Peter Schiff (Inflation) Debates Harry Dent (Deflation)

[Zippyjuan]

It doesn't mattet how cool the chart is if it's that obviously misleading.
If you only consider health insurance premiums subtracted from gross pay where employees get full coverage benefits, it might be correct. If you add in the employer contribution then it's closer to the housing figure.

If you add the employer paid share to your income figure, it is offset.

 

[openfire]

And you think Europe or Japan is better?

Like I said... I agree with everything Peter says but the bottom line is until China or Russia or the BRICS or whomevers offer the world a more stable currency the dollar is still king. All of the unsustainable debt issues in America don't matter so long as the rest of the world's are worse.

This is why Austrians cannot time the collapse because what they are predicting is the day the world wakes up and stops using the dollar. When is that going to happen?

It has already started...

 

[Zippyjuan]

Between January 2015 and January 2016, foreign holdings of US debt have gone from $6.218 trillion to $6.183 trillion- a decline of $35 billion or 0.6%. Major sell-off? http://ticdata.treasury.gov/Publish/mfh.txt

Yet somehow your chart claims $225 billion sold over that time- but noting that it says "central banks"- my list is "foreign holdings", include banks and other financial institutions so other foreign institutions are buying what the central banks are selling.

http://money.cnn.com/2016/02/17/news/economy/china-us-debt-dump-central-banks/

Foreign governments sold more U.S. Treasuries than they bought in 11 out of 12 months last year, according to Treasury data.

The U.S. debt dump is a sign of two things:
1. How aggressive central banks are acting to keep their economy afloat amid global weakness.
2. After years of building up savings -- the so-called "global savings glut" -- countries are starting to sell off their reserves.

A weak currency often reflects a slowing or shrinking economy. For instance, Russia and Brazil are both in recession and their currencies have collapsed in value.

Both these countries along with many developing countries depend on commodities like oil, metals and food, to power their growth. Commodity prices -- especially oil prices -- tanked last year and have continued to do so in 2016.

When commodities plunge, currencies tend to follow suit. And when currencies rapidly decline, cash tends to flow out of a country and into safer havens. So central banks have tried to prevent massive capital outflows by easing their currency collapse.

China spent $500 billion last year just to prop up its currency, the yuan. Despite all its spending, China's total holdings -- by public institutions and private investors -- of U.S. Treasury debt is up a bit from a year ago.

That's also true for the majority of countries: total foreign holdings increased in December compared to a year ago. So even though central banks are dumping U.S. debt, there's plenty of demand for it from private investors.

 

[openfire]

Between January 2015 and January 2016, foreign holdings of US debt have gone from $6.218 trillion to $6.183 trillion- a decline of $35 billion or 0.6%. Major sell-off? http://ticdata.treasury.gov/Publish/mfh.txt

Yet somehow your chart claims $225 billion sold over that time- but noting that it says "central banks"- my list is "foreign holdings", include banks and other financial institutions so other foreign institutions are buying what the central banks are selling.

http://money.cnn.com/2016/02/17/news/economy/china-us-debt-dump-central-banks/

Or maybe the Fed itself is the buyer?

 

[Zippyjuan]

The Fed quite buying Treasuries in October 2014 (they do continue to roll over the ones they do have as they mature). Also they do not count as a "Foreign Holder of US Debt".

According to their latest Balance Sheet report their holdings increased by $1.7 billion over the last year (interest from maturing bonds being the reason for that increase)- last weekend in March being the period measured.

 

[openfire]

The Fed quite buying Treasuries in October 2014 (they do continue to roll over the ones they do have as they mature). Also they do not count as a "Foreign Holder of US Debt".

Through foreign proxies. When China dumped US Treasuries, who soaked them up and why didn't yields rise?

 

[Zippyjuan]

When did China dump Treasuries and how many did they sell?

