marvelous markets
TC5...@aol.com
I have no credentials to lend authority to my opinions. If you require
credentials to validate an opinion, read something else. I am simply
exercising my free speech rights. I observe a remarkable event occurring
in financial markets around the world, yet the experts seem to be missing
some obvious points worthy of consideration.
1) Notice that the federal debt of the USA is several trillion dollars.
For the sake of keeping this example simple, suppose that it is actually
five trillion, with a note to the side that the official debt is not the
full obligation of unfunded commitments. Let the experts argue over what
should be counted or excluded.
2) Notice that at 6.5 % interest on 30 years compounded annually the
payoff is 6.614 times the principal. Some other payoffs : 7.5% - 8.755x *
7.0 % - 7.612x * 6.5% - 6.614x * 6.0 - 5.743x * 5.5% - 4.984x * 5.0% -
4.322x I have never had to decide how to invest money, so I am not
familiar with the actual mechanism by which the government calculates and
pays interest on its major debt obligations. Perhaps the experts will
respond with a historical graph of the actual return on investment for
government securities held for ten years or longer as corrected for
actual rather than theoretical inflation. It would be interesting to all
concerned if there were any year during the past 60 in which the value of
the payoff exceeded the value of the principal sum at the date of loan.
Suppose that there was actually a plan to amortize the debt over the next
30 years - 5 trillion at 6 percent is 300 billion interest plus about 167
billion principal or about a half trillion per year diminishing for the
next thirty years. Compare this to the current budget and tax debates and
decide for yourself whether 167 billion allocated to principal is likely.
3) From 2) notice that a half percentage change in the 30 year interest
rate at 6.5 % (if applied to all debt) is more or less equal to the total
principal owed at this time. Then if the government actually intended to
start paying off the debt 30 years from now, a half percentage difference
in the rate saves the American taxpayers 5 trillion dollars over 30 years
- more or less. No doubt any government official who can save 5 trillion
dollars will be heard by those who decide debt policy....
4) A significant percentage of the federal debt is in short term notes.
The latest trick of high finance is to issue "inflation free" debt at
longer terms. If the buyer can be persuaded to purchase the note at all,
then the theory is that the buyer can be presumed stupid enough to be
persuaded to accept a lower interest rate since there is no inflation.
Guess who decides whether there is no inflation ? Right - the debtor does
ho ho ho ha ha ha hee-hee. Tell another better joke ? ok...
5) When the debt roll over rate exceeds (or will exceed) the rate at
which fools can be found to purchase debt, and the debtor has plundered
all sources of ready cash, what is a desperate debtor to do ? Someday the
debtor may have to monetize or repudiate the debt, but things are not yet
so desperate. The situation is a market dislocation with demand at price
less than supply at cost. The solution for this debtor is to manipulate
demand until it meets or exceeds supply. A business would try
advertising. A government can tweak a few economic indicators and
schedule press conferences to manipulate public opinion. For example by
making world stock markets appear volatile and risky through a 15 % drop
in stock indexes of a trillion or so dollars, the 30 year rate can be
dropped a percent or so for a 10 trillion dollar payback. Who could
resist the temptation to apply such a lever ? And the sad truth is that
people are so stupid that you can do it repeatedly and call it "market
corrections".
6) I quote a famous statement "You can fool all the people some of the
time, and some people all the time....."
7) In law it is necessary to produce evidence to support a claim
regarding intent. In physics it is only necessary to observe cause and
effect. If a cause reliably produces a given effect, then a working
hypothesis can be developed. Perhaps the experts will provide a reply
showing the correlation between major stock indexes and government
security interest rates over the past thirty years...
8) This is my first posting on the internet. I do not log on regularly. I
do not follow newsgroups. I probably will not respond to any followup
threads. I dumped this polemic onto this newsgroup because it seemed
appropriate. Feel free to criticize my sanity, judgement, or logic since
I lack the resources to sue you. I have no money at all, so do not bother
me with your offers of investment advice. I am not interested in
providing anyone else with investment advice. Why am I bothering to write
at all ? A few hours of watching "experts" on cable TV convinced me that
the greatest swindle in the history of mankind to date might not be
properly appreciated while all the evidence was at hand. Marvel as it
unfolds before your eyes ! Who can possibly imagine the amazement in
store for the experts and future viewers when the debt is monetized !!!
