We crushed it here at MNE! Sorry, no one even came close.

First I want to address a post I put up here the day of the conclusion of the Fed meeting when I said the stock rally (that day) wouldn't last and that we'd stall.

Well, that didn't happen, obviously.

However, that shouldn't diminish the fact that I said here, here, here, here and here (and probably a lot more places, but I am too lazy to look) where I said you gotta buy stocks and I gave you the reason: flows.

Two things: the flows are back and market sentiment is now shifting to very bullish.

The market is in a sweet spot now with sentiment aligned with direction (and fundamentals). It's going a lot higher and the only chance you'll have for a correction will be when the Fed raises rates. And it will. When that happens there will be some sort of bearish knee-jerk reaction and you'll have a chance to buy, however, by that time the stock market could be significantly higher.

By the way, remember all those people who were panicking and saying "sell" and there would be a catastrophe? Remember the RBS call? They were all completely and utterly wrong.

The "low hanging" fruit is probably gone. Maybe not. Depends on your definition of low hanging. I like really low hanging, like when people are selling like crazy. That's when I buy because it's like the idiots are just giving you their money. Take David Einhorn's money, remember?

There could be a "low hanging fruit" trade right now and that's shorting Treasuries. Even the idiots now think the Fed will never be able to raise. (After years of telling us how rates were going to skyrocket.) Short Treasuries. NO ONE is talking about that except, you guessed it, right here on MNE. Like, we always scoop everyone.

Which brings me to the economy. If you are thinking recession because the deficit is too small, forget it. No chance. The flows are big and this stock market rally, which will continue, will boost confidence and spending.

The people with the forecasts based on deficits for the last three years should just man up and throw in the towel.

Once again we got it all right here by looking at flows. It's all about flows or, mostly about flows anyway.

Oh yeah, how about the "oil bottom" call that I made back in January? Maybe a little early, but the market is 30% higher now. Not bad.

And what about the dollar going down? And gold rallying? Franco with metals prices bottoming, too. Jeez, I almost forgot those.

I swear, this site should have a million visitors a month. It's crazy that we don't.

Like I said, I must suck at marketing.

Media bewildered as China sells huge amounts of Treasuries and nothing happens in bond market, rates don't soar. Idiots.

Bloomberg and other financial media outlets are running a story about how China sold $180 billion in Treasuries and the market did nothing.

Why are we not surprised?

It seems that Bloomberg and the rest of the financial media mental midgets are still clueless. They still believe, I guess, that China sets rates in the U.S. or, that dollars come from anywhere else, but the U.S. government.

We have long said here in Mike Norman Economics that the worries over China selling our Treasuries or, any other entity selling Treasuries is meaningless because, a) there will always be demand for Treasuries when the Federal Gov't is spending $11 trillion per year (Gross "withdrawals" as per the Treasury's end of the Fiscal Year statement), which equates to vast amounts of resrves piling up in the bankiing system. And, b) when reserves pay nothing and Treasuries pay something.

Here are some of the idiotic statements by the media with regard to the China sales:

"America has relied on foreign buyers as the Treasury market swelled to $12.7 trillion in order to finance stimulus that helped pull the economy out of recession and bail out the banking system." 

America relied on foreign buyers to stimuluate its economy and savce the banking system?? Seriously??? Hahahaha. What utter idiocy.

And this...

"Now, the Asian nation is stepping back as it raises money to support flagging growth and a crumbling stock market, and allows its currency to trade more freely." 

China is selling Treasuies to "raise money to support flagging growth." Hhahahaha....are you fucking kidding me??? China is spending in yuan.

Then there's this by the woman who will probably be our next  president:

And in 2007, Democrat Hillary Clinton, then a Senator from New York, said in a letter to then-Treasury Secretary Henry Paulson and then-Fed Chairman Ben S. Bernanke that foreign ownership of U.S. debt was a “source of great vulnerability.” The economy “can too easily be held hostage to the economic decisions being made in Beijing, Shanghai and Tokyo,” she said.

