireland’s modern history." “There’s certainly an element of panic and hysteria,” said Peter Dixon, an economist at Commerzbank AG in London. “The ECB will bend over backwards to ensure that one of the countries within its orbit doesn’t default."

2009.11.07 New York Daily News - "President Obama signed a $24 billion economic stimulus bill into law... The law provides another 14 weeks of benefits to all out-of-work people who have exhausted their benefits... in states where the jobless rate is 8.5% or more get an additional six weeks. The extra 20 weeks could push the maximum a person in a high unemployment state could receive to 99 weeks, the most in history."

HERE ARE SOME PICTURES FROM THE FEDERAL RESERVE DECEMBER 2009 MARKET REPORT (Click to enlarge):


No social unrest in the US because the government continues to subsidize unemployed workers. Now you can get benefits for almost a full two years. The unemployed are staying unemployed longer than any time in US history.







Of concern is the fact that even with continued extensions of unemployment benefits, continuing claims are dropping. Since total unemployment has not improved and continuing claims are falling, this can only mean people are falling through the US social safety net.

The Value of Lost Data

As quoted from the UK London Times (November 29, 2009):

"SCIENTISTS at the University of East Anglia (UEA) have admitted throwing away much of the raw temperature data on which their predictions of global warming are based. It means that other academics are not able to check basic calculations said to show a long-term rise in temperature over the past 150 years. The UEA’s Climatic Research Unit (CRU) was forced to reveal the loss following requests for the data under Freedom of Information legislation."

Fortunately, we no longer need the data because everyone accepts that global warming is occuring but the technique here can now be used in Copenhagen.

The plan is for Developed countries to emit less greenhouse gases in the future while Developing countries will be allowed to emit more. The idea being that at some point in the future, all countries will have contributed the same amout of greenhouse gases into the environment and then we will have another meeting.

Since developed countries have contributed the most green house gases and therefore have all the historical data, they will be in charge of keeping score going forward.

If, in the event Developed countries don't like the score going forward, they will simply lose their data and calculate events as they see fit.

After all, it is one of the worlds most greatest diplomats that said, "those that vote decide nothing; those that count the votes decide everything".

Look it up....

How to Transfer Wealth

I just picked a bank at random and retrieved these figures for 12/1/2009:

For savers: 12 month Certificate of Deposit: 1.25 % return
For borrowers: Credit Card Interest Charged: 19.99% ; 30 Year Home Mortgage: 4.875%
20 Year Home Equity Loan: 6.49%

So it would seem banks would be lending lots of money because the rate at which they pay versus the rate at which they charge is really big. They should be making tons of money!
But they are not lending because even though the spread is huge, there is a risk free way for them to make even more money.

STEP (1): The US Federal Reserve bank creates money out of thin air and makes it available to preferred banks at near 0% interest.

STEP (2): Preferred banks borrow money from the Fed at 0%.

STEP (3): The Preferred banks use this money to buy US Treasury certificates that yield more than 0%. Example: 10yr yield is greater than 4%.

STEP (4): US government pays the interest to the preferred banks using Taxpayer dollars.

WHY BANKS DON’T LEND:
So… if you were a bank, why would you ever lend any money to individuals when you can lend it to the US government who will in turn take money from its citizens to pay you back. All this accomplished by using money that doesn’t really exist which you borrowed at 0% interest.

WHY AN ASSET BUBBLE IS FORMING:
Shaving a couple of interest points from the US government can get boring after a while. So, why not take some of that money and start buying domestic and foreign stocks. After all, the money is free and you, plus other banks, will all start buying and pump up the stock market creating a “herd mentality”. Maybe even get your friends at the FED to buy index futures with additionally manufactured dollars to really accelerate the rise in the stock markets.

WHEN WILL FED INTEREST RATES RISE?:
Never. What has been created is a massive “carry trade” at an unprecedented scale that can never be unwound. Besides, in the old days the FED raised rates so banks, in turn, would raise rates to cool down the economy by making credit tighter. Credit is already tight at 0% so there is no need to raise rates because it would have no effect.

WON’T ALL THIS MONEY CREATION CAUSE INFLATION AND REQUIRE THE FED TO RAISE RATES?:

No. We are in a well hidden deflationary spiral. As more and more individuals have less and less money because it is being taken away from them or they are jobless, local prices will fall- eventually resulting in labor rate parity world wide.

When people can’t afford things the price naturally falls. This is why the US housing market is not done falling and won’t stop until median home prices begin to align with median incomes.

Imported goods will become more expensive and therefore appear inflated but that is just currency effect without change in real prices. However, imports will slow because no one can buy them- eventually resulting in global economies becoming regional. That is- local goods, produced locally and consumed locally.

And besides, the FED is not really creating money because the money is not being allowed to fully enter the economy. We are simply point shaving here and the preferred banks only have to pay back the principle (0% interest rate effect) or even if they default- who cares the money didn't really exist in the first place!