The 30 Year bond auction was a bit disappointing. According to Bloomberg:
Treasury 30-year bonds declined after a record $16 billion sale of the debt, the last of this week’s three offerings totaling $81 billion, drew the weakest demand since May.
The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.26, the least since May and below an average of 2.39 at the last 10 auctions. The bonds drew a yield of 4.469 percent, higher than the forecast of 4.424 percent in a Bloomberg News survey of five of the Federal Reserve’s 18 primary dealers.
The fact remains that the US has roughly a 4 year debt duration with north of 40% due to mature within a year is a serious issue. The worlds bond markets aren't quite used to the $100b in auctions week in and week out. This figure is equivelent to $5.1 trillion for nexts years issuance. This supply could seriously challenge the demand for more US debt.
Current US cultural behaviours and beliefs strongly indicate that more economic trouble will beget more stimulus etc. The flawed stimulus doom loop will keep going until the world decides to stop funding the party.
Shock and awe no longer accompany domestic bailouts, stimulouts etc. Every new announcement of federal activity seems to create the belief in the public that we all need a bailout so get in line. The rhetoric is capitalism is for the other guy. I am a victim.
The new Identity politics is defined by SIC code .
Trained as anthropologist, I treat economics as a bounded belief system.
The US is now challenged as many actors in the culture are rapidly adopting defeatist and self defeating beliefs. Accountability and a sense of responsibility go out the window. The dangerous doom loop thinking goes like this:
I am a member of industry/group X. I am important or at least my local representative tells me this when I fund his/her campaign.
Everyone else got bailed out, why not me. Soon the positive feedback loop will accelerate as people feel "cheated" for not being stimulated. I am a victim.
The heart of the Keynesian argument for counter cyclical injections of liquidity and stimulus is based on loose assumptions of the multiplier effects.
In my opinion The Keynesian stimulus thesis rests on one of two flawed assumptions.
1. Officials are expert at stimulating or allocating efficiently.
2. It doesn't matter where liquidity goes as it will multiply and create demand.
The only paper I trust these days is either labeled Charmin or produced by the Norwegian central bank, good luck with those insured muni's the fun isn't going to stop at the federal level, it could bubble up as well. MBIA, AMBAC etc. bond insurance may not be a backstop, of course the state of New York can help out.