A real, "leader," she is going to be. Running over to China, begging them not to sell. Pathetic. And worse yet, that's "insight" coming from her advisers.

Let us not forget, either, the quote from our military commanders. This one from former Chairman of the Joint Chiefs, Admiral Mike Mullen who said:

“I’ve said many times that I believe the single, biggest threat to our national security is our debt, so I also believe we have every responsibility to help eliminate that threat,” he said. “We must, and will, do our part.”

There you go, people. These are our leaders. Totally, fucking, clueless ideologues who think they needn't know or understand anything more than the shit that litters their brain dead minds, which they spew out to us on a daily basis. And the media is there pathetic mouthpiece.

Bloomberg...ha!!

More unbelievably stupid shit from Bloomberg LLP

Here comes more unbelievably stupid and ignorant commentary from Bloomberg LLP. Mike built a great financial information service, but tarnished it when he added that whole team of idiots over  there who sit and do commentary. That goes for their TV channel, too. It sucks.

This time I am referring to an article that comes NOT from our favorite Bloomberg columnist and CINEMA MAJOR--Caroline Baum--who opinies on all things economic (did I mention she's a cinema major?), but some girl by the name of Kasia Klimasinka who, with a name like that is probably straight out of Russia or one of the former Soviet Republics so I shouldn't be too surprised by the incredibly flawed take on things. In fact, I wouldn't be surprised if Putin was reading her shit right now, which would explain some of the inept economic moves he's been making recently, but I digress.

Anyway, Ms. Klimasinka starts her piece off with a very scary title, which warns us that "America's fututre just got $7 trillion worse" because,  supposedly, in 2035 that's how much will be added to the USA's "debt."

I don't know about you, but I just love it when they start projecting out 10, 20, 30 years into the future in order to scare people now, as if nothing can be done/will be done and does this have any real fuckng significance??? I mean, why stop at 2035 when you can say, in the year ten billion two thousand fifteen (thereabouts) the earth will be consumed by our sun when it turns into a giant supernova. Now THAT'S scary.

Below is a snippet from the article. Feel free to read it with amusement or disgust (depending what kind of  person you are)

In 2035, the debt will almost equal the size of the U.S. economy; four years later it will match the previous record, set in 1946, at 106 percent of gross domestic product, the CBO estimated last year. Compare that to the 2014 debt burden of $12.8 trillion, or 74 percent of GDP. 

Wow. I'm shaking in my fucking boots.

This is not only mind-bogglingly stupid and pathetically misinformed, it's just really shitty journalism. Go try to work at Bloomberg. They're a stickler  for credentials and that applies to academics, I'm sure this chick probably went to Columbia School of Journalism or Mike's Alma Matter, Johns Hopkins no less, and yet, they publish this crap? This is a totally one-side, misinformed, slanted and completely ignorant piece. It's not worth the electrons it was written with.

However, give Ms. Klitchensinka some credit. She did use citations in her article. She cited the very fair and balanced, "Committee for a Responsible Federal Budget." In case you didn't know who those guys are, they're a right wing organization whose sole aim is to get rid of the social safety nets. The president over there is Maya MacGuineas. Ms. MacGuineas spent her entire career slinging conservative tripe at places like Brookings, followed by stints on that rag sheet, Wall Street Journal, on the editorial board, of course. Her nickname is the "anti-deficit warrior." Is that freakin' corny or what? The "Anti-deficit warrior?" Seriously? What utter stupidity. It's blind, rah, rah, dogma. Frat house shit.

Okay, now let me switch gears a bit. I have something for you to look at. It's the Debt Clock. You know, that's the not-so-little fear monger widget that MacGuineas and other "responsible" folks like her dreamt up and run. It's pure propaganda, but many people are frightened by it. There's a big one right here in Times Square, NYC. 

At the very top of the Debt Clock (the online version) it shows the $18.2 trillion national debt. The number's right there, right in front of our faces to make sure we see it. Alongside the national "debt" is the supposed, "debt per citizen" of $56,793 and right next to that is the "debt per taxpayer" of $154,219. The very way the Debt Clock is designed is to get us (the people) to see these supposedly really, really, scary numbers.

