Tuesday, February 21, 2017

A Wild and Crazy Idea

Do you ever wonder why the dollar didn't hit new highs after the Fed tightened in December? In fact, now, it looks like it will retrace back to 96? The fundamentals haven't been this strong for the dollar in decades, so why?
Here is a list of countries and what they pay for a 10-Year Note, and how I feel about the return.
* Germany, world export power= .30% Get real!
* Switzerland, old world leader in gold and today? Negative fiat= .18% See above.
* UK, London finance center= 1.21% Like in 10 years, there will be less than 2%, inflation&Brexit!?
* France, election blues approaching= 1.03% See UK and Brexit above.
* Italy, banks ready to implode= 2.17% Won't even be in EU in 10 years.
* Greece, basket case= 7.58% Do you know 100% of nothing yields? Same as this note.
* Japan, 3rd largest economy= .08% If that's so, how come Japanese cars cost more than this yield per year in price increases? You would be better off with a Greece note and that is simply crazy.
* India, rising economic power, uses more oil than China= 6.85% Great, but lose it back on currency exchange and Modi wants to get rid of cash, period!!!
* Australia, nice, safe country= 2.80% Best in Show!
US= 2.41%
You get the world currency in a safe, secure nation. You could also get currency appreciation if Fed comes through with the three proposed rate hikes which would make it the new crown winner for Best in Show!
What about the US debt and other factors?
This is the thorn in the side of the fundamentals. At present, the world holds $5.94T or 43% of all US government debt. In addition to the notes, there are other bills like Medicare and Social Security which is pushing US debt to $20T or 100% of GDP. Big, big issue with no resolution on hand, but then again, this is about a wild and crazy idea. Japan holds the most debt and China holds $1T, however both of these buyers are buying less as the debt market is down from 50% by 7%. Then, there is the danger of Saudi Arabia and the Petro-dollar. Every transaction in oil must be in US dollars. The Saudi's use this as leverage in our foreign policy. Do as we like or we will find another currency in the oil trade. Big problem, especially with the new Trump administration and a possible policy change?
Some people believe something is in the works about the dollar, but it hasn't hit the fan yet. World debt buyers of US debt are worried about Trump's plans for our trade imbalances. They will try to use their holdings as leverage against us. I say...
Bring It On!!!
That's right. Sell all your holdings and our Fed will buy them all with fiat money. Your money is worthless fiat currency and we will give you ours. Now, we will be free from all world threats to our economy and policy. Then, to be totally free and clear, we have Congress null and void the Fed because of all the mistakes and corruption that they are responsible. FREE and CLEAR!  NO DEBT! We can return to the gold standard like our Founding Fathers directed us. Yea, Baby!
Dear reader, there you have it.