Ninety-seven percent of all existing Treasury debt has been created since August 15, 1971!

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Davos
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Ninety-seven percent of all existing Treasury debt has been created since August 15, 1971!

Ninety-seven percent of all existing Treasury debt has been created since August 15, 1971!

"Ninety-seven percent of all existing Treasury debt has been created since August 15, 1971! Ninety-three percent of it has been created since Mr Volcker “saved” the paper Dollar in late 1979! Please note that the gain in Treasuries and the loss in the US Dollar almost exactly cancel out.

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Re: Ninety-seven percent of all existing Treasury debt has ...

I share Bill Buckler's concern about exponential debt growth. But one CANNOT compare 1971 dollars to 2010 dollars. The CPI has inflated by a factor of 5.39 times since 1971. 

It's still the case, after converting federal debt to constant dollars, that 84% of it has been created since the 1960s. Failing to make this conversion is a form of statistical sensationalism, by writers who are either uninformed (not the case with Bill Buckler, since he refers to the inflation) or simply want to jerk people's chains with arithmetic hockey-stick figures and charts.

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Davos
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Re: Ninety-seven percent of all existing Treasury debt has ...

Super point. I was not aware it was 84% since the 1960s but with the second longest war I'm not surprised. Utter mess! But hey, like you said - the recession is over according to NBER

 

 

..............................................and the depression has began.

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Re: Ninety-seven percent of all existing Treasury debt has ...
machinehead wrote:

I share Bill Buckler's concern about exponential debt growth. But one CANNOT compare 1971 dollars to 2010 dollars. The CPI has inflated by a factor of 5.39 times since 1971. 

It's still the case, after converting federal debt to constant dollars, that 84% of it has been created since the 1960s. Failing to make this conversion is a form of statistical sensationalism, by writers who are either uninformed (not the case with Bill Buckler, since he refers to the inflation) or simply want to jerk people's chains with arithmetic hockey-stick figures and charts.

Please note that the gain in Treasuries and the loss in the US Dollar almost exactly cancel out.

That would assume a buy and hold strategy for 30-40 years and he may also be ignoring the interest received.  Of course the reality is even if you bought 30 year bonds, they've matured.  The dollar has been up down and sideways over the same time frame.

To your point about CPI's 5.39 factor since 1971, what does that say about precious metals?

After Nixon slammed the window shut (forgot to yell :"Watch your fingers!") gold worked its way up to around $100 by 1973.  So using that number x 5.39 yields a price of $539.  You could generously call silver about $2 for that same time frame x 5.39 = $10.78.

Current PM bulls seem blissfully unaware of the PM's Two Lost Decades ( 1980 - 2000) .  I'll bet they think they invented sex too. Smile

 

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Re: Ninety-seven percent of all existing Treasury debt has ...
yobob1 wrote:

Please note that the gain in Treasuries and the loss in the US Dollar almost exactly cancel out.

That would assume a buy and hold strategy for 30-40 years and he may also be ignoring the interest received.  Of course the reality is even if you bought 30 year bonds, they've matured.  The dollar has been up down and sideways over the same time frame.

To your point about CPI's 5.39 factor since 1971, what does that say about precious metals?

After Nixon slammed the window shut (forgot to yell :"Watch your fingers!") gold worked its way up to around $100 by 1973.  So using that number x 5.39 yields a price of $539.  You could generously call silver about $2 for that same time frame x 5.39 = $10.78.

Current PM bulls seem blissfully unaware of the PM's Two Lost Decades ( 1980 - 2000) .  I'll bet they think they invented sex too. Smile

Practically speaking, if you want to stay exposed to 30-year Treasuries, you have to roll them over every year, exchanging your 29-year maturity Treasury bond for a new 30-year maturity bond. This is what long-Treasury funds such as TLT do, to maintain their target long maturity.

Since 1972, the long-Treasury rollover strategy has produced a 9% compounded annual return, which includes reinvested interest. This would have multiplied a $1,000 investment in 1972 to $26,600 today, handily beating the drop in the dollar and outpacing gold too.

In the long term, this must always be the case. Neither gold nor the dollar offer any yield. An asset such as T-bonds, which does offer a yield, will always beat no-yield currencies in a long-term comparison.

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Re: Ninety-seven percent of all existing Treasury debt has ...
machinehead wrote:

Since 1972, the long-Treasury rollover strategy has produced a 9% compounded annual return, which includes reinvested interest. This would have multiplied a $1,000 investment in 1972 to $26,600 today, handily beating the drop in the dollar and outpacing gold too.

Taxes?

Both the interest and any capital gains would get a bite taken out of them....

 

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Re: Ninety-seven percent of all existing Treasury debt has ...
cmartenson wrote:
machinehead wrote:

Since 1972, the long-Treasury rollover strategy has produced a 9% compounded annual return, which includes reinvested interest. This would have multiplied a $1,000 investment in 1972 to $26,600 today, handily beating the drop in the dollar and outpacing gold too.

Taxes?

Both the interest and any capital gains would get a bite taken out of them....

 

Me, mr gripe about taxes all stinking week, totally missed that. And I've been harping on the jan1-aug15 work to pay uncle scam debt. super point!

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Re: Ninety-seven percent of all existing Treasury debt has ...

Taxes are a fact of life unless you want to go with certain munis.  if you bought gold and sold it for a profit you have the onerous "collectible" rate (currently 28% for most folks) albeit slightly less for Eagles.

Again you're correct MH, however it would have been possible to buy some 30's during the Volker shock wave and just sat on them and pulled a high teens cash flow off until maturity. 

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Re: Ninety-seven percent of all existing Treasury debt has ...
yobob1 wrote:

Taxes are a fact of life unless you want to go with certain munis.  if you bought gold and sold it for a profit you have the onerous "collectible" rate (currently 28% for most folks) albeit slightly less for Eagles.

Again you're correct MH, however it would have been possible to buy some 30's during the Volker shock wave and just sat on them and pulled a high teens cash flow off until maturity. 

Or until they were called.  A lot of those high yielders were retired early forcing reinvestment in lower yielding issues.  I lost a few of those along the way.

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yobob1
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Re: Ninety-seven percent of all existing Treasury debt has ...

Natch Chris.  And of course they would have called them as soon as possible.  Back then I was an immortal 20 something that would have known "bond" as 007 and little else.  Of course all the money was plowed right back into (and under?) our business until I finally had it throwing off cash in the 1990s.  We were on the other side of that  - paying interest at close to 20% - hard to model a business to make money doing that.

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Re: Ninety-seven percent of all existing Treasury debt has ...

My understanding is that most Treasuries are non-callable. In the past, a few were callable at 5 years before maturity. Since the early 1980s, call before maturity could be avoided by purchasing STRIPs -- deep-discount zero-coupon Treasuries which offer a certain final maturity date.

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Re: Ninety-seven percent of all existing Treasury debt has ...
machinehead wrote:

Since 1972, the long-Treasury rollover strategy has produced a 9% compounded annual return, which includes reinvested interest. This would have multiplied a $1,000 investment in 1972 to $26,600 today, handily beating the drop in the dollar and outpacing gold too.

That's a 26.6 fold increase. But why pick 1972? Gold was $35 when the window was shut in 1971 and its around $1280 today,  a 36.5 fold increase.

 

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Re: Ninety-seven percent of all existing Treasury debt has ...

Don't know about Treasuries either. Va. state munis are callable, had it happen within 5 yrs. pulled a tidy little ladder down I had going.

 

robie

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