How the Treasury Bubble Will Burst and Why

[slamminshaun]

I saw some talk on here a while ago about "what do you think the next bubble to burst will be". I tend to agree with the author of the following article, the next shoe to drop will be in Treasurys. Here's what it means...

http://seekingalpha.com/article/1152...y?source=yahoo

[Fox McCloud]

interesting, but I still think that this "deflationary" theory is only temporary, and once several events come to pass, it'll quickly turn into an inflationary period, once again.

[jy006m]

So it will burst no matter what? Also interesting that it's saying gold is a better investment than other commodities like silver. I was hoping to read about what triggers it though so I know when to buy the TBT.

[theoakman]

the treasury bubble will burst because they've never paid off a tbill without selling another one to pay for it. It's a classic ponzi scheme, and they are running out of people to buy them. The only way to make good on those promises once they have no more t-bills to sell is to print the money to make good on their promise. So, either 1. they default or 2. they print the money and make good on their promise.

No one can tell you when to buy TBT because no one really knows.

[jclay2]

the treasury bubble will burst because they've never paid off a tbill without selling another one to pay for it. It's a classic ponzi scheme, and they are running out of people to buy them. The only way to make good on those promises once they have no more t-bills to sell is to print the money to make good on their promise. So, either 1. they default or 2. they print the money and make good on their promise.

No one can tell you when to buy TBT because no one really knows.

Exactly once people realize this is a complete ponzi scheme, they will slowly and then rapidly run for the exits. For the last 40 years our government has paid off their debt with more debt. It is mathematically impossible to continue this way. Whats worse is that there is a huge looming cloud of entitlements and bailouts valued in tens of trillions of dollars that you know our politicians won't help but "attempt" to pay for. Judgment day and currency devaluation will come, however, you can at least know that the road to get there will be much rising interest rates as more and more people realize our inability to pay back debt.

[jy006m]

I'm really worried about my asian stocks now then. If treasuries collapse, the U.S. Economy is done, and in turn the World Economy is going to get dragged down with it. Then Peter Schiff may be wrong on this one. Does anyone else agree I should get out of asian stocks now?

[jonahtrainer]

interesting, but I still think that this "deflationary" theory is only temporary, and once several events come to pass, it'll quickly turn into an inflationary period, once again.

Hyperinflation is the last layer of the liquidity pyramid to evaporate in the deflationary credit contraction as capital burrows down the liquidity pyramid.

From the article:

Eventually it [fiat currency and fractional reserve banking] will be replaced by a commodity currency with 100% reserves and no counter-party risk.

[jy006m]

Hmm, although if deflation continues and accelerates, wouldn't T-Bills be viewed as being profitable? If that's the case, the bubble might not burst for years if this is going to be the 1930's all over again.

[hugolp]

I'm really worried about my asian stocks now then. If treasuries collapse, the U.S. Economy is done, and in turn the World Economy is going to get dragged down with it. Then Peter Schiff may be wrong on this one. Does anyone else agree I should get out of asian stocks now?

http://mises.org/story/3293

[eric_cartman]

i think it will burst when the Arab countries have to sell their treasuries to fund their socialistic economies because their oil revenues have dried up. So the low oil price will cause the Arabs to sell treasuries instead of buying them like they have been for decades. and the Arabs will be selling at a time when the US government is trying to sell more than ever before at a time when no one is buying. The US dollar will be falling in value, and then interest rates will rise. The Fed may then step in and keep interest rates low by printing money and buying the debt themselves. so therefore, rates will not go up very high, but the dollar will sink in value and T-Bills become worthless. The Fed will be the only one buying these things and their value will be worthless. However, for those betting on higher interest rates, the Fed will probably screw you and keep interest rates low, so shorting the long bonds probably will not be as profitable as people think and buying gold will probably provide great profits in my opinion.

[jy006m]

http://mises.org/story/3293

Well, I know long-term, China will do better than the U.S., but I'm talking about the next year or so, where there is a good chance the treasury bond market collapses which would send a ripple effect throughout the rest of the world. By getting out of Asian stocks, I mean sitting on the sidelines for now and getting back in after the treasury market collapses so I can get an even better price for the stocks.

[icon124]

Exactly once people realize this is a complete ponzi scheme, they will slowly and then rapidly run for the exits. For the last 40 years our government has paid off their debt with more debt. It is mathematically impossible to continue this way. Whats worse is that there is a huge looming cloud of entitlements and bailouts valued in tens of trillions of dollars that you know our politicians won't help but "attempt" to pay for. Judgment day and currency devaluation will come, however, you can at least know that the road to get there will be much rising interest rates as more and more people realize our inability to pay back debt.

Um I'm pretty sure most of the entire world realizes this is a ponzi scheme...but I still haven't seen anyone run the other way.