Connect the dots and be glad you prepped for Y2K. : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Just a hunch but scenario appears to be as follows: 1. FED raises rates to fight inflation.

2. Japan dumps US Treasuries due to higher rate and liklihood of further erosion of value in future. Japan unveils plans to issue US Trillions of dollars of Japanes Yen based debt replacing IMHO the US T-Bill holdings of Japanese households.

3. US Treasury is buyer of long bond to avert collapse of US debt market and dollar. Had Japan dumped US bonds and no one purchased them the bond would have fallen and interest rates for future US financing would go thru the roof.

4. This is still inflationary as the rapidity of action surprised the major players and they were caught in the wrong position with the investment strategies.

5. The effect is now the US treasury has monetized our debt by replacing the longbonds with greenbacks which reduces the value of the dollar and lead to INFLATION.

Anyone want to sell their Y2K gold or silver?

-- Bill P (, February 03, 2000


So what's the Wall Street scenario tomorrow? More furious selling of bonds?

-- dinosaur (, February 03, 2000.

Actually I think it is the Japanese that will be selling and the US treasury is the only player with deep enough pockets to buy bonds in the quantites being dumped by Japan.

This is inflationary and may help propel but may also be bad for inflation and rate sensitive stocks - utilities down is likely.

One thing for sure - this is a sea change in the marketplace and a shuffle and redeal of new cards to all the players.

Gold UP. Euro up. Dollar down.

Maybe - then maybe not. Expect VOLATILITY to increase.

BTW I am out of the stock mkt at this time.

-- Bill P (, February 03, 2000.

Alan Greenspan's bio shows that he may have been surprised by US Treasury swift move in the bond market. Note he is a Republican and avowed anti-inflation hawk. So it appears out of character for him to endorse the Clinton/Gore/Summers action in bonds today.

Greenspan reappointed to FED Chairmanship

Fair use for Educational and Research Purposes

Thursday February 3, 8:42 pm Eastern Time NEWSMAKER-Greenspan a deft manager of U.S. economy WASHINGTON, Feb 3 (Reuters) - Alan Greenspan has seen it all since becoming chairman of the Federal Reserve Board in 1987, with the economy going from boom to bust and entering the record books this month as the longest expansion in history.

The quiet-spoken and owlish-looking central banker has achieved a near-invincible aura reflected in the acclaim which accompanied the U.S. Senate's vote on Thursday to confirm him for a fourth four-year term as Fed chief.

``As long as there are people like Alan Greenspan who are willing to serve, I think America is in good shape,'' Senate Banking Committee Chairman Phil Gramm said.

The job, demanding as it is, clearly still holds zest for Greenspan, who will be 74 in March. The position is frequently referred to as the second most powerful job in the world and Greenspan relishes it.

``It's been an extraordinary challenge,'' he commented at a White House ceremony last month. ``Hypotheses matter, actions matter and the ideas you come up with matter,'' he said.

Greenspan has won plaudits not only from global financial markets for his skills managing the world's largest economy, but also from Washington's power politicians.

His confirmation came as the U.S. economy entered a record 107 months of steady growth in February -- the longest period in U.S. history -- since the last recession ended in March 1991.

Greenspan became Fed chairman in August 1987, barely two months before the ``Black Monday'' crash of stock prices on Wall Street. His decision to quickly react by pumping money into the financial system was widely credited with helping avert panic and set a tone for his tenure.

With 12 years under his belt and another four-year term ahead, Greenspan will be one of the longest-serving Fed chiefs in history -- nominated by three presidents, Ronald Reagan, George Bush and President Bill Clinton.

He currently ranks No. 3 in tenure as Fed chairman, behind William McChesney Martin who served from April 1951 to early 1970 and Mariner Eccles from November 1934 to early 1948. If he serves out his term, Greenspan could become the second-longest serving Fed chairman.

During the last recession, from mid-1990 to March 1991, Greenspan calmly insisted that recovery was just around the corner and appeared reluctant to cut interest rates, to the dismay of many in Congress who accused him of moving too slowly to revive the economy.

It is in the period since recession ended, as the Fed balanced the central bank's twin goals of maximum employment and stable prices, that Greenspan truly won his reputation as a master central banker. U.S. unemployment currently is at a three-decade low of 4.1 percent and inflation is mute.


A long-time Republican, Greenspan developed a good working relationship with Clinton's Democratic administration, supporting its attempts to help solve Asia's financial crisis.

The Fed, which influences the economy through changes in short-term interest rates that can affect total demand, enjoys the most independence of any government agency. Its chairman is often portrayed as the second most powerful policymaker in the country after the president.

Under Greenspan, the Fed doubled interest rates between 1994 and 1995 in a bid to preempt inflation. Many economists have credited those moves with helping to set the stage for the currently healthy economic environment.

When economists began asking if the extraordinary conditions constituted a ``New Era'' in which the economy could grow faster than previously thought possible, Greenspan briefly appeared to toy with the idea, but quickly distanced himself from any notion he might have become soft on inflation.