But here's something they never show you: not our little chickie journalist at Bloomberg or Maya and her colleagues at "Responsible" budget or any of the cynics, liars and morons who are working nonstop to foist this bullshit on us. 

If you look all the way down at the very bottom of the debt clock, right smack in the middle you will see "Total National Assets" of $115.8 trillion and assets per citizen of $361,000. 

You got that? The nation's assets--right  now--are almost 10 times the debt and the assets per citizen--right now--are almost seven times the debt. And that's now. What will they be like 18 years hence? They never tell you that. In fact, the debt clock in Times Square doesn't even have those asset numbers. It's deliberately left out. 

So you see, the whole thing is intentionally designed to manipulate you into demanding what THEY want and believing what THEY believe.

I can promise you this: Walk into any bank with these ratios: assets, 10x your liabilities and income 85 times your annual debt service ('cause that's what it is) and believe me, they'll lend you money. They'll fucking throw money at  you.

And we all know it's not even about that. It's not about the USA getting a loan in 2035 or 2075 or tomorrow for that matter. It's got nothing to do with borrowing. That's because the USA doesn't borrow. It doesn't borrow its own dollars that it can create without limit. The whole assertion is preposterous. All of the treasury securities out there today, every penny, all $18 trillion, have been bought with dollars and the same will be true in 2035 when the amount will be $40 trillion or whatever.  And those dollars will be there because they will have already been spent into existence. I'll even go a step further...all Treasuries in existence, now and in the future, ARE dollars, just held in a different form. THERE. IS. NO. DEBT.

That about raps it up. That's all I really want to say for now. Bloomberg LLP is garbage. Don't read it. Taking your advice from a cinema major or any of the other jokers over there is like taking medical advice from a quack. It can kill ya. 

As for Maya MacGuineas, Committee for a Responsible Federal Budget, Brookings, Wall Street Journal and all the other deluded ideologues out there who are tying to lie to us and screw us over...FUCK YOU, TOO!

Since 1998 Treasury has issued $719 TRILLION of debt. And guess what? Dollar strong, rates at zero.

Using the data from the Daily Treasury Statement archives it is possible to see exactly how much debt the U.S. has issued since 1998. (The DTS archives go back to 1998.)

Since 1998 the U.S. government  has issued $719 TRILLION of debt. That's 719 T-R-I-L-L-I-O-N. This is not a typo.

And guess what?

Interest rates are at zero and the dollar is very strong.

Of course we know that all that debt is just really dollars. So another way to say it is that since 1998 the U.S. Treasury PRINTED $719 trillion dollars.

And guess what? No inflation.

We also know that the government redeemed (paid back) all but $18 trillion of that debt. So it "paid back" $701 trillion.

The $18 trillion (what everyone is hysterical about--our national "debt") we got to hold on to.

That's all this debt nonsense is about.

Here is the year-by-year breakdown of how much debt was issued. It's right from the Treasury's own statement. I am not making this up. I just put the numbers in a spreadsheet. By the way, these data only go back to 1998 as I said, however, if you went back to the birth of the Republic, that is, 1789, the total issuance would surely be in the quadrillions and again, no collapse, no skyrocketing interest rates, no inflation.

Image: Treasury issuance in millions $

Guy May Have Seen A Burning Bush, And Heard a Forgotten Voice Bubbling Out Of His Suppressed Memory?

Commentary by Roger Erickson

Maybe he fell into a trance while viewing a burning economics textbook in Harvard Square?

"In the next 12 to 24 months, capital markets are going to struggle on account of... are you ready?... not enough government debt." Shah Gilani

Why, that's amazing!!! Where could he have POSSIBLY come up with such an idea ... in the year 2013? :(  

At this rate, our group brain may fatally shrink it's cultural perspective by short circuiting it's own dialectic field. :)

Given the tendency for more specialists to know more and more about less and less, until they all know everything about nothing ... maybe we really WILL all end up as Libertarians.

