Yankee Doodle Con Men

By: David Cox
Submitted: 2007-01-17 16:25:29
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Shill ’shil, n : one who acts as a decoy (as for a pitchman) If I were selling twenty dollar bills on the street corner for ten dollars the natural inclination would be to suspect that I was up to no good. As a child we are admonished that all the glitters is not gold. Conversely if I were on that same street corner selling twenty dollar bills for twenty five dollars you wouldn’t expect business to be very brisk, yet that’s exactly what caught my attention.

America as a nation finances it’s debt with treasury notes holding auctions and selling them with a promise of repayment with interest. Kind of like a savings bond for nation with an income surplus, a way for nations like Saudi Arabia or Kuwait or China with huge cash in flows to be enable the bank to close their vault door at night. If for example the world economy were such that there was a low demand for the notes the government would raise the yield rate to make them more attractive, just as your bank raises interest rates to attract funds. Yet the yield on the treasury notes has barely moved despite the value loss of the dollar

Roman Caesar’s valued coins at how many could be struck out of a pound of gold or a pound of silver hence the pound sterling. The availability of precious metal limited the wealth of paupers and kings alike, but we no longer use a gold standard or silver standard it was too limiting to economic growth. We have gone to a paper trust system, if your sitting around the poker table with Bill Gates and Oprah Winfrey and they were having a bad night and Oprah says I’ll see your million and raise you a million, you look down at your four aces and say Oprah I don’t see any money on the table. See looks up at you with those big brown eyes and says you can trust me for it and Bill chimes in saying she’s good for it I’ll vouch for her.

Well what would you do? It’s easy to trust people with all the money in the world what motivation would they have to cheat you? These treasury notes are all about trust, as long as the US dollar is the world’s reserve currency the world is saying we trust you more than anyone else. But Bill and Oprah are having a bad night I’m up 900 million dollars The busboy can hardly be seen over the pile of money around him. So by 2:00 AM I’ve got a pile of IOU’s six inches high and when Oprah grabs her pen to write out another one I shake my head and say Oprah I just don’t want anymore of your paper. Bill pops up and says I’ll by all her IOU’s I’ll be glad to buy them, but Bill I add your not doing to well your self?

The game is all about trust, in June 2005 US public debt stood at 4,528 Billion dollars by June 2006 it had reached 4,797 billions. Ok this isn’t news; we all know this country is up to its eyeballs in debt. But since the US is the world economies, Bill Gates and Oprah Winfrey lets take a look at who’s taking the IOU’s and who’s not. Our good friends the oil sheiks and OPEC moguls have added to their holdings from 68.5 Billion to 101.5 billion in twelve months. They’ve got plenty and have to keep pumping and if they cut the US off the world economy goes in the dumper demand falls. The price goes down they lose either way, either they take the paper and take a chance or lose up front.

China has expanded from 298 billion to 327 Billion in twelve months, not a huge increase little more than ten percent but when you have a trillion dollar account surplus (that’s 999 billion 999 million 999 thousand 999hundred plus a buck) Hey Oprah can I borrow $3.27? Our friends in Korea our pals the ones we’ve the US opens our markets to 63 billion to 69 billion, six billion in twelve months that one strikes me as bizarre, we import their cars and goods at the determent of our own and they can only scrap up a lousy 6 billion to help us out? Why even the much maligned French kicked in all most that much and increased their holdings that much, from 23.2 to 28.9 billion a 5.7 billion increase, that’s a lot of wine and cheese folks.

As unnerving as the huge debt numbers can be the question we are forced to ask is, Who’s not buying and why? OPEC China just numbers on a page to them not a big deal but ask yourself this grasshopper, why did the following country’s reduce their holdings? Japan –32 billion, Switzerland – 4 billion, Netherlands –2.2 billion, Ireland, -2.2 billion small purchasers and private holdings dropped from 139 billion to 120 billion. Ok fine some countries are moving away from the dollar currency so what? Please look who is buying and who are not, those who are buying have an overriding motivation to buy it is in their own self-interest. The countries listed who have reduced their holdings are they enemy’s or even unfriendly to the US? No, but what they are, is not dependent on the US, they decide using financial criteria alone not political whether to buy or not.

Ok, China OPEC, Korea you don’t need a calculator to figure this out but Her Majesty’s Government of the United Kingdom has purchased 142.6 billion dollars worth of IOU’s in twelve months from 58.8 billion to a staggering 201.4 billion, excuse me your majesty but where are you getting all this cash? Did you liquidate Charles’s inheritance? Not that it’s any of my business but when you throw in the common wealth’s additional 26 billion it totals 168.6 billion dollars in twelve months. I know Great Britain is America’s greatest ally but if your drowning do you really want your friends to jump in and drown too?

Who is easy to understand, what is the extraordinary increase in purchases so the question is why? Why would the UK purchase more US treasury notes than OPEC, China Germany and France combined in twelve months June 05 to June 06? Why run to buy more dollars when nations without self-interest or non-dependant are moving away from the dollar. It smells like there's something rotten in Kensington

Shill 'shil, n : one who acts as a decoy (as for a pitchman)

Data is from the US Treasury - Current as of June 2006

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