his article continues from

Oh boy, this is as funny as it can get. World wide it has been proclaimed that people, countries are looking towards safety of their investments. US Bonds, bills are the safest place to be in…as the economy in US falters and produces hard to belive and digest bitter news daily. US bond, treasury sales go even higher record demand. May be US just need to spit out even more bad news and even bigger investment blunders of mega proportions on a daily basis.

Even though common sense tells you that this can’t be true. USD can’t be and should not be considered safe, it should not be going up in value, specially for a country going through such a turmoile. Common sense will tell you that others would want to keep a distance in such situation, then how come people are rushing towards fire only to see their investment burnt ?

Did you read Greenshoot Manufacturing ? you must read that post, you will clearly see that even though manufacturing has dropped and dropping, some how, magically Manufacuring index went up. GM, Chrysler, Ford shutting down factories, laying off people, eliminating jobs….Michigan Consumer Sentiment Index Went UP against all the common sense that you can apply.

This situation is no different…..you are told against what your common sense is telling you already. This makes it hard for an individual which side to trust, your own common sense or the math (index) or the arguments that have been thrown on your face by the media ?

I have come to an understanding that my common sense is what I am going to believe, because it has my own credibility behind it and I am to be blamed if the decision did not turn out good. But it’s better than believing bullshit and hype from the media.

Anyway, on this topic of bonds, currency and US treasuries. Let us refer to the one and only who matters the most Mr. Buffet himself and this is what he had to say about US dollars and bonds….!! Since he has proven time and again that NO ONE IS a better investor than him ( there is a reason why he is the world’s richest person ). He must be listened to…so please do.

Buffett says U.S. Treasury bubble one for the ages
Sat Feb 28, 2009 9:31pm ,
By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett, whose Berkshire Hathaway Inc (BRKa.N) (BRKb.N) sits on $25.54 billion (17.8 billion pounds) of cash, said worried investors are making a costly mistake by buying up U.S. Treasuries that yield almost nothing.

In his widely read annual letter to Berkshire shareholders, the man many consider the world’s most revered investor said investors are engulfed by a “paralyzing fear” stemming from the credit crisis and falling housing and stock prices. Treasury prices have benefited as investors flocked to the perceived safety of the “triple-A” rated debt.

But Buffett said that with the U.S. Federal Reserve and Treasury Department going “all in” to jump-start an economy shrinking at the fastest pace since 1982, “once-unthinkable dosages” of stimulus will likely spur an “onslaught” of inflation, an enemy of fixed-income investors. “The investment world has gone from underpricing risk to overpricing it,” Buffett wrote. “Cash is earning close to nothing and will surely find its purchasing power eroded over time.” < Hello, he is talking about USD here >

“When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s,” he went on. “But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”

Don’t get caught if the Treasury ‘bubble’ bursts
Updated 3/30/2009 2:52 PM |

Q: Warren Buffett said Treasuries are in a bubble right now. What does that mean?
A: Warren Buffett’s annual letters to Berkshire Hathaway investors are always worth reading.
The letters are one part common sense, one part business sense and one part shareholder information. < Gee… he did not mention government statistics and media input, I wonder why !! >

In one section, Buffett points to the current rush into U.S. Treasury bills, notes and bonds as the latest bubble in capital markets. He writes: “When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”

Yes, you read that right. Buffett is saying the value of U.S. Treasury securities has been pushed to bubble levels. Certainly, panic over the health of the financial system has pushed investors to buy dollars and load up on Treasuries. When investors rush to buy Treasuries, they push prices up and yields down.

In fact, at one point last year, buyers in short-term Treasuries were willing to accept negative yields. That is, they were willing to take back less money than they were lending, if only to be assured that they would get most of their money back.
Adding to the risks facing Treasuries is the fact inflation could be a side-effect of the government’s massive borrowing and spending to stimulate the economy. If inflation kicks in, Treasury prices will likely suffer. If at the same time investors choose to escape this safe haven, Treasury prices could be in for a big fall.

Mr. Buffet is not alone in his vision on US bond’s and treasuries future…our president says the same thing…just with a twist..message is clear if you’re paying attention.