How do we fight that trend, and adequately manage public perspective, not just individual perspective? How did Shah finally get this far? Maybe he had a dream where he was visited by the ghosts of Eccles'/Lerner's/Vickrey's/Mosler's/Godley's/Wray's/Mitchell's/other's-publications-past .... and their chorus's too?

Not to mention that the wording itself is so precious. (Banks will be forced to hold more [fiat] treasuries.)

Given that treasury securities are expressions of group credit invested in diverse forms of private liquidity ... haven't they ALWAYS - in one form or another - been a requisite consequence of expanding human activity on planet earth?

More people to express fiat?

Each with more options, yearly, for expressing both individual AND group fiat? (Unless we REALLY screw up.)

Don't be surprised that more net fiat is expressed?

Nevertheless, "It's a miracle?"

Only on planet Dogma, where the true believers Hear No Obvious, See No Obvious, and Speak No Obvious ... until it's [again] seen as a divine revelation.

Maybe it's so obvious now that even novice thinkers can taste, smell & feel it? Even if they obviously don't yet understand it? :(

Fine. Given this latest comedic twist, let's try a strategy adjustment. Hold "Burning Tush" events in WalMart parking lots, outside Ivy League economics departments, and in front of hedge fund offices. Heck, even on YouTube. Play Mosler tapes at the burnings, from hidden speakers. For effect, periodically dub in something like Bill Cosby's voice :

  "Noah! This is the Public."

[Public:  "Build me an economy. Make it F(P,Fiat) by F(O,Fiat)" *]

[Orthodoximists**: "Right! .. uh .. What's a fiat?" ]

Anyone know how to animate a ghost of DoubleFacePalm fiat?

* function of both population and individual options

** Orthodoximist: "Specialist in extracting dogmas out of asses."

The Fed trying its best to help Jim Rogers, Schiff, Naseem Taleb, Kyle Bass and the other Austrian clowns make money

Boy, the Fed must feel real sorry for Jim Rogers, Peter Schiff, Naseem Taleb, Kyle Bass and all the other clueless, Austrian, debt doomsday, non-MMT types. It looks like the central bank is venturing out with a totally different approach to try to help these poor fools make money.

We all know the aforementioned have been shorting Treasuries mercilessly for at least the past four years, losing vast sums for themselves or their sorry followers, despite the fact that the Fed had been TELLING THEM not to sell the Treasury market at least until 2015. But, noooooo...these geniuses just wouldn't listen.

(Psssssst...they still think it's the bond vigilantes or the Chinese who set U.S. interest rates. We MMTers know better!)

So apparently out of deep concern for their bleeding pocketbooks, Bernanke & Co. is now telling the, "We're a debtor nation" (please say it in the voice of an old prospector) crowd that they can refrain from going short until the unemployment rate falls below 6.5%. Or to put it another way, they can go long until then.

As much as I'd like to think these clueless wonders are going to catch on, something tells me that their philanthropy to the MMT side (read: long side) of the Treasury market is going to continue.

Yes Lauren, it is true what they say about fools and their money. Hey folks, don't feel bad. Just think of it as doing a public service.

David Ferguson — Ohio GOP Senate hopeful shorting U.S. Treasury bonds and betting on default

Another fool about to be parted from his money. Where do they find these people? Not only is it dumb financially; betting against the US is also toying with political suicide betting against the US.

Republican Josh Mandel, the former Ohio congressman and State Treasurer who is running against Sen. Sherrod Brown (D-OH) to represent Ohio in the Senate, has positioned himself and his wife financially to reap a significant profit if the U.S. government fails to raise the debt ceiling and defaults on its loans, according to Think Progress. Mandel has campaigned on refusing to raise the debt ceiling, a move which he opposed when it came to a vote last year.

Oh, and did I mention conflict of interest?

And lest anyone forget:

House Majority Leader Rep. Eric Cantor (R-VA)came under fire last year for similar financial entanglements. It was revealed that the, too, was betting against the U.S. Treasury while publicly agitating against raising the debt ceiling, a position that many consider to be a profound conflict of interest.

What do these folks not get about ethics?