Sincerely, Lonnie C Clay - TC5...@aol.com I have no credentials to lend
authority to my opinions. If you require credentials to validate an
opinion, read something else. I am simply exercising my free speech
rights. I observe a remarkable event occurring in financial markets
around the world, yet the experts seem to be missing some obvious points
worthy of consideration.
1) Notice that the federal debt of the USA is several trillion dollars.
For the sake of keeping this example simple, suppose that it is actually
five triilion, with a note to the side that the official debt is not the
full obligation of unfunded commitments. Let the experts argue over what
should be counted or excluded.
2) Notice that at 6.5 % interest on 30 years compounded annually the
payoff is 6.614 times the principal. Some other payoffs : 7.5% - 8.755x *
7.0 % - 7.612x * 6.5% - 6.614x * 6.0 - 5.743x * 5.5% - 4.984x * 5.0% -
4.322x I have never had to decide how to invest money, so I am not
familiar with the actual mechanism by which the government calculates and
pays interest on its major debt obligations. Perhaps the experts will
respond with a historical graph of the actual return on investment for
government securities held for ten years or longer as corrected for
actual rather than theoretical inflation. It would be interesting to all
concerned if there were any year during the past 60 in which the value of
the payoff exceeded the value of the principal sum at the date of loan.
Suppose that there was actually a plan to amortize the debt over the next
30 years - 5 trillion at 6 percent is 300 billion interest plus about 167
billion principal or about a half trillion per year diminishing for the
next thirty years. Compare this to the current budget and tax debates and
decide for yourself whether 167 billion allocated to principal is likely.
3) From 2) notice that a half percentage change in the 30 year interest
rate at 6.5 % (if applied to all debt) is more or less equal to the total
principal owed at this time. Then if the government actually intended to
start paying off the debt 30 years from now, a half percentage difference
in the rate saves the American taxpayers 5 trillion dollars over 30 years
- more or less. No doubt any government official who can save 5 trillion
dollars will be heard by those who decide debt policy....
4) A significant percentage of the federal debt is in short term notes.
The latest trick of high finance is to issue "inflation free" debt at
longer terms. If the buyer can be persuaded to purchase the note at all,
then the theory is that the buyer can be presumed stupid enough to be
persuaded to accept a lower interest rate since there is no inflation.
Guess who decides whether there is no inflation ? Right - the debtor does
ho ho ho ha ha ha hee-hee. Tell another better joke ? ok...
5) When the debt rollover rate exceeds (or will exceed) the rate at which
fools can be found to purchase debt, and the debtor has plundered all
sources of ready cash, what is a desperate debtor to do ? Someday the
debtor may have to monetize or repudiate the debt, but things are not yet
so desperate. The situation is a market dislocation with demand at price
less than supply at cost. The solution for this debtor is to manipulate
demand until it meets or exceeds supply. A business would try
advertising. A government can tweak a few economic indicators and
schedule press conferences to manipulate public opinion. For example by
making world stock markets appear volatile and risky through a 15 % drop
in stock indexes of a trillion or so dollars, the 30 year rate can be
dropped a percent or so for a 10 trillion dollar payback. Who could
resist the temptation to apply such a lever ? And the sad truth is that
people are so stupid that you can do it repeatedly and call it "market
corrections".
6) I quote a famous statement "You can fool all the people some of the
time, and some people all the time....."
7) In law it is necessary to produce evidence to support a claim
regarding intent. In physics it is only necessary to observe cause and
effect. If a cause reliably produces a given effect, then a working
hypothesis can be developed. Perhaps the experts will provide a reply
showing the correlation between major stock indexes and government
security interest rates over the past thirty years...
8) This is my first posting on the internet. I do not log on regularly. I
do not follow newsgroups. I probably will not respond to any followup
threads. I dumped this polemic onto this newsgroup because it seemed
appropriate. Feel free to criticize my sanity, judgment, or logic since I
lack the resources to sue you. I have no money at all, so do not bother
me with your offers of investment advice. I am not interested in
providing anyone else with investment advice. Why am I bothering to write
at all ? A few hours of watching "experts" on cable TV convinced me that
the greatest swindle in the history of mankind to date might not be
properly appreciated while all the evidence was at hand. Marvel as it
unfolds before your eyes ! Who can possibly imagine the amazement in
store for the experts and future viewers when the debt is monetized !!!
Sincerely, Lonnie C Clay - TC5...@aol.com
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