Obama Says U.S. Long-Term Debt Load ‘Unsustainable’ (Update1)
By Roger Runningen and Hans Nichols

May 14 (Bloomberg) — President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

– This is coming from Mr. Buffet and Mr. President at the same time when China is regulary attacking USD in each and every international forum it can manage to get in China is the largest financier of US Debt. Everybody knows that even the students in Chian laugh looking at the amount of debt held with China in USD. So let us review China’s view on the situation…

Geithner looks to sell safety of US bonds < first of all if they are so safe why are you selling the concept that they are safe , anyway he is selling this to China>
By Wang Xu and Zhang Haizhou (China Daily)
Updated: 2009-06-01 09:31
Visiting US Treasury Secretary Timothy Geithner is expected to reassure China of the safety of its investments in the US and resist the temptation of trade protectionism - crucial to woo further Chinese lending to the world’s largest borrower.

Geithner, who arrived in Beijing yesterday on his first trip as Treasury chief, is expected to meet with President Hu Jintao, Premier Wen Jiabao and Vice-Premier Wang Qishan, as well as deliver a speech at Peking University.

Observers say Geithner’s top priority would be to persuade Chinese policymakers to continue the purchase of US Treasuries, vital for Barack Obama’s administration to finance its stimulus plan and pull the US economy out of recession.

Looks like Geithner’s assurance to China was not enough. So now a new candidate is being sent…over.

Bernanke Is Said to Plan Assuring China at Summit (Update2)
By Mark Drajem
July 16 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke will brief Chinese officials at a summit this month about how the U.S. plans to keep inflation in check over the next few years, according to people advised on the plans.

David Loevinger, a U.S. Treasury official coordinating the meeting, told business lobbyists and lawyers in Washington yesterday that the Obama administration was enlisting Bernanke to try to assuage Chinese concerns about long-term U.S. economic health, people at the meeting said on condition of anonymity.

–And then if the demand is so high…why is that China needs to be re-assured, go sell it to somebody else..the news does not add up. On one hand the demand is very high on the other…existing customers have be re-assured that their investments are safe. Obviously the cutomers are not looking at < or believing> what has been vastly publicized.

Geithner to Reassure China U.S. Will Control Deficits (Update1)
By Rebecca Christie

June 1 (Bloomberg) — Treasury Secretary Timothy Geithner arrived in Beijing with a pledge that the Obama administration will control its borrowing as he sought to reassure China its holdings of U.S. government debt are safe.

“No one is going to be more concerned about future deficits than we are,” Geithner told reporters on the way to two days of meetings that start today in China’s capital.
China held about $768 billion of Treasuries as of March, according to U.S. government data.

Rising Yields

Treasuries have lost 5.1 percent so far this year including reinvested interest, according to Merrill Lynch & Co. index data. The dollar has also slumped, with the Federal Reserve’s trade-weighted Major Currency Dollar index sliding 3.2 percent so far this year. < wait a minute if the demand is so high and eveybody is rushing to park their money in treasureis how come they lost ?? things don’t add up >

Looks like situation is exactly opposite to what have been potrayed by the media.

Chinese economists deem vast holding of US bonds “risky” < and so they must be re-assured >
(Xinhua),
Updated: 2009-05-31 16:16
On the first day of US Treasury Secretary Timothy Geithner’s visit to China, the Beijing-based Global Times published a survey of 23 famous Chinese economists on Sunday, saying that the majority of them deemed the vast holding of US bonds “risky.”

Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says < and this is how US visit to China was concluded…with lots of insults >
By Bloomberg News
June 1 (Bloomberg) — Another global financial crisis triggered by a loss of confidence in the dollar may be inevitable unless the U.S. saves more, said Yu Yongding, a former Chinese central bank adviser.

It’s “very natural” for the world to be concerned about the U.S. government’s spending and planned record fiscal deficit, Yu said in e-mailed comments yesterday relating to a visit to Beijing by U.S. Treasury Secretary Timothy Geithner.

The Obama administration aims to reduce the fiscal deficit to “roughly” 3 percent of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today. The treasury secretary added that China’s investments in U.S. financial assets are very safe, and that the Obama administration is committed to a strong dollar.

< here comes the insult > It may be helpful if “Geithner can show us some arithmetic,” said Yu. “We need to know how the U.S. government can achieve this objective.” The deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion shortfall, according to the Congressional Budget Office.

The U.S. needs a higher savings rate and a smaller deficit on the current account, which is the broadest measure of trade, or “another financial crisis triggered by a dollar crisis could be inevitable,” the Chinese academic said.

