Friday, February 5, 2010

Random Items

A cornucopia of things for you as I press my nose against the window of the world today. It's also only 7 days before the Games.

Olympic Games

Since I will be in Downtown Vancouver during the Games, I hope to bring you some streetshot photos of things going on outside the venues - no promises though.

Less than flattering news articles on the downtown eastside continue. Here's one from the Globe and Mail.

Meanwhile the lack of snow on Cypruss is fodder for the late night talk show circuit. I mean, honestly, anyone who lives here knows that it's no great surprise there is no snow locally in February. Why on earth isn't every alpine event up at Whistler?

A sports segment on ESPN shared that sentiment when talking about Cypress Mountain. The host of the segment said, "This isn't the big downhill mountain, this is some dopey little mountain where they're going to hold their little dopey X Games events."

Sigh. Too true.

Interest Rates

The people at the Council on Foreign Relations speculate that US interest rates on Treasury debt will be increasing around the end of the first quarter if the Fed discontinues its monetization of mortgage debt.

As the Fed has essentially purchased ALL new US Treasury issuance since 2009, that seems to be a reasonable bet (hattip: Jesse's Café Américain).

  • "The Federal Reserve plans to stop buying securities issued by government housing loan agencies Fannie Mae and Freddie Mac by the end of the first quarter.

    This is not only likely to push up mortgage rates; Treasury rates should rise as well. Throughout 2009, the private sector sold a portion of their agency holdings to the Fed and used those funds to buy Treasury's.

    Once the Fed’s agency purchases stop, this private sector portfolio shift will end, removing a major source of demand in the Treasury market.

    As the chart shows, since the start of 2009 the Fed has bought or financed the entire increase in Treasury issuance. As Fed purchases slow and Treasury issuance continues at a high level, interest rates will have to move up to attract new buyers."


Gold has plunged downward as the US dollar surges against the Euro yesterday and today.

Why is this happening? The big story is the sovereign debt concerns of the impolitely nicknamed PIIGS. The PIIGS are Portugal, Italy, Ireland, Greece and Spain.

Driving the flight to the US dollar is concerns focusing on debt to GDP percentage of these countries.

What's so truly bizarre, however, is that the United States stands directly in the middle of the PIGS nations on the debt to GDP percentage scale!

In the US, state after state is facing serious budget problems. The latest is Connecticut as this report notes. "The signs of economic distress are everywhere -- in our towns, our homes, our businesses and places of worship. Connecticut residents are paying attention, and elected state officials who ignore what they are telling us do so at their own peril. If we thought that passing a state budget was difficult last year, just wait. This year's three-month legislative session will be brutal."

So... if the argument against the PIGS is the debt to GDP percentage. The exact same argument would place the US dollar in a crisis position.

Not to hard to see what lies ahead here.

It's becoming a race to the bottom, which ultimately is what makes currency values what they are. Watch for similar arguments about the size of the debt to GDP ratio to soon batter the US dollar.

Froogle Scott Chronicles

The next two instalments of the Froogle Scott Chronicles are out over at VREAA.

Part 2: Up, Up, Up: Winning the Real Estate Lottery can be read here.

Part 3: Priced Out Forever? Vancouver Renters and Basement Suites can be read here.

That's it for now. Updates may or may not be added.


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  1. No snow just makes the X-games events more Xtreme!

  2. Hey if we add Russia and the US to the PIIGS, we get PIIGS R' US!

  3. So what your're saying is that they're not only falling to the bottom, they're fighting their way there.

  4. This is a big deal. Get on board.

  5. Looks like the Big 6 Banks are even worried, about all their loan & credit card losses when the housing prices collapse.

    According to this article the Banks are urging the government to raise CMHC Down Payment requirments to try and stop this bubble. Too Late!

  6. Things are going to get ugly.

    I had read somewhere a few weeks back, that to get US Treasuries sold all they have to do is sink the stock market and commodities then the money will flood into them. I know it sounds ridiculous but with what's been happening recently, it makes me wonder.

    Great work Whisperer. Thanks for keeping on top of this, it's appreciated.