Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Gold and Silver to Explode with Treasury Issuance in 2010

Commodities / Gold and Silver 2010 Dec 30, 2009 - 10:17 AM GMT

By: Dr_Jeff_Lewis

Commodities

Best Financial Markets Analysis ArticleNow that 2009 has come to a close, investors are looking forward to the happenings of 2010.  One of the most important events is the issuance of nearly $2.2 trillion in Treasury bonds to fund government spending.  Although $2.2 trillion seems relatively small compared to a federal debt just over $12 trillion, the size is magnified when you consider its impact on the markets.


2009 Treasury Sales

The 2009 Treasury issuance was relatively tiny due to the amount of quantitative easing enacted by the Federal Reserve.  To help ease the credit markets, namely the Treasury markets which allow the government to spend money, the Federal Reserve printed over a trillion dollars and purchased several hundred billion dollars of US Treasuries, as well as nearly $1 trillion of “agency debt” or mortgage-backed securities. 

After the Fed’s buying spree, there was only $200 billion in fixed income remaining, creating a net issuance in 2009 of $200 billion.  Of course, $200 billion is virtually nothing when it comes to the world economy and the amount of money in existence, and thus, $200 billion was consumed relatively easily, with no real impact on the marketplace.

The Situation in 2010

Fixed income issues are set to increase from $1.75 trillion to $2.25 trillion next year, with the difference mostly comprised of heavier borrowing by the Federal Government via the Treasury markets. 

Unfortunately, the Federal Reserve has only $200 billion remaining in its quantitative easing fund to buy agency debt and US Treasuries, and the funds will only last until March under the program enacted early last year.  This leaves a total of $2.05 trillion unfunded that must be borrowed to keep government programs in the black – at least with capital and not actual earnings. 

Therefore, in the next year, the US Treasury will need to borrow more than $2 trillion without the help of the Federal Reserve.  China has already said it is limiting its purchases of US Treasuries, and the government is proving its resolve by redeeming long-dated bonds and rolling them into short term debt.  Other purchasers, such as Japan, have their own financial problems.  The remaining countries, institutions, and other investors aren't too keen on earning low rates on what is quickly becoming riskier debt. 

What is the solution?  The Fed will simply need to print more money.

The Fed Will Have to Step in with its Printer

Remember, this recession was triggered due to a shortage of credit.  To aid in both creating credit, as well as providing short term loans to businesses and government, the Federal Reserve began to create money to ease the burden.  As a result, the Fed bought more debt than anyone else by a factor of 10. 

Moving into next year, with the same credit problems and net issuance of $2.25 trillion, the Fed will have to further its quantitative easing (inflation) programs to keep the Treasury markets liquid.  Should the Federal Reserve continue to print money to gap a shortfall in Treasury sales, the creation of $2 trillion would create inflation of 25% overnight.  Obviously, as in all markets, inflation will not come out of the woodwork for a period of months and possibly up to two years, but it will eventually reach the market.  Subsequently, in 2010, investors of all types need to be incredibly prudent with their money and protect their assets with precious metals.

By Dr. Jeff Lewis

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

Copyright © 2009 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules