Saturday, August 08, 2009

Inflation Ahead?

The Market Ticker has a very interesting report. From August 6th.

Remember the Dallas Fed's Fisher saying that "The Fed will not become the handmaiden of Treasury"?

He was lying (The Fed already has), and now there is proof.

Mad props to both Zerohedge and Chris Martenson for noticing this; I missed the facts buried in the CUSIP list.

The upshot: The Fed bought nearly half of LAST WEEK'S 7 year Treasury Issuance TODAY.

Huh? Remember, after the 5 year auction that went badly (and which I wrote about) the 7yr auction went "well." Rick Santelli (and a lot of other people) agreed - demand was strong. That made no sense to me at the time, coming one day after a near-failure in the 5 year.

Well now we know what happened: The Fed pretty clearly pre-arranged, either explicitly or by "suggestion", that the Primary Dealers take up the auction with the promise that The Fed would immediately monetize half what the Primary Dealer's took!

Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!

If you think the economy and credit markets are "on the mend" why would The Fed do something like this? It would not be necessary unless The Fed was told (by those very same Primary Dealers) that they were going to be unable or unwilling to take down any more Treasury Debt.

Folks, let me be clear: The United States HAS OFFICIALLY HIT THE TREASURY DEBT WALL and The Fed and Treasury are engaged in subterfuge and conspiracy in an attempt to hide this from the market.
What this means is that the dollar's value is much less than what it was last week. If it is true. Or to put it another way. The government in the last 6 months has stolen a nice fraction of your money. As of today you are broke and don't know it.

There are two ways to protect yourself. Buy hard assets or go into debt.

It may very well be Wiemar Republic time. And you know what follows that.

Cross Posted at Classical Values


simentt said...

Hard assets;
Tinned foods,
and gold.

Something to consume, something with which to protect yourself and something to with which to conduct trade once the economy eventually gets going again.

You may want to hang on to a few bill-bundles as well, as they per roll may end up cheaper than same-quality toilet paper.

On a more serious note, is there a schedule posted for the upcoming treasury issuance auctions?


Neil said...
This comment has been removed by the author.
Neil said...

Remember the saying; don't fight the Fed. The economy is still in deflationary mode, and probably will be for the next two years. That means that the Fed has a lot of leeway to pull these kinds of stunts without causing inflation.

It's what happens when it stops working that gets scary.