{"id":14326,"date":"2013-06-17T15:38:05","date_gmt":"2013-06-17T22:38:05","guid":{"rendered":"http:\/\/www.itmtrading.com\/?p=14326"},"modified":"2013-06-19T15:37:03","modified_gmt":"2013-06-19T22:37:03","slug":"ponzi-scheme-treasuries","status":"publish","type":"post","link":"https:\/\/www.itmtrading.com\/blog\/ponzi-scheme-treasuries\/","title":{"rendered":"Ponzi Scheme Treasuries?"},"content":{"rendered":"

If the definition of a Ponzi scheme is \u00e2\u20ac\u0153Borrowing from one source to pay for another in a seemingly endless loop until no one is left to feed new money into the system at which point the system collapses\u00e2\u20ac\u009d , then a number of government programs approach shadowy reflections of a Ponzi scheme. It is something very similar to the Treasuries market<\/a> where, in the words of Rick Santelli, \u00e2\u20ac\u0153The Treasury issues paper and the Fed basically buys the paper and the intermediation of this is 22 primary dealers like in \u00e2\u20ac\u02dcBonfire of the Vanities,\u00e2\u20ac\u2122 basically knows that the Fed will always be well bid for the paper.\u00e2\u20ac\u009d<\/p>\n

Meet Scott Minerd, Chief Investment Officer of Guggenheim Partners who made the comparison of the Treasury Market to a Ponzi scheme and agrees that it hinges on the definition. <\/p>\n

Mr. Minred refers to the philosophy of Hyman Minsky, the famous economist \u00e2\u20ac\u0153Who basically, under his theory says that government programs designed to stabilize the economy are ultimately destabilizing. That is, markets that are being managed through a policy mechanism that provides stability which is not at equilibrium ultimately have to come undone once the policy is removed.\u00e2\u20ac\u009d Could this be the reason the markets tremble every time Mr. Bernanke suggest the withdrawing of QE?<\/p>\n

His reaction to the opinion of many that we will see a tapering of Quantitative Easing this year, Mr. Minerd responds, \u00e2\u20ac\u0153I am actually in the camp that I think there\u00e2\u20ac\u2122s probably at least a 50% chance that we\u00e2\u20ac\u2122re not going to taper this year, and let me tell you why. When you look at how much interest rates have moved, even before we had this massive backup in rates of 50 basis points which is about, you know, 25% given the level of interest rates we started at. We are starting to see housing activity stall out. Mortgage applications dropping off and refinancing applications dropping off, and housing is in and of itself directly and indirectly contributing to about two-thirds of GDP. So when you see the last GDP number at 2.4% and you consider that housing is at least 1.5% of that, if housing stalls out, and I\u00e2\u20ac\u2122m not talking about it falling off a cliff, I\u00e2\u20ac\u2122m talking about just the activity, flattening out where we don\u00e2\u20ac\u2122t have any home price appreciation or growth in construction, then what we\u00e2\u20ac\u2122re going to start to see is that the economy is going to stall, and if the economy starts to stall rates are going to come down, and I think the dialogue before the end of the summer is going to be what, not about tapering, it\u00e2\u20ac\u2122s going to be about increasing the size of QE or extending QE because of housing.\u00e2\u20ac\u009d<\/p>\n

Mr. Minerd\u00e2\u20ac\u2122s outlook for the remainder of the year is something less than bright: \u00e2\u20ac\u0153Over the next few months, on top of the market volatility that we are currently experiencing around the QE debate, until this thing gets a little better resolved, I think uncertainty will remain high, uncertainty is not good for asset prices and I think we are in for a rough summer.\u00e2\u20ac\u009d<\/p>\n

This is a wonderful time to look into precious metals as a preserver of your wealth<\/a> and we at ITM Trading would welcome the opportunity to discuss its many advantages, Please feel free to give us a call at 1 888 OWN GOLD (1 888 696 4653).<\/p>\n","protected":false},"excerpt":{"rendered":"

If the definition of a Ponzi scheme is \u00e2\u20ac\u0153Borrowing from one source to pay for another in a seemingly endless loop […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1207],"tags":[27,53,59],"class_list":["post-14326","post","type-post","status-publish","format-standard","hentry","category-blog","tag-american-economy","tag-federal-reserve","tag-gold-2"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/14326","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/comments?post=14326"}],"version-history":[{"count":2,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/14326\/revisions"}],"predecessor-version":[{"id":14339,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/14326\/revisions\/14339"}],"wp:attachment":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/media?parent=14326"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/categories?post=14326"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/tags?post=14326"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}