Tuesday, September 11, 2012

Helicopter Ben to the rescue.....

Well the market is cock-a-hoop because our old friend Helicopter Ben might just announce that the FED is going to buy even MORE U.S. Treasuries with newly printed USDs. And boy are there are a lot of newly printed USDs around already. Printed by the FED, of course. And what does all that money printing actually achieve? Well in the first place it helps create the illusion that there are buyers out there for next year's wallpaper (aka U.S. Treasuries). Only there aren't.

The TIC data, the releases of which rarely get much of a mention these days in the pro-USD press, clearly show that new and willing buyers for ALL THOSE U.S. Treasuries have failed to show up. This is something of a problem when you have this massive ongoing need for finance and a shrinking tax base. All those wars, all that military.... somebody's got to pay for it.

So Ben rides to the rescue. Well sort of. But he's not rescuing the USD (which is tanking). Ben's job is to keep the U.S. Treasury market from imploding, which might just scare all those offshore holders of U.S. Treasuries. The U.S. might not be able to find any more willing buyers of U.S. Treasuries but they sure as hell don't want to see existing holders start selling. So Ben is helping. QE3 won't help the economy, or the U.S. job market but at least it might help maintain the status quo on the U.S. Treasury market. Ben is helping to keep up appearances. At some point there will be no point doing even that.

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