Read it at Raw Story
Ohio GOP Senate hopeful shorting U.S. Treasury bonds and betting on default
David Ferguson

Zero Hedge — Treasury Yields Plunge To All-Time Record Lows Across The Curve

Read it at Zero Hedge (short, charts)

Treasury Yields Plunge To All-Time Record Lows Across The Curve

Submitted by Tyler Durden

John Carney — The Mystery of the US Treasury Market

The US Treasury market continues to baffle.

Despite an almost unfathomable supply of U.S. government debt, yields right across the curve remain at stunningly low levels. It almost seems as if the law of supply and demand has been suspended.

The quest to explain this phenomenon is giving rise to a conspiracy theory of the markets: the Fed is secretly propping up demand for Treasurys by printing dollars....

Viewed in this light, there is no contradiction or mystery at all to falling Treasury yields. Investors are buying the stock of safe assets even faster than the world can produce them....

Getting this right is important for understanding fiscal and monetary policy. We’re living through a great contraction of safe assets, which puts enormous strain on a financial system heavily reliant on collateralized trading between counter-parties. Any program that threatens to reduce, say, the amount of debt issued by the U.S. government should at least take into consideration the likely effects of further contraction.

Read it at CNBC NetNet
The Mystery of the US Treasury Market

by John Carney | Senior Editor

Another good one from John.

UPDATE: Prof. Scott Fullwiler in the comments:

STF said...
Apparently none of these people have heard of arbitrage (and hedging net long/short positions via derivatives), particularly where the dealers are guaranteed liquidity in the repo mkt by the Fed (not to mention CB swaps to stabilize access to offshore funds for non-dealers). And that's all the time, not just now, as Eccles explained. Supply/demand is true, but you have to have the right supply/demand to get the analysis right. So "there's more debt supply so rates should be higher as prices fall unless there's some Fed conspiracy" is applying Econ 101 to a far more complex context.
June 28, 2012 7:03 PM

Revisiting my bearish commodity/currency/inflation call that I made back in February and debunking the myth of Fed "money printing"

This was right on the money. Had you sold commodities, currencies, gold, stocks and other risk assets (and bought bonds and the dollar) around that time, you'd be laughing all the way to the bank right now.

Reuters — U.S. lets China bypass Wall Street for Treasury orders

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, according to documents viewed by Reuters.

Read it at Reuters (Exclusive)
U.S. lets China bypass Wall Street for Treasury orders

by Emily Flitter

Explaining the recent spike in interest rates

There’s been a lot of chatter about the recent enormous “spike” in interest rates. I want to make some comments and observations.

First, this spike, while large in percentage terms over such a short period is really tiny in nominal terms. Take a look:

Once you have a little perspective the “enormous spike” becomes a joke.

Second point:

Rates are anchored by Fed policy and that doesn’t just mean short term rates, it means rates all along the curve. Whatever the Fed funds rate is will be reflected further out. A 10-year yield is nothing more than a reflection of Fed policy over that term. And since the Fed has been very clear about its intention to keep rates low and maintain a “highly accommodative” policy stance out until 2014, there is not going to be some big move up in rates. We’ve probably already hit the upside ceiling for rates.

Third point:

The rise in rates over the past several weeks has been due to a number of things, one of them being an improving forecast for the U.S. economy AND a dissipation of fears of a European meltdown. (In my opinion, the jury is still out on both of these views.)

In addition there has also been a largely unnoticed, but fairly sharp decline, in reserve balances over the past few weeks. (See chart below.) This has been due to the Fed allowing existing positions on its balance sheet to “roll off” (i.e. proceeds from maturing securities are not reinvested) AND a large amount of bond issuance by the Federal Government this month to cover expenditures, which has not been offset yet by Fed monetary operations.

On that last point, notice the recent upturn in reserve balances on the chart below. The Fed is once again stepping in to add reserves. Bottom line, the bond selloff is probably over.

Bill Gross smoked again??

Following his now-infamous bet on the Treasury market last year, where he went heavily short, Gross reversed his view in December and loaded up. Now bonds are tanking.

