Daily Digest 5/22 - China Can Now Monetize U.S. Debt Directly, The Real Oil Price Culprits, All The Water On Planet Earth
- Comments from Italy on "Financial Terrorism", Taxes, General Economic Condition, and Mario Monti
- Ex-ECB Head Proposes Giving Greece the Benton Harbor, Michigan Treatment
- China Can Now Monetize U.S. Debt Directly
- U.S. Said to Let China Buy Direct From Treasury
- Merkel Pressed to Share German States’ Debt Costs
- No One Can Afford Another Round of Iran Sanctions
- Who Are The Real Culprits Behind High Oil Prices?
- All The Water On Planet Earth
The phenomenon is so widespread and dramatic that a few figures should help explaining it. Statistics show that owners of luxury cars, yachts or private planes declare in average very few tens of thousands Euros income per year, much less of the value of the objects they own. Clearly, this is simply mathematically impossible!
Berlin is enraged that the Greeks have voted in favor of candidates opposed to the austerity deal Berlin coerced the disgraced and fallen Greek government to sign. The austerians have decided that since democracy is the problem, imperialism is the answer. Jean-Claude Trichet, former head of the European Central Bank (ECB), and a fiercer austerian than Chancellor Merkel, has proposed a plan to cripple Greek democracy. Naturally, the business press reacted with praise. Reuters’ headline gushed: Ex-ECB head unveils bold plan to save the euro.
China Can Now Monetize US Debt Directly (pinecarr)
The Treasury, apparently dissatisfied with the speed of indirect bank and/or Fed-inspired monetization of its exponentially rising debt-load at ever-cheaper costs of funds, decided in June 2011 to allow the Chinese, with their equally large bucket of USDs to bid directly for US Treasuries. As Reuters reports, China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury's first-ever direct relationship with a foreign government. The documents, viewed by Reuters, indicate that the US Treasury has given the PBOC a direct computer link to its auction system - which was first used in the 2Y auction of June 2011.
The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.
China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn't been necessary.
German borrowing costs plunged as investors sought a haven from the doubts that Greece can remain in the 17-nation currency zone. The yields on German two-, five-, 10-and 30-year bonds have declined to the lowest on record. States have benefited as well, with five-year debt from North-Rhine Westphalia dropping to as low as 1.5 percent last week from more than 3 percent in 2011. The federal government pays 0.5 percent to borrow for five years.
Among the deals the West could put on the table, despite Israel’s objections, are a stay for the 1 July European sanctions, and a reversal of European sanctions on insurance for tankers transporting Iranian petrochemicals, which is supposed to be extended to oil in July. The Obama administration will not remove sanctions as a result of Baghdad, but it could promise an incremental relaxation in return for a commitment from Iran.
The former are typically producers or suppliers with a vested interest in securing as high a price as possible for their output. They can also be manufacturers who depend on procuring as low a price as possible for their raw materials. Both parties are interested in delivery as a function of pricing.
Speculators don’t care about delivery and, in fact, go to great lengths to avoid it.
All The Water On Planet Earth (jdargis)
How much of planet Earth is made of water? Very little, actually. Although oceans of water cover about 70 percent of Earth's surface, these oceans are shallow compared to the Earth's radius.
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