Why not, it's your money!

The Current U.S. Federal Government Spending Spree

Posted by admin in Government Spending - (2 Comments)

The Federal Government is definitely the largest customer of goods and services. The government has purchased all types of goods and services such as foodstuff, raw materials, research, properties, development, and even maintenance services and staff.. You can compare the government to a corporation if you take a close look.. The other companies will merely look very small.. If the company runs a business, then the government is a organization managing the nation. 
In order to provide the essential services for the country and its constituents, the government needs to buy what it require. Just like an office purchases utilities, supplies, along with other services for it to operate, the Federal Government must do the same thing. Government expenditures have reached as much as 0B in several goods and services.. 
Thousand of employees have been laid-off due to the fact of the economic catastrophe which also pressured companies to downsize.. The time to invest in government contracts is now.. The current release of the Stimulus Package is enough explanation.. The stimulus package is an supplemental budget from the government that allows it to shell out more to stimulate the suffering economic climate Exactly what does it mean? It means 7B will go in to the economy into diverse projects and programs. The government will buy services and products from, who knows, it may be you. With the stimulus package currently out and circulating, the time has come to sell to the Federal Government, a government contractor. 
A government contractor is usually a company or individual with products or services the government is interested. For those who have what the government needs, during a crisis it sure does need a ton; chances are you can get a government contract. The nation is in an economic hole and the government needs to pull it out of that hole. What better way to lift up than a spending spree, infuse money into the economy and try jump starting it. Businesses may not hire more workers and fire many. The Federal Government nonetheless is looking for ways to get the stimulus money into the economy through contractors. 
An undesirable economic environment and a government willing to spend billions in dollars, currently is the best time in selling to the Federal Government.

Commodity trader Phil Silverman discusses why the precious metal continues to rise at a record pace.
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Question by iamtruman: How will government spending and consumer spending improve our economy?
Fiscal deficit will likely to result in more borrowing by U.S government in the form of issuing more treasury bills and consumer spending with borrowing money will likely to result in more debt which they can’t afford to pay back. Japan has trillions of savings and Japanese government encourages consumer spending to stimulate their economy. Our savings rate is less than one percent, both our government and people are broke so the only way we can spend is by adding more debt which got us into this mess to begin with.

Best answer:

Answer by SDD
Government spending cannot “improve our economy” because every cent that the government spends has to first be taken or borrowed from someone in the private sector, who now has that much less to spend/invest. Only if you posit that that money would otherwise be buried in someone’s back yard could that be true.

You’re wrong about the personal savings rate, though. It’s about 6%

What do you think? Answer below!

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Are Tax Offset Programs Causing Student Loan Defaults?

Posted by admin in US Treasury - (0 Comments)

What is a Treasury Offset?

Under this Treasury Offset Program, the Financial Management Service, a bureau of the US Department of Treasury will offset Federal and/or State payments if a borrower fails to pay their obligation.  While the most common type of Federal payment offset is Federal income tax refunds, several other types, including social security benefit payments, are also eligible for full or partial offset. In other words, if a borrower has an outstanding debt and they have incoming social security benefits, this too can be subjected to the offset.

In addition to defaulted debts held by ED, defaulted loans held by guaranty agencies are also included in the process.

Other Federal and State agencies also certify debts for offset, but Department of Ed has historically been responsible for the largest volume of offsets.  As a result, many tax professionals, and even the IRS, will automatically assume that an offset has been requested by the Department of Ed when, in fact, it may have gone to some other Federal or State debt.

State Payments

State payments (e.g., State tax refunds), in addition to Federal payments, may be offset in the Treasury offset program.  Just recently the treasury was requested to offset both Federal and State payments on out standing federal student loans.

What is a Treasury Offset?

The purpose of a Treasury offset is to recover the amounts for the Federal taxpayers without the cost of litigation fees. It was created to basically recover the unpaid debts arising from federally supported activities, which include student financial assistance.

Since 1986 the Department of Education has referred millions of defaulted student loan debts and grant claims to the Department of Treasury for collection by offseting against federal and/or state income tax refunds and any other payments authorized by law. The Department of Ed can request that Department of Treasury arrange an offset to collect any Federal defaulted student loan debt or grant claim.  Once the Department of Educations refers a delinquent borrower to the treasury department these group of debtors are considered to be certified permanently as long as the account is in an active defaulted status (outstanding).

What does it mean if I am certified?

