Chris Martenson: The Shell Game Continues…
Many of you know Chris Martenson from his phenomenal presenation and educational set, The Crash Course. He recently wrote a new post regarding the Treasury "Shell Game" that is a fantastic read, well worth your time.
The Shell Game Continues…
Submitted by Chris Martenson - Monday, April 5, 2010
* Record-breaking Treasury auctions continue to go off without a hitch, thanks to massive foreign participation.
* However, the amounts reported to be bought in the auction results do not match the Custody Account or TIC report amounts.
* The Fed is allegedly all done buying MBS and Treasury paper. This cuts off an important source of liquidity for the Treasury, commodity, and stock markets.
* How will these markets respond to a liquidity drought?
The end of March is upon us. I need to take a moment to re-analyze the data to see what might happen now that the stimulus money has worn off, and, more importantly, now that the Federal Reserve's massive Mortgage Backed Security (MBS) purchase program is over.
This is important for a variety of reasons. The first is that the enormous flood of liquidity that the Federal Reserve injected into the financial system has found its way into the Treasury market, supporting government borrowing and also lowering interest rates for the housing market. How will the Treasury market respond once the liquidity spigot is turned off?
The second is that this flood of liquidity has supported all sorts of other asset markets along the way, including the stock and commodity markets. What will happen to these when the flood stops? Will the base economy have recovered enough that the financial markets can operate on their own? Will stocks falter after an amazing run? Or will the whole thing shudder to a halt for a double-dip recession?
... continue reading the whole thing, it breaks a lot of the Treasury shenanigans into a easy to understand manner: READ FULL POST