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Senior Contributor

Re: A Good Day For Grains

That coin idea was stupid, creative accounting that no investors ever would stand for. I don't think they will come out and declare default. They'll have a few failed Treasury auctions, the Fed will wind up buying the lion's share of what is offered, the market will get the hint and crash, and the Fed will buy in 5-10 trillion securities when the price is 30% of face value. This way they will have plausible deniability as they will try to hide the entire operation by having the dealers buy for the Fed secretly. 

 

But at some point the word will get out, and then the US will have to wait a long time before it will be able to borrow another cent. In the meanwhile, the damage it will do to financial markets and holders of Treasury securities will be devastating. Banks, insurance companies, the Social Security administration. I would not be surprised if Treasury has not had a very secret task force of bureaucrats working on the details of this game plan for a very long time, because the bureaucrats know that this will be the final act some day and they need to be ready on how to play the hand.

 

I just hope I am short the day it all starts, it will be a career trade.

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Senior Contributor

Re: A Good Day For Grains

Dude, Treasury 30 year bonds are still at 3%...when the "it" finally starts, you will go from 3% to 10% in like three weeks. There are still too many market players willing to invest in the US debt, and that has to dry up in a hurry for the final plunge to begin. In fact you still could have a monster rally in Treasuries when the next recession starts that could take you back to the low 2% area, a final blow off top in prices, befire the collapse hits. 

 

Patience is a virtue in something like this, because it will be unmistake-able when it occurs, you won't have to read tea leaves or search for it.

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