It's a wonder that this guy has any clients left!

Another market "guru" misunderstanding how rates are set

Just heard Doug Kass ("Dougie" as they call him) of Seabreeze Partners and a CNBC Fast Money Contributor out with comments a few minutes ago that display his lack of understanding of the bond market and how rates are set.

He's advising shorting Treasuries because he says that they can "get decimated in a muddle through economic environment."

He mentions the "bond vigilantes" and other such nonsense.

Kass will get this wrong if he actually trades it this way. But if you listen to Kass you never really know what his position is. He'll say he's short bonds and two weeks from now if bonds go up he'll say he never said that or that he was long.

Clueless commentary about Japan sovereign debt

I’ve been hearing a lot of comments recently from the ranks of the VSP’s (Very Smart People, and I’m being massively facetious here) about the coming need for Japan to roll over $3 trillion in sovereign debt. They are saying it as if it were some giant tsunami rolling in rapidly off the ocean, headed toward the beach. And we—investors—are supposed to be feeling like a bunch of helpless, English tourists trapped on the island of Phuket, 20 minutes after a #10 on the Richter scale underwater earthquake just hit a couple of miles offshore.

Anyone who is saying this or warning of this is monumentally and completely ignorant about the monetary system.

Japan’s debt—all of it—is denominated in yen. Japan makes the yen. It controls ALL yen denominated accounts. The act of “rolling over debt” is merely an accounting procedure at the Bank of Japan (the Japanese central bank). When those securities reach maturity and come due, the Bank of Japan merely credits the reserve accounts of Japanese bond holders by $3 trillion and debits the securities accounts of those same bond holders. What just happened? Not much. It’s like your CD coming due at the bank. What happens there? The bank debits your CD (you no longer have it) and credits your checking account by the amount of the CD.

So is $3 trillion a big number?

Ha!!!!!!!!!!!!!!!!!!!!!

So far this fiscal year (5 mos), the US Treasury rolled over or redeemed $2.6 trillion. Did the world come to an end? For all of 2011, the US Treasury rolled over $7 trillion. We’re all still here and so are the markets. Doing very well thank you very much.

Plain and simple: these people saying these things are clueless. Ignore them.

China sold Treasuries in 2011 and guess what? Interest rates fell to record lows!

Here's another thing that the clueless Debt Doomsday crowd has been warning us about. I can hear them right now screaming hysterically about how one day China is going to start dumping its Treasuries.

Well guess what? They did. They sold a bunch last year and on balance, were net liquidating.

So what happened? Did rates spike like the misguided Doomsday guys forecast?

Hardly.

Actually, the opposite happened: rates collasped to new lows. The only ones who got this right were the MMT guys, like us, right here!

My comments on Ben Bernanke

Bernanke made me so upset today, I just had to make this video!!

So easy even a kid can understand

We don't borrow from China or anybody else. In this video I explain it in a way that even a kid can understand. Watch the entire video.

The phony debt crisis!

At a Treasury auction today of 4-week bills, investors were prepared to give the government over a quarter of a trillion dollars AT ZERO PERCENT INTEREST!

And they keep telling us there's a debt crisis and we need to cut the debt!

If this doesn't show how the whole debt thing is a total farce and a total propaganda lie, then I don't know what will.

Pimco's Gross regrets "mistake" on US debt call

All of MMT had this right because MMT allows you to understand that the central bank sets rates and that the funds used to buy government securities comes from government spending itself.

It's bad enough that Bill Gross got it wrong, but he embarrassed himself by Tweeting, "Who will buy them now?" when the Fed ended QE2 on June 30. For a currency issuing nation there is never lack of funds or a lack of buyers for public debt issued in its own currency, by definition.

Gross continues to embarrass himself in his explanation of why he shorted the bonds:

“Do I wish I had more Treasurys? Yeah, that’s pretty obvious,” Mr Gross told the Financial Times last week, adding: “I get that it was my/our mistake in thinking that the US economy can chug along at 2 percent real growth rates. It doesn’t look like it can.”

He still thinks that the market sets rates.

Read story here.