Crash the U.S. Treasury = Cash to Billionaires

[divvy]

The real problem with quantitative easing is that it was designed to lower interest rates. This reduces the return that large corporations and rich folks see on their fixed income investments. The GOP-Teavangelical solution? Crash the U.S. Treasury. This will force Treasury yields higher and increase the income of the wealthiest among us.

You and I? Well not so much. We will have to pay higher interest rates to subsidize this massive transfer of wealth. State governments will have to pay more for the money they borrow. This leads to higher taxes on all of us except for the most wealthy. It also leads to fewer government services for the most needy among us.

No matter how you cut it, the GOP is gutting America and throwing the choicest cuts to their constituency. They are "Taking Back America" all right. They are taking us back to the bad-old-days of the 1800's when the wealthiest lived their lives with impunity.

I am angry that we have NOBODY willing to speak clearly and forcefully about this republican charade. Cantor is on the news almost every night stating his position. The Democratic Party is AWOL. My contributions to our party are AWOL.

I need to see some more spine from our leaders. I need to hear more clear speech. I need to see more involvement in real issues like the labor dispute in Wisconsin. I need to see positive action for our public schools. The "multi-dimensional chess argument is a lie.

[unblock]

1. ok that works for future borrowing, but what about present borrowing?

the value of virtually all debt would plummet. any holder of treasuries, or any debt that is directly or indirectly keyed off of treasuries (which is to say, virtually all debt, period) would lose tremendous value instantly.

so, think of all those gold speculators driving up gold prices. well, most of them buy futures and post a small margin in the form of treasuries. a default on treasuries means they need to pony up more money or sell their gold futures immediately. so the price of gold would crash as well.

this same story is replayed for many other assets.

billionaires would lose a HUEUEUEUGE amount of money very quickly.

yeah, they can save later at a higher interest rate, but NO WAY they'd be happy losing so much so quickly first.

[checks-n-balances]

3. Agreed, though the tragedy is that some billionaires

(or wanna-be billionaires) are so drunk with greed, power, and ambition to be willing to make insanely risky moves. The bubble in which they exist doesn't include people with consciences calling them on their bullshit or warning them of the dangers...in essence, some of them are probably surrounded by "yes-men."

[divvy]

4. The NAV of a bond fund will crash ..... buy more

You will get the benifit of the increased yield on every share you buy.

[unblock]

7. then why don't rich people love inflation?

this is all just seriously incorrect.

rich people love low borrowing costs, not high, and certainly not artificially engineered high borrowing costs.

[divvy]

8. Inflation? What are you referring to?

Inflation is more about the velocity of money than it is about prices. Especially interest rates. The Fed might raise the overnight rate to cool an overheated economy but this is miles from what we are talking about here.

Maybe you don't understand how the capital markets work. Would you rather loan 100k to Bill Gates, or to a person who has been broke and unemployed for 2 years? Obviously the unemployed person is a bigger credit risk so he will have to a higher interest rate to borrow the money. Bill Gates on the other hand, will ALWAYS pay far less for a loan than you or I will. Risky corporates always pay more than safer corporates do also.

Try calling your local credit union. Ask what the loan rate is for a "shared secured loan" Tell them you will buy a CD of equal maturity and value as the loan. You will find that you will be able to borrow for 1% to 2% above the CD rate. Now imagine you had several hundred million with an institution .......

Sorry, but your arguments here are seriously flawed. Did you miss the 12% 30 year Treasury bonds of the 1980's? Sorry about your luck.

Hey wait, you might just get another opportunity !

[unblock]

10. my point is that rich people don't like high interest rates.

yes, you can gain in just about any market, but lower interest rates give rich people many more profitable things to do with their money.

with higher interest rates, the better plays are to buy and hold debt. not very exciting for rich people.
with lower interest rates, the better plays are to borrow cheap and invest in any of a large number of things; with big leverage there is risk but the reward can be huge. this is the environment rich people prefer.

they also like having a "risk-free" treasury market available to run away from any scary market moves, or to serve as a hedge for other investments. many, MANY financial investments in the capital markets depend on the notion of treasuries being "risk-free".

should treasuries turn out to have real risks, as indicated by an actual default, then much of what the capital markets have created is destroyed or at least seriously re-evaluated. this would be terrible for all, and terrible for rich people as well.

[Atman]

2. The Democratic Party in not AWOL -- the media is totally controlled by the GOP

The Dems are out there every night, but they don't get the air time. Remember the Bush anti war protests? We have no control over the message the GOP wants to push on the American people.

[divvy]

5. I think the President could get as much air time as he wanted.

I do think that the GOP controls the media, but I still feel that our leadership has been LAME in getting our message out.

[Atman]

6. He has no good message to get out, and he knows it.

He's not going to win many points going on TV every night and talking about his latest capitulation to the Republicans.

[divvy]

9. I would agree with that ....

however, I would hope he would somehow find a spine and fight the bastards.

[JohnnyRingo]

11. Wealth doesn't evaporate.

When someone loses money, someone else gains it.