We Will Buy Our Own Bonds Now

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We Will Buy Our Own Bonds Now

Because Noone Else Wants To

The US features a large Capital Accounts deficit, driven by a structural trade deficit [We spend too much] and despite a positive income balance. In other words, the US is structurally living beyond its means.

- Valentin Giust Global Macro Strategist, Credit Agricole

Why Gold Will Continue to Rise

[ EDIT- Hat tip and comment at 15:01 regarding a concept discussed with Tom Luongo several times this past year or so; specifically how Europe/ UK suffers most from changing US monetary policy . - VBL]

Summary/ Thesis

Given the global trend towards dedollarization accompanied by many nations offloading UST as a trusted store of value it merited looking at the world from a Current Accounts perspective. The conclusion is given global changes and the US’s slow pace adjusting to those changes, these will happen:

  1. Gold will continue to rise,

  2. Treasuries will continue to weaken,

  3. and the US standard of living will continue to deteriorate

What follows is how these concliusions were made

Left Chart represents our negative trade balance, or stuff we import. The right chart represents the amount of foreign capital (mostly in bond purchases) that flows into the US which finances our spending.

Questions Asked and Answered

Credit Agricole released a very nice piece (at bottom) dissecting who owns what globally. Given mercantile trends and revamping of both supply chains, the report was helpful answering questions regarding Gold and its price path from here. These are the questions asked and answered.

What needs to change if the US is to continue to enjoy its current standard of living relative to the world?

What about UST makes them so desirable for foreign investors?

Who will buy our debt going forward if Foreigners are not?

What can we do to stop foreigners from selling, or make them consider buying more?

What other assets can approach UST qualities or be used to do this?

Can’t we just buy our own debt? ( nationalize the debt?)

Why isn’t simply buying our own debt enough to keep our current standard of living?

Podcast Outline

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