Among other skills, Greenspan has mastered the art of sounding like a Delphic central banker and even wryly commented on it to a group of economists in June 1995.

``What I've learned at the Fed is a new language called 'Fed speak'. We learn to mumble with great incoherence,'' he said.

He can speak in such a roundabout way that the first two or three times he proposed marriage to prominent Washington television reporter Andrea Mitchell, she said she ``just didn't get it.'' The couple had been dating for 12 years before they married in April 1997, the second marriage for both.


An avowed anti-inflation hawk, Greenspan is a one-time follower of the late Ayn Rand, who espoused the supremacy of laissez-faire and the profit motive in several popular novels.

Greenspan was born in New York City on March 6, 1926. Music was his first love and the one-time jazz saxophonist studied at the Juilliard School in New York for two years and then briefly toured the country with a swing band before turning to economic studies at New York University.

He received his NYU bachelors degree in economics in 1948 and a masters degree two years later, but did not earn a doctorate until he became chairman of the Council of Economic Advisors under President Gerald Ford in 1974. NYU awarded the degree in 1977 without requiring a dissertation.

-- Bill P (, February 03, 2000.

You mentioned "a sea change in the marketplace" which reminded me of the DOW Titanic. Has this new current shifted the vessel closer to the iceberg?

I heard and read that Phil Gramm declared Greenspan to be the greatest central banker in the history of the world. Boasting. America has continued its longest running prosperity ever with consumer confidence at an all time high. More boasting. Record after record is being broken. Is there no end to the good times?

I believe we will soon witness a sudden truncation of prosperity, and no one will be laughing when the hard times come.

-- dinosaur (, February 03, 2000.

My God, this is a sobering thread. I was getting a little giddy with the heady mixture of politics and other OT's but tonight seems to be a party down sort of atmosphere. I hate to go academic on the campfire crew but I wonder if this isn't some sort of reaction to the stress of awaiting the death by a thousand cuts scenario (which does seem to be playing out as projected).There seems to be an atmosphere of attenuated anxiety. Thanks for your insights. And OT or not, I'm still not going to use air transport for a while and am following the board's economic postings very,very closely.By the way, since gold,silver and platinum aren't edible, is there a chance the bean and rice moguls will win in the end?

-- mike in houston (, February 03, 2000.

Fine. And let's not forget the announcement by China about 2 days ago, that they plan to unload their dollars in favor of Euros. Can you scream like your tit's in the wringer......???


-- Squirrel Hunter (nuts@upina.cellrelaytower), February 04, 2000.

Bill P,

Actually I think it is the Japanese that will be selling and the US treasury is the only player with deep enough pockets to buy bonds in the quantites being dumped by Japan.

Isn't this a good thing? Aren't we just buying back our debt early (like paying off your mortgage early)? -TECH32-

-- TECH32 (TECH32@NOMAIL.COM), February 04, 2000.

Bill....You stated earlier you're out of the stock market. This may be a dumb question and evident to everyone but me. Are the bond markets and short term treasuries as vulnerable to colapse

-- kevin (, February 04, 2000.


I suppose it would be a good thing paying off our debt if we used real assets instead of printing press dollars. By redeeming bonds for paper money the increase in paper money supply lowers the value of the already existing dollars in the money supply. Thisis inflationary. Our trading partners, notably OPEC, will not be pleased. Left unchecked, it could result in other currrencies such as the Euro gaining as the favored currecny for international trade. The Euro is backed in part by EU gold reservesd which is intended to give the Euro some stability in world markets. If the preferenmce for the Euro replaces the dollars many foreign holdings of dollars will flood the market just like the snowball rolling down the hill build into an avalanche.


It doesn't appear that the bond market or bond investors are going to see a collapse. Rather it appears that the investment banks that are positioned against rising inflation and that have shorted gold are being squeezed. Bonds will continue to pay interest as long as the bond issuer does not default. Rising inflation may result in future interest rate increase which would lower the value of current bonds. This would not hurt a bond holder unless he trades his bond before it matures. The question for bond holders will be to watch their yields versus inflation. If inflation increases significantly enough so that past bonds are not pacing equal to or ahead of inflation other bond holders will dump bonds so that current yields rise to current inflation levels.

I do have my 401K switched to a capital preservation fixed rate funds and discretionary funds in hard silver and some gold.

-- Bill P (, February 04, 2000.

Kinda O.T. here, but I'm beginning to be happy about my status in life, I have lots of practice being poor. We garden, and hunt close to home and I preserve much of our food myself. I have also learned to forage in the area where I live as there are many wild foods here.I worry about the vast majority of people in this country that would starve to death without something ready made to pop in the microwave. I will never regret all these beans and rice I have either, I have already been enjoying them. God help us all when the s#^t hits the proverbial fan with this.

-- Laurie in Idaho (, February 04, 2000.

OUCH! >"<

-- Lurkess (Lurkess@Lurking.Net), February 04, 2000.

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