[BigTex]

If the dollar is going to be worth less and less going forward, who is buying long term U.S. debt at such low rates, and why?

I understand the China play, but that CAN'T go on indefinitely.

Sooner or later, the risk associated with buying the long term debt MUST show up in the interest rate being paid on the debt.

For example, the Lehman 20 year treasury ETF (TLT) is trading at $96 or so. If long term rates went north of 7%, it would cut the fund's value in half. That's crazy, yet I don't see what will stop it from happening.

[scienceteacher]

That's tight Rex - and things that can't go on any longer tend not too! Rates are going to go up and bonds will crash. Schiff says bonds are the last bubble!

[Gerben]

If you believe that inflation will not rise and the dollar will restore to its old value, then buying US bonds is a pretty good investment.

[heroineworshipper]

It's the only place to put cash when you're too terrified of the stock market.

[BigTex]

$this->bbcode_second_pass_quote('heroineworshipper', 'I')t's the only place to put cash when you're too terrified of the stock market.

[Concerned]

$this->bbcode_second_pass_quote('BigTex', '')$this->bbcode_second_pass_quote('heroineworshipper', 'I')t's the only place to put cash when you're too terrified of the stock market.

[pup55]

$this->bbcode_second_pass_quote('', 'w')ho is buying long term U.S. debt at such low rates, and why?

[DantesPeak]

In addition at this time the trade deficit greatly exceeds the budget deficit. Foreign governments usually want to invest those dollars in US treasuries, and to a lesser extent US government agencies (Fannie, Freddie).

So there is a surplus of demand as compared to supply. The interest rate is not important to foreign governments because of a lack of alternatives.

[BigTex]

The idea that a government would be able to sell bonds that pay an interest rate that is below the rate of inflation on the currency in which the bonds are denominated CANNOT continue for any period of time.

If anyone can explain how this CAN continue long term, please explain. I understand it is happening right now, but right now is a pretty unusual set of circumstances, in my view. In fact, I think the fact that it is happening right now is probably one of the reasons that whatever cliff we are driving toward is going to be so ugly.

For example, if I was an OPEC member receiving dollars for my oil, I would be PISSED. The U.S. would be telling me to pump more oil, but I would see the U.S. doing nothing to protect the value of the currency used to purchase my oil. At some point, I might just get fed up with the arrangement.

Long term interest rates need to be about 7-8% right now. This would put a huge damper on economic activity, which is exactly what we need. But when this happens it's going to kill the current bond holders, who imagine they are in a safe investment. Holding a long term bond that pays 3-5% right now is going to look like a very bad idea in a year or two.

[mmasters]

It's a symptom of the type of debt based money system we use and how it's being used. It works this way because the money is inflating and interest is being charged so that makes the current money worth less over time. As a result the focus naturally becomes on short term money. The fact that long term rates have gotten like this is because there's so much inflation it has warped the system as such.

If you look at a number of ancient civilizations like the Egyptians they weren't short term focused as you can see the monuments they built still standing proud today. They also used a currency system that's rather the opposite of the one we use today and encouraged long term investing by paying a fee to use money rather than an interest charge.

[dukey]

interest rates are so low
to destroy the dollar
so it can be replaced with the amero

[BigTex]

$this->bbcode_second_pass_quote('dukey', 'i')nterest rates are so low
to destroy the dollar
so it can be replaced with the amero

[Starvid]

$this->bbcode_second_pass_quote('dukey', 'i')nterest rates are so low
to destroy the dollar
so it can be replaced with the amero

[Starvid]

$this->bbcode_second_pass_quote('BigTex', 'T')he idea that a government would be able to sell bonds that pay an interest rate that is below the rate of inflation on the currency in which the bonds are denominated CANNOT continue for any period of time.

[Starvid]

From some guys I like:

[AWPrime]

Starvid, then I would go with Iceland.

[Alcassin]

$this->bbcode_second_pass_quote('Starvid', '')$this->bbcode_second_pass_quote('dukey', 'i')nterest rates are so low
to destroy the dollar
so it can be replaced with the amero

[BigTex]

$this->bbcode_second_pass_quote('Starvid', 'F')rom some guys I like:

[Euric]

$this->bbcode_second_pass_quote('Gerben', 'I')f you believe that inflation will not rise and the dollar will restore to its old value, then buying US bonds is a pretty good investment.

[xarkz]

$this->bbcode_second_pass_quote('AWPrime', 'S')tarvid, then I would go with Iceland.