The U.S. current account deficit fell to $673.3 billion or 4.74 percent of GDP last year from $731.2 billion, or 4.91 percent of GDP, the year earlier.  Referring to the Federal Reserve “as the world’s biggest junk investor,” and to Chairman Ben S. Bernanke as “helicopter Ben,” Yu said the Fed has dropped “tons of money from the sky since the subprime crisis.”

“The balance sheet of the Federal Reserve not only has expanded like mad but is also ridden with ‘rubbish’ assets,” he said. < another insult >

This is not all insults just kept coming in……………

China’s Yu Tells U.S. Not to Be Complacent About Debt (Update1)
By Bloomberg News

June 2 (Bloomberg) — China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.

“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.”  Yu said he is scheduled to meet Geithner today at the Grand Hyatt Hotel in Beijing.

<This is what US thinks…>

“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”

< And here comes the response again >

The U.S. should take China’s interests into consideration “so that your own interest can be protected,” Yu said. “You should not try to inflate away your debt burden.” China could still diversify some of its Treasury holdings into euros or commodities, Yu added.

‘Buy Cheap’

“Yes, some people say the euro is very weak,” Yu said. “Okay, weak is good, we’ll buy very cheap.”

The best outcome for China would still be to negotiate with the U.S. and reach agreement on its Treasury holdings, Yu said. “The borrower should keep their promises,” he added. “The U.S. should be a responsible country.” < warning !! >

U.S. government securities have tumbled 4.3 percent this year, the worst performance since Merrill Lynch & Co. began tracking returns in 1978, as so-called bond vigilantes drove up yields to punish President Barack Obama for increasing the budget shortfall. < Humm, now that does not sound like record demand for THE SAFEST ASSETs or doe it ?>

–And that is how that meeting ended…Chinese students laughed, Yu gave a run for this money……as of writing this post new developments took place as a much higher speed…..BRIC countires that have landed American over 1.1 Trillion dollars…have joined together to seek an alternative to the US Dollar. First it was just China, then came Russia and Finally India has joined too.

Anyway that was just China…then very soon just as he left for China with a re-assurance…he also left for Gulf again to re-assure that their investment in USD is safe….

Geithner to reassure Gulf allies on dollar assets

By Ulf Laessing and Glenn Somerville

RIYADH/LONDON (Reuters) - Treasury Secretary Timothy Geithner will seek to reassure Gulf Arab states this week that U.S. dollar assets they hold in large quantities remain a strong investment.

A recent decline in Saudi foreign assets shows the purchase of U.S. treasuries by Washington’s Gulf allies, five having currencies pegged to the dollar, at levels seen in the past decades should no longer be taken for granted.

And then right around that time…Japan came up and said they must think of getting out of USD too….hummm!!

DPJ’s Nakagawa Says Japan Should Diversify Reserves (Update2)

By Keiko Ujikane and Kyoko Shimodoi

July 13 (Bloomberg) — Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds.

“In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing,” Masaharu Nakagawa, the shadow finance minister in the Democratic Party of Japan, said in an interview in Tokyo on July 9. “Many countries are starting to diversify their reserves.”

Japanese investors are the biggest foreign holders of Treasuries after China with $685.9 billion of the securities in April, and Finance Minister Kaoru Yosano said last month his trust in the bonds is “unshakable.” The DPJ yesterday beat the ruling Liberal Democratic Party in elections for Tokyo’s city assembly, boosting its prospects ahead of national polls that Prime Minister Taro Aso today called for Aug. 30.

–Now that to me does not look like people are rushing to make world’s safest investment but that looks to me like people are rushing away from it. The story continues….

CHINA - RUSSIA - INDIA
Leaders of emerging nations for an alternative to the dollar 06/10/2009 14:29
The leaders of BRIC (Brazil, Russia, India and China) will meet next week in Russia to discuss the global crisis, currencies and climate change. They aim to find a common ground to bring greater weight to September summit of the world’s 20 largest economies in the USA.
Beijing (AsiaNews/Agencies) –Next week in Yekaterinburg (Russia) leaders from Brazil, Russia, India and China (Bric) will meet to discuss the global crisis and development but also to discuss the possibility of finding an alternative to the US dollar in global currency. President Hu Jintao will represent China at the summit which the government in Beijing has already cautiously defined as being “very important”.

