Have U.S. Treasury debt security investors gone insane? Above, is the current yield curve for Treasure Debt Securities (source: U.S. Treasury Dept.) as of June 13, 2011. I’ve shown the current “official” U.S. Inflation rate (at 2.4%) as per the CPI (Consumer Price Index) from the BLS (U.S. Bureau of Labor Statistics). Bottom line, if you own the 7% T-Note you’re breaking even! We all know that the CPI is grossly understated to keep transfer payments low (Social Security, Medicare, etc.). Then why would supposedly rational investors buy debt securities at B/E? Is it security, patriotism or just insanity? Well, it’s a little of each. The “full faith and credit” of the U.S. Government stands behind U.S. debt securities. Hogwash, the U.S. is already a third world country with 1% of the population owning 24% of the assets. Add in over 40 million people on food stamps, unemployment that won’t go down and housing prices that won’t go up and you’ve got the makings of Great Depression II. The “Great Correction” is, in fact, the “Great Sham and Scam” of the U.S. Government.
And who are the biggest holders of Treasury Debt Securities? No, it’s not China; it’s the U.S. Government with almost 5 Trillion dollars ($5T) followed by, 2 – Mutual Funds $0.8T, 3 – China – $0.8T, 4 – Japan $0.6T and 5 – State and Local Governments – $0.6T. You thought you’re Social Security retirement was chocked full of cash? No, it’s full of paper, i.e., U.S. Treasury Debt Securities of course!
The Master of Disaster