Colin J. Smith » U.S. Treasuries

What is Quantitiative Easing?

Colin Smith — Sun, 14 Nov 2010 09:41:11 +0000

A friend of mine posted this on his Facebook page earlier today and I’m sharing it here. Pretty funny stuff.

Jim Grant on U.S. Treasury Bonds

Colin Smith — Sat, 03 Apr 2010 03:01:44 +0000

U.S. Dollar worries…

Colin Smith — Tue, 06 Oct 2009 07:20:35 +0000

I had an interesting chat with a guy a couple days ago on the state of the economy and I came away from our discussion with a lot to think about. I won’t name my friend personally, but I will say that he is an independent currency trader with a respectable amount of capital at work. In a discussion that began by kicking around ideas about what the housing market will do over the next year or so, he made the following predictions:

The U.S. dollar is positioned to decline substantially over the next year. The fundamentals driving this trend are the U.S. governments continued “quantitative easing,” or money printing.
The U.S., like other countries earlier in history, is operating under a ‘fiat’ currency regime, with nothing to back up its actual value. No Gold standard, etc.
Unemployment will not recover in 2010. Rather, it will flatline in the ‘jobless recovery’ that has become the conventional wisdom or “new normal” among many observers.
Countries like China that hold enormous U.S Treasury reserves are desperate to unload their holdings, or at least, minimize their exposure to their existing dollar holdings.
The sustained rally in gold will hold in the short term, while the likelihood of a massive rally in sync with a sharp and sustained decline in the U.S dollar is in the cards for the long term. (More Here)

While these bearish calls have been heard before, and the recent rally has confounded many of those who have foreseen doom and gloom, the fundamentals make sense to me. The U.S. government is printing huge amounts of money. According to economics, such a drastic increase in the money supply will result in inflation and a loss of value for the dollar. Moreover, the Chinese, Japanese and Gulf States are not idiots and will not continue to buy U.S Treasuries.

Going forward, assets like precious metals and commodities seem to be the best options for investors because “the fundamentals are unimpaired,” as Jim Rogers likes to say.The fundamentals of the U.S. Dollar and even the U.S. government are impaired, just like AIG and Citigroup.

At this point, it is important to take appropriate measures in a timely fashion.

How much debt is too much debt for the United States?

Colin Smith — Fri, 31 Jul 2009 06:59:46 +0000

This is a great story from today’s WSJ on current US Treasury auctions and the the worry associated with the U.S. being cut off from the hand that feeds our profligate spending: China. Apparently recent debt issues at the U.S Treasury have gone alright, but as this story describes, Chinese buyers are showing signs that they may be growing weary of our fiscal irresponsibility. And who can blame them? I don’t. I wouldn’t invest in Treasury bills right now.

I think it is becoming clear that the U.S requires debt financing to function; it is structurally integral to how our country is now managed. Not a very good thing.

I am somewhat worried about this. Spending other people’s money won’t go on forever and the day will come when the Chinese fail to show up. U.S. Treasuries will fail at auction for the first time in our nation’s history.

Borrowed time and borrowed money….