Russia, China to push global currency at G8 summit
Tue, Jul 7 05:47 PM
Hundred-dollar notes are placed on a desk for counting at the Korea Exchange Bank’s headquarters… Enlarge Photo Hundred-dollar notes are placed on a desk for counting at the Korea Exchange Bank’s headquarters…

China, Russia and Brazil will use this week’s G8 summit in Italy to push their view that the world needs to start seeking a new global reserve currency as an alternative to the dollar, officials said on Tuesday.

As leaders of the Group of Eight rich nations and the major developing powers travelled to Italy for a three-day summit starting on Wednesday, it seemed unlikely the currency debate would get a specific mention in summit documents.

–This is the first time ever that India has given a press statement openly.
India Joins Russia, China in Questioning U.S. Dollar Dominance
By Mark Deen and Isabelle Mas

July 4 (Bloomberg) — Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.

“The major part of Indian reserves is in dollars — that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview yesterday in Aix-en-Provence, France, where he was attending an economic conference.

Singh is preparing to join leaders from the Group of Eight industrialized nations — the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia — at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representative to the summit.

As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.

–India did not stop at questioning Dollar’s dominance…Prime Minister went on……..by adding few more remarks of his own.

Rich nations to blame for global slowdown: PM < we all know who the rich nation is >
Posted: Jul 07, 2009 at 1533 hrs IST

New Delhi Leaving for Italy to attend the Summit of G-8 industrialised nations, Prime Minister Manmohan Singh said on Tuesday that the economic slowdown needed be dealt with by a concerted and well-coordinated global response addressing systemic failures and stimulating the real economy.

“The slowdown in the advanced economies has affected our exports, strengthened protectionist sentiments and impacted credit and capital flows. We would, therefore, like to see a concerted and well-coordinated global response to address systemic failures and to stimulate the real economy,” he said in a departure statement.

–This is very significant because that just a month ago India was reluctant to join the move away from dollar.

India reluctant to join de-dollarisation chorus at BRIC
Mon, Jun 15 12:00 PM
New Delhi, June 15 (ANI): While China and Russia are likely to pitch for the induction of a new global currency to replace the dollar as the world’s main reserve (de-dollarisation) at the first BRIC summit beginning tomorrow in Yekaterinburg, it is most unlikely that India will join the chorus on this issue, according to government sources.

–Things have definitely and suddenly changed now. China has strongly suggested USD alternative as SDR and they are pushing full force forward to achieve that goal. Here is response for SDR ( Special drawing rights ) from BRIC nations so far.

Russia, Brazil Plan to Buy $20 Billion IMF Bonds (Update3)

By Alex Nicholson and Andre Soliani

June 10 (Bloomberg) — Russia and Brazil, seeking to reduce their dependence on the dollar, announced plans to buy $20 billion of bonds from the International Monetary Fund and diversify foreign-currency reserves.

Russia’s central bank said it may cut investments in U.S. Treasuries, currently valued at as much as $140 billion, a week after China said it may reduce reliance on the dollar and American bonds. Brazil’s Finance Minister Guido Mantega said his country will purchase $10 billion of debt sold by the IMF, China will buy $50 billion and India may announce similar funding.

China is expected to buy as much as $50 billion of the bonds, IMF Managing Director Dominique Strauss-Kahn said yesterday.

Russia May Swap Some U.S. Treasuries for IMF Debt (Update1)
By Alex Nicholson and Dakin Campbell
June 10 (Bloomberg) — Russia may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the central bank said today. The comment drove Treasuries and the dollar lower.

Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said some reserves may be moved from Treasuries into IMF debt, reiterating comments made last month by Finance Minister Alexei Kudrin. Ulyukayev’s remarks were confirmed by a Bank Rossii official who declined to be named, citing bank policy.

Will this happen ? Will USD go out of fashion ?

Based upon creditbility of Mr. Buffet it’s not a question ‘if’ it will happen but rather when will it happen ?

Then the next question is are you ready ? do you have a plan ? well, Chinese do…….

Chinese Yuan’s Role in Global Trade to Surge by 2012 (Update1)
By Anchalee Worrachate

July 14 (Bloomberg) — The role of China’s yuan, or renminbi, in global trade may increase at a faster pace than most economists expect as the country surpasses Japan as the world’s second-biggest economy, according to HSBC Holdings Plc.

As much as half of Chinese trade, or about $2 trillion, will be settled in yuan by 2012, from less than 10 percent today, said Qu Hongbin, China chief economist at HSBC, Europe’s biggest bank.

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