Treasury losses widen, sale 'Dismal'

[Neutrino]

buyers turned a cold shoulder. DJIA minus 106.

http://biz.yahoo.com/rb/030805/markets_bonds_5.html

[On the Road]

1. What Does This Mean?

That long-term interest rates will rise no matter what the Fed does?
Or that stronger economic numbers made stocks more attractive?

I've never understood the bond market.

[TahitiNut]

2. Think both "risk" and "reward".

:shrug:

[papau]

3. Changing long term Gov deficit expectations changes Long term rates

We said this in the 90's, as the Fortune 50 long term interest rate models all incorporated expectations on Gov borrowing.

When in 2001 Bush destroyed the surplus project and turned it into a forever deficit, we said that while 95% of the long term rate reflects current economic conditions (if things suck, rates are low), long term rates become "sticky" to the high side if projections show deficits forever. I/we got Lester Thurow at MIT to admit to supply and demand applying long term interest rates in an article in the Boston Globe in 2001 -

Now even even some of the media's favorite economic gurus agree that long term rates have disconnected from Fed's short term actions.

To put it another way - Bush's tax cuts for the rich screwed the economy, the country, the world

enjoy the $400 check this summer - if you get one.

[pfitz59]

4. It means we're screwed!

Means no one wants to finance Chimpy's downward spiral. Means money will flow to Asia or Europe or even South America before it comes to our door! It means watch out for LIHOP #2!

[qb]

5. It means the economy is headed for a certain recovery

at least that's how the pop-economists and Bush admin are certain to spin it.

[JNelson6563]

7. which is an amazing claim

for them to make, not that that would stop them from making it.

These rate increases will pour cold water on the mortgage/refi sectors and that has been a big driver in keeping the economy afloat. This should be interesting....

Julie

[gasperc]

9. it's all a huge drag

had the tax cuts been better planned and spending controlled then growth would be taking off but any growth is because interest rates are low, any steam that it does gather is going to be pulling a one ton counter weight in the form of higher interest NOT initiated by the FED.

[tsipple]

6. Fed Has Less Influence Over Short Term Rates

This is not good news at all.

[gasperc]

8. That check we just got in the mail is actually monopoly money

didn't you notice Mr. Parker in the corner.

Maybe these dumb fuck yahoos will finally realize they have to sell the $455billion deficit to somebody and guess what nobody's buying, the market's saturated or better yet flooded

[BiggJawn]

10. How much longer before we make money keeping it under the mattress?

The banks are already paying 1% or less on passbook, and maybe 2% on MoneyMarket accounts...Much more and they'll be assessing our savings a "Service Charge" like they already do to our chequeing....

[PROGRESSIVE1]

11. Money market accounts pay only .10% - .20%...

more than a traditional savings account these days. The rate at our local bank is as follows:

Passbook: .50%
Moneymarket: .75%

What is this about the banks charging us on our savings accounts??? Please respond!

[finecraft]

13. Kind of a "Stamp Tax"

The idea originated in the Dallas Federal Reserve Office a few weeks ago: in order for the economy to pick up, money needs to be circulated. If people get their tax cut and put the extra money they receive into their savings accounts instead of buying goods and services, the economy will stay flat. To force us to spend our tax cuts, the Dallas Fed suggested that any funds staying in savings accounts for over a specific period, (say 6 months), would be required to be "stamped", or effectively taxed for not being in circulation. There was a review paper of this proposed program on the Dallas Fed website a few weeks ago. It may still be there, unless someone realized that this was a stupid, stupid idea and pulled it.

[LoneStarLiberal]

19. Dallas Fed Link

<http://www.dallasfed.org/htm/research/pdfs/bd0503.pdf>

Here's the link to the Dallas Fed presentation in .pdf.

[tsipple]

23. Stupid, Stupid, Stupid

A tax on long-term savings account deposits? There are an unbelievably large number of ways Americans could avoid that tax. One way would be simply to withdraw all their money and hang onto it in paper bills. The banks would love a run on deposits. Would do wonders for the banking system.

Or Americans could flee into Euros and Yen, depressing the U.S. Dollar precipitously (and dangerously).

Or they could "churn" between savings accounts at different institutions every five months, just moving deposits from bank to bank, with absolutely no productive impact.

Or Americans could move their dollar-denominated funds into any of several countries that have banks ready to accept deposits. The U.S. banking system would bleed money to, say, the Caymans. Suddenly millions of Americans would discover the joys of avoiding taxes, too.

What an idiotic idea. Can anyone help me understand any way that sort of tax would help?

[BiggJawn]

15. Hasn't happened yet....yet.....

Don't panic! It hasn't happened yet, but with rates going in the toilet like they are, how far away can that be? Either that, or banks could require that you keep "X" amount on deposit or they'll soak you to the bone with chequeing fees?

[hatrack]

12. "Prices so low, we're practically GIVING away the public debt!!!"

"We must be INSANE!!!!!!"

[aquart]

21. Nobody's buying because we don't trust Bush to pay.

He would default on treasury obligations in a heartbeat because he has no conception of a bad consequence to a bad action.

All his life, he did something bad and just got richer and more powerful as a reward.

There will be no upswing until Bush is gone.

Isn't that funny? Republicans being so good for business and all?

[alfredo]

14. My bank has stopped paying dividends

I remember Clinton saying not to pay much attention to the stock market, watch the bond market.

Edited because doing so gets me hot.

[gristy]

16. So if the fed can't raise enough money in the bond market

what do they do? Is that when then simply turn on the printing presses? And inflate their way out of their predicament (theirs, not ours)?

on edit: We're still screwed.

[sidpleasant]

17. What do they do?

Raise the interest on Treasury bonds to make them more attractive as investments, I guess. That'll raise mortgage rates which might start choking the boom in housing sales and refinancing. If we are in an artificially inflated housing bubble and it bursts things could get really really bad, if this guys prediction is even half right.

[gristy]

18. good link, sid

Here's the last two paragraphs from sid's link:

"To make matters worse, a third bubble from the '90s is also still with us -- the dollar bubble. The Clinton administration deliberately pursued a 'strong dollar' policy. This had the desirable short-term effect of restraining inflation and raising domestic living standards by making imports cheaper for people in the United States. (An undesirable short-term effect was the devastation of U.S. manufacturing.) However, in the long-term, the strong dollar policy is unsustainable. As a result of its massive bill for imports, the United States is currently borrowing more than $550 billion a year from abroad (approximately 5.3 percent of GDP), since it is buying much more from abroad than it is selling. This borrowing is paid for by selling off U.S. assets. If the trade deficit remains at its current level, within a decade foreigners will own the entire stock market, much of the government debt and many of our homes.

"At some point, the dollar will have to fall significantly to bring the deficit down to a sustainable level. When this happens, the resulting rise in import prices will contribute to a rise in the inflation rate and a deterioration in domestic living standards. If the Federal Reserve Board raises interest rates to prevent an increase in the inflation rate, then the impact of the falling dollar will be especially painful, as higher unemployment, which accompanies higher interest rates, will be an inevitable result."

[brokensymmetry]

20. Yikes!

Great link, but not reassuring!

[aquart]

22. Is this the point when Republicans look for a rope?

They're the only ones who can take him down. Are they scared enough yet?