Short term T-bills accumulation indicates short term thinking because the long term outlook is unbearable.

The banking system in place was/is made to inflate, plan accordingly.

In his famous treatise, “The Wealth of Nations,” Adam Smith noted there had never been a “single instance” of sovereign debts having been repaid once “accumulated to a certain degree.” We may have reached Smith’s threshold.

We are at a Smithian moment, in which the temptation for the Fed to spend its last dime of credibility may prove irresistible. Investors are already being taxed by inflation and can rationally expect that tax rate (the inflation rate) to be raised going forward. Wages are not keeping up. Main Street is being taxed to fund Wall Street excess. Anyone who works, saves and invests is exposed to confiscation of his capital and earnings through inflation.

If the Fed maintained its independence of action and said no to the inflationary finance of Congress’s profligacy, we wouldn’t have reached this point. But the Fed has forsaken that independence amid an absence of leadership.

http://online.wsj.com/article/SB121936581501662161.html?mod=opinion_main_commentaries

Agreed.

Treasuries are the place to be right now. These busts don’t all happen at once, the events are sequential. When equities collapse (weeks and months now, not years), money will flow into Treasuries, then corporate bonds will be the next to go. Eventually, there will be forced reflation that will kill the $, and then and only then, Treasuries will sell off. It is all about layers of risk.

I actually know people who are long stocks and short Treasuries. But they are so hubristic that I cannot feel sorry for them.

Can you please explain this in a little more detail?

A couple of key points here.

The Olympics are over. Now the Chinese will play hardball.

Although the US may not understand it, China’s grand design is to reintegrate “the motherland”. Tibet, Hong Kong, Macao basically leaves one final domino (other than the Spratly Islands).

TAIWAN.

Taiwan is on the back burner of every American politician.

It will obviously be in the headlines in the future and I suspect the date will be far sooner rather than later.

And our economic destiny will surely be held hostage to that demand.

Deficits suck.

Matt Dubuque

Reallocating to Beijing cartoon character collectibles: Chinese prime minister Hu Jintao, quoted in _China Daily_ “Well, we seem to have a lot of these Fannie things around. Don’t get me wrong, I love a little Fanny now and then, but I’ve heard about some opportunities to buy these Beijing Olympic character costumes and ON THE CHEAP. Wave ‘em in! I just lifted 3,000,000 retarded space age panda stuffed animals for like 200 yuan!

Hu’s the man now dawg?

Hu’s the man now dawg?

Hu you talkin’ to Willis?

Hu’s on first?

No, Hu’s on first!

That’s right Hu’s your Baba now, Gege?

The dollar isn’t going to collapse this go round. It very well might in the next decade, but not now. Everyone crows about our deficits, etc. (I certainly do), but how can those not be priced in when movies like IOUSA get so much coverage? That is as contrary an indicator as I can think of.

I will short the dollar and expect its collapse when everyone doesn’t, because thats when it’s most likely to happen.

At long as the political benefits the Chinese derive for the slice of their population that owns or works in the export sector exceeds the losses on investments in treasuries, the Chinese will stick with its mercantilist currency policy. Thus, you can’t say any particular level of currency losses is big enough for them to change their way, without calculating the political benefit they derive.

Also, if they have a goal of hurting US power by making the US so indebteded it suffers the way Germany did after WWI, query how long this could go on. Sort of like force feeding a duck enough to kill itself in order to make a delicacy.