 

[openfire]

China Officially Sold A Quarter Trillion Treasurys In The Past Year (Unofficially Much More)

 

[Zippyjuan]

Belgium saw a large increase in US Treasury Holdings because of new capital requirements in Europe following the recession. Belgium is a financial center for Europe and "Foreign holdings" include all owners- including banks, financial institutions, and Central Banks. In this case, loans were required to have higher grade collateral to be approved and many started using US Treasuries for that purpose. Treasuries held in escrow for loans count as US Treasuries held in Belgium.

A further explanation for the rise of Belgium as a big Treasury holder is financial reform that requires the greater use of top-rated government debt as collateral for derivatives trades.

Euroclear, which holds more than €22tn in assets under custody, confirmed that the volume of US Treasuries it holds had “gone up dramatically” in recent months.

Traders say Euroclear is renowned for its sophisticated collateral management system, which helps global investors move bonds to various clearing houses around the world.

US Treasury paper is the largest and most liquid of “safe” collateral used to backstop the financial system. Indeed, since the financial crisis, the amount of outstanding US Treasury debt has nearly tripled to $12tn, creating a vast pool of collateral for the global financial system.

http://www.ft.com/intl/cms/s/0/a1de1546-c489-11e3-b2fb-00144feabdc0.html#axzz44tBgGehh

A quarter of a $trillion would be almost one fifth of their holdings. The article is from October, 2015. In January, 2015 China had $1.239 trillion in US treasuries. By January of 2016, that was $1.238 trillion. http://ticdata.treasury.gov/Publish/mfh.txt

But as noted, the Foreign Holders includes central banks plus private investors and banks. The Chinese central bank did sell Treasuries but others in China were buying. That is why the China "foreign holdings" was little changed.

 

[openfire]

Headline says they sold a quarter $trillion in Treasuries but the article says their foreign exchange holdings changed by that. ForEx holdings include many things including Treasuries and even other foreign currency holdings. I don't see any dates when this supposedly happened so I can't check the figures.

Belgium saw a large increase in US Treasury Holdings because of new capital requirements in Europe following the recession. Belgium is a financial center for Europe and "Foreign holdings" include all owners- including banks, financial institutions, and Central Banks. In this case, loans were required to have higher grade collateral to be approved and many started using US Treasuries for that purpose.



http://www.ft.com/intl/cms/s/0/a1de1546-c489-11e3-b2fb-00144feabdc0.html#axzz44tBgGehh

A quarter of a $trillion would be almost one fourth of their holdings. That did not happen.

You need to look at China + Belgium:

But the real surprise emerges when stacking the monthly Chinese and Belgian holdings on top of each other. One gets the following chart, which in itself is hardly shocking...

... but becomes so when one also overlays China's offically reported monthly Forex reserves on top of the consolidated China+Belgium treasury holdings. Here one can easily see that indeed Belgium was nothing but an "anonymous" front for Chinese Treasury buying...

Revealing The Identity Of The Mystery "Belgian" Buyer Of US Treasurys

 

[groverblue]

Harry Dent is right. Mike Maloney does a great job of covering the deflation cycle. Here are a few videos that everyone should watch.

 

[openfire]

^ The Fed will combat deflation with $ printing. That's what Dent doesn't get. He compares this situation to the deflation of the 30's, but what he ignores is that the US money supply was legally constrained by the gold standard at that time, whereas now, the Fed can - and will - print to oblivion if necessary to prevent deflation from imploding the system. QE to infinity, negative interest rates, helicopter money, or any combination thereof will be implemented, all of which are inflationary.

 

[groverblue]

^ The Fed will combat deflation with $ printing. That's what Dent doesn't get. He compares this situation to the deflation of the 30's, but what he ignores is that the US money supply was legally constrained by the gold standard at that time, whereas now, the Fed can - and will - print to oblivion if necessary to prevent deflation from imploding the system. QE to infinity, negative interest rates, helicopter money, or any combination thereof will be implemented, all of which are inflationary.

The reason deflation will be "allowed" is because the dollar will experience short-term strength, which will temporarily prevent the Fed from printing. The lack of access to dollars will create a credit crunch, and deflation will be well underway (people will be forced to pay down debt) when the dollar starts to loose ground to gold/silver. Then inflation will send PMs soaring. That's how I understand it.