Daily chart of 30 Year Treasury price is telling it all: rolling top is showing that buyers are demanding higher Yield and selling pressure is mounting. T Bills were trading almost at zero yield showing panic and flight to "quality" in frozen money markets in the middle of the week, after "bailout solution" these yields are sharply higher. The last resort of Reserve Currency of Choice - Treasuries are going to be downgraded to the Junk status by the market. It will not happen overnight, but we are getting there. More and more voices heard about new financial security, the first nation to come out with Gold reserved currency could benefit enormously in this turmoil.
Bailout is the act of desperation. It is hard to think so looking at souring stock market in the last two days, but it is the reality. Government will buy out the worst assets from the system which has become worthless in the current markets and could bankrupt all US financial system.
Treasury Bubble is the last to burst with falling de facto Credit rating of USA Corp after taking on its balance sheet all this toxic waste from the banks. Inflation is here and can not be controlled in US at this moment, if you still believe that falling economy is always deflationary, just have look at Zimbabwe now or at Russia, or at Turkey in early 90s.
Tsunami of liquidity will make its way into the system it will not address systemic insolvency crises or derivative mess, it will only grease the wheels of a "free markets". Smart money will buy into strong underlying economics of Canada, Brazil, China, Australia and will take a protection in the form of Gold holdings. Countries with real Wealth reserves (contrary to systemic deficit in US) will build up their gold reserves and will continue to diversify out of dollars.
No comments:
Post a Comment