I would like to add two data points to that fine report.
1. If you guys have not yet looked into Tether, or USDT as they refer to it, then I suggest you do a little research. Someone, somewhere has decided that a "Tether" is equal to one dollar. You know who accepts "Tether" dollars for dollars? The US Treasury market. Right now, Tether has $140 billion in treasuries on their books. But who controls the "printing" of Tether? Who controls the spending of Tether? Somebody, somewhere that is not controlled or regulated by any elected official. Howard Lutnick is on the board of Tether, and was the CEO of the largest US bond dealer in the world, Cantor Fitzgerald. No conflict of interest there, right? The ultimate point being, if Tether is recognized as a one for one with the dollar, then essentially Tether is another digital dollar printing press.....that is outside the purview of any oversight or regulation.....and they are being used to help prop up the treasury market.
2. The Cayman Islands is the largest single holder of US debt in the world. I have often said that if I were the Fed, I would open shell corporations around the world, funnel dollars into the back door, and use that money to buy treasuries. Well, the Cayman Islands have become a "hedge fund" mecca.....and guess what they are buying? Treasuries to the tune of $1.8 trillion. And then we get that nifty headline about how "Foreign Buyers were major purchasers of the current US Treasury offering today." How foreign? Just "foreign" enough to be called "foreign." Just enough so that the narrative holds.
The world doesn't have to completely stop buying Treasuries to bring the pain. Any..ANY...reduction in bond purchases is painful at this point. The US must borrow more this year than it borrowed last year. And this trend will continue until it collapses. So any reduction in REAL buyers is a problem. Every time we have to buy our own debt, we throw gasoline on the inflation fire.
This only gets worse from here......there is no fixing this.
Before WWII, Britain was the big financial power and had been for a long time. Then it became the US. I think we're going to see a similar dynamic play out over the next generation or two. Just as Britain didn't disappear or become financially irrelevant, neither will the US. However, the days of it being the only game in town are over and it will have to share the stage and compete with others. This is actually a good thing for the global economy but a bad thing for those who took their position of unquestioned power for granted.
China is an obvious one to step up but I feel it will be more than China. I think you'll see more financial power from India and the Middle East and more trade blocs forming among the middle powers trying to side step US and China.
If the US has to fund its own bond market issuance, helped out by stable coins and more QE, does the US consumer also have to save more, effectively into Treasuries ? thereby further weakening consumption and resulting in a recession, which is coming anyway ?
I would like to add two data points to that fine report.
1. If you guys have not yet looked into Tether, or USDT as they refer to it, then I suggest you do a little research. Someone, somewhere has decided that a "Tether" is equal to one dollar. You know who accepts "Tether" dollars for dollars? The US Treasury market. Right now, Tether has $140 billion in treasuries on their books. But who controls the "printing" of Tether? Who controls the spending of Tether? Somebody, somewhere that is not controlled or regulated by any elected official. Howard Lutnick is on the board of Tether, and was the CEO of the largest US bond dealer in the world, Cantor Fitzgerald. No conflict of interest there, right? The ultimate point being, if Tether is recognized as a one for one with the dollar, then essentially Tether is another digital dollar printing press.....that is outside the purview of any oversight or regulation.....and they are being used to help prop up the treasury market.
2. The Cayman Islands is the largest single holder of US debt in the world. I have often said that if I were the Fed, I would open shell corporations around the world, funnel dollars into the back door, and use that money to buy treasuries. Well, the Cayman Islands have become a "hedge fund" mecca.....and guess what they are buying? Treasuries to the tune of $1.8 trillion. And then we get that nifty headline about how "Foreign Buyers were major purchasers of the current US Treasury offering today." How foreign? Just "foreign" enough to be called "foreign." Just enough so that the narrative holds.
The world doesn't have to completely stop buying Treasuries to bring the pain. Any..ANY...reduction in bond purchases is painful at this point. The US must borrow more this year than it borrowed last year. And this trend will continue until it collapses. So any reduction in REAL buyers is a problem. Every time we have to buy our own debt, we throw gasoline on the inflation fire.
This only gets worse from here......there is no fixing this.
This would be why they just invented a whole new treasury buyer out of thin air with the stable coin issuers.
Currently Tether alone holds the equivalent of 1,350 Denmarks.
Thank You for the good work on the article as always
"Second, Europe is moving into a higher-defense-spending era"
To fight a foe of their creation.
For decades, many administrations kicked the can down the road.....and here we are.
Who will get stuck with the tab? Take a guess....
Before WWII, Britain was the big financial power and had been for a long time. Then it became the US. I think we're going to see a similar dynamic play out over the next generation or two. Just as Britain didn't disappear or become financially irrelevant, neither will the US. However, the days of it being the only game in town are over and it will have to share the stage and compete with others. This is actually a good thing for the global economy but a bad thing for those who took their position of unquestioned power for granted.
China is an obvious one to step up but I feel it will be more than China. I think you'll see more financial power from India and the Middle East and more trade blocs forming among the middle powers trying to side step US and China.
Peter Schiff never disappoints!
If the US has to fund its own bond market issuance, helped out by stable coins and more QE, does the US consumer also have to save more, effectively into Treasuries ? thereby further weakening consumption and resulting in a recession, which is coming anyway ?