The FED has spoken "no bailout for mainstreet"
"the Fed has now delivered its ultimatum: there will be no “quantitative easing” for municipal governments."
http://www.webofdebt.com/articles/nobailout_mainstreet.php
So listen to the below and realise municipal defaults big time is on it's way..
The coming municipal chrisis
http://www.youtube.com/watch?v=DD9gLtbu2qM&feature=related
Given the dire straits US finances are in also on a state level it's quite reveiling realising that now the only thing able to keep the municipal bonds market up in the US is the assumtion the state (read FED) will come to the resque and bailout also that market:
GAO: "USA is living beyond its means"
http://www.youtube.com/watch?v=KjZBOCAgR64&NR=1
But GAOs warning has by no means been adhered to over the years and thus the situation now has worsened. Now it's real bad..or how about a unfunded liabilitie in the tune of well over $200 trillion?
http://www.news.com.au/business/breaking-news/us-government-hiding-true-amount-of-debt/story-e6frfkur-1225926567256
So now with the assumtion municipals may not be saved by the state (read FED) that then is a marked heading to some real short term challenges. But the situation in fact is even worse on the state level where today the FED increasingly are the one buying treasuries, as foreginers hold back and even withdraw, and they do that via QE, printing money out of thin air, and then buing bonds with a very low short term interest. So far they have been able to kick the can further down the road for a while.
However as there is nothing in this world that builds inflation to the extent QE does and as the US unike the Japanise have zilt and zero domestic savings able to finance this debt this all spells dollar devalutaion as interrest rates starts to increase and the interrest payment on that debt is heading higher.
In short - bonds regardless of whether these are treasuries or minicipals all are assets private investors all have started to flee from already leaving only the central banks and the IMF to try to juggle the situation. As times passes by this will become evident for most people. Instead hard assets is where it's at.
Some say "yeah but look at the dollar now strengthening". Sure but then you're measuring against other fiat currencies and not relative real values. Right now nobody wants a hard currency and debasing the currency game is where it's at. In the mean time cost for food and living all are heading higher.
It's all a competition right now between the Dollar and the Euro as the focus changes between US treasuries and municipal markets and the European PIIGS. The one holding the bonds markets up in the US is the FED via QE. In Europe we have the central banks but also the Chinese.
Them chinese are smart people, buying up real cheap European countries and thus political as well as economical influence. Guess who was part in financing the recent Portugese and Spanish bond auctions..?
China lends more than World Bank to developing nations
http://www.msnbc.msn.com/id/41128822/ns/business-world_business/
Bond vigilante
http://en.wikipedia.org/wiki/Bond_vigilante
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