How are you going to cultivate your finances in these economic times with the rapid destruction of the money balances?
When it comes to foreign creditors selling off their U.S. Treasuries, it seems like they’ll always buy our debt because our bond market is the most liquid, safest warehouse for their money. In the short-term, that’s probably true. But the longer-term trend is much different. Like irresponsible teenagers throwing a party and trashing the house while their parents are gone, the Fed and Washington politicians don’t want to tell their constituency the ugly truth: that the current government spending spree is not only mortgaging America’s future, but will destroy the financial foundations of this country.
But over time, they WILL gradually lower demand for U.S. debt, pushing bond prices lower, and interest rates higher.
Why are foreign creditors trying to avoid U.S. debt? First, the U.S. government has adopted an unofficial policy of U.S. dollar debasement or, at best, an official policy of not-so-benign neglect. Second, despite a U.S. federal deficit that’s at least three times larger than the worst in history, there’s no plan to bring it under control. Third, the U.S. Federal Reserve is monetizing the debt with printed money, a classic cause of rising gold, rising commodity prices, and a declining currency.
Concern is rising sharply in places like China. The country has more than $2 trillion in reserves. Perhaps as much as ¾ of that is in US dollars. If the dollar keeps declining, so too will the value of those Treasuries, corporate bonds, and equities. In fact, the former vice chairman of China’s Standing Committee warned that concern is rising, and rising fast.
China’s Ministry of Finance also said that it would sell $900 million worth of government bonds soon. This is the first issue of Chinese government debt targeted at global investors. The idea is to increase international confidence in China’s currency and China’s bond market.
Please don’t disregard this important long-term trend. It’s going to lead to higher interest rates, whether the Fed and Treasury like it or not. That sounds like a good thing if you own those securities, but it’s not…remember, when interest rates rise, the value of the underlying bonds decrease substantially.
For those of you with a long-term horizon in your retirement planning, make sure you understand that it is a near certainty that US savings bonds and Treasury bonds will drop dramatically in value.
At GLSI, we offer up to 10.0% fixed interest, secured by real estate whose cash flow is nearly double that. And when we say secured, we mean secured by a 1st position mortgage. You’re not second or third in line behind other lienholders. Contact us for a truly fixed and secured investment!
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