Once Department of Ed certifies a defaulted account for treasury offset, that account will remain certified for the life of the defaulted balance unless it is inactivated by law (e.g. active bankruptcies).  Once certified, borrowers may not avoid offset simply by making voluntary payments.  Borrowers may avoid offset by resolving the account through satisfying their account in full, settlement compromise (Partial pay-offs), completing the rehabilitation payment program, consolidation, or discharge by dispute.  In other words, if a borrower is not disputing the account they would need to either pay the balance in full or bring the account back to a current status.

How can I check if I am certified for Treasury offsets?

There are several ways to go about checking if a defaulted loan holder is certified for Treasury offset. The most common route would be to contact Department of Ed directly; however in most instances the Department of Ed’s customer service call center will often refer a borrower to the assigned collection agency currently holding the loan. A borrower is able to check with the collection agency if they have been certified for the offset because the collection agency has access to the same system as Department of Ed’s customer service representatives. As mentioned above, these agencies are notorious for falsely advising borrowers by twisting their word tracks in their favor. The collection agency’s main intent is to receive a commission from the Department of Ed for resolving the account so it may not be the wisest route. The best route to receive an unbiased answer would be to contact the Treasury Department directly. Most defaulted student loan holders are unaware that the Treasury Department has designated a call center to solely service individuals certified for Treasury offsets.

Department of Education’s customer service number: (800) 621-3115

Treasury Department’s designated offset call center: (800)304-3107

Other things that you might want to know:

Are there different types of compromises?
Standard compromises are compromises where the borrower:

* Pays only the current principal and interest (waiver of projected collection costs/fees)
* Pays at least the current principal and half the interest (50%); or,
* Pays at least 90% of the current principal and interest balance

What is the Rehabilitation payment program?
Rehabilitation payment program is the process by which a federal agency or a third-party given authority by a Federal agency, assess the borrower’s financial situation to allow a payment arrangement.  Through this process at the Dept. of Ed and the agency’s discretion, the debtors will be allowed to repay their student loans through installment arrangements (payments).  Only after the necessary documents have been obtained by Dept. of ED and the 3rd party agency the borrowers can complete the number of consistent payments required in order to successfully rehabilitate.

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Want To Know About Currency Trading And How It Effects The Dollar?

Posted by admin in US Currency - (1 Comments)

Currency trading is the wealthiest business in the world averaging about 2 trillions of US dollars and that too each day. This if compared to other equity markets together seems to be a comparison of Jupiter to earth. That is what the magnitude of forex trading and reason is for wealthy A Forex broker is a arbitrator between customer and the market.

Currency trading has its own aspects and largely depends on news and movements of the country for which currency is traded for. Here the Foreign exchange brokers come in handy and largely earn their commission either in hourly basis or volume brokerage. But their success depends largely on customers making huge profits and thus giving back huge precarious markets.

Also to capture this market there have been companies that provide security to be with the market from anywhere. Also the increased reliability and portability have made such platforms a need of the hour.

Each of us has a potent broker in ourselves, it’s just to realize and acquire knowledge, and nothing can stop you from being a successful broker. There may be hurdle and ks. So a Forex broker should always be in touch with the world and have knowledge of robust trading platforms to these brokers with large volume of transactions. These platforms are available online 24X7 and can be accessed from anywhere in the world. This makes it easy when you start but it’s easier when you know how to drive.

Question by fatjoe3833: Should I convert my US currency to Canadian dollars?
I am planning a trip to Niagara Falls, Canada. From past experience, I know that most merchants accept both US and Canadian currency. When the US dollar was worth more than the Canadian dollar I would always convert my currency. Now that each currency is worth about the same, should I still convert?

Best answer:

Answer by Jeff
If you are going to be in Canada, convert to Canadian money.

Not your whole life savings, but just what you’re planning to spend.

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Why The U.S. Trade Deficit Grows In Light Of Record Oil Prices Drops

Posted by admin in US Trade Deficit - (1 Comments)

By Jason Simpkins
Associate Editor
Money Morning

The U.S. trade deficit grew in October as both the volume of oil exports and our trade deficit with China surged to a record highs. A widening deficit means the United States will not be able to rely on trade to help pull the economy out of what may be the longest recession in the post-World War II era.

The U.S. trade deficit grew to .2 billion in October, a 1.1% increase from .5 billion in September. Imports fell 1.3% to 8.9 billion, but exports fell even further, dropping 2.2% to 1.7 billion – the lowest level since January.

On reason for the reason for the larger deficit was more lopsided trade with China. The trade gap with China increased to a record billion, up from .8 billion in September. China last year supplanted Canada as the largest source U.S. imports. Since joining the World Trade Organization in 2001, China has also emerged as the fastest growing major export market for U.S. products.

A record amount of oil imports also sent the deficit soaring, offsetting a significant decline in crude prices. Petroleum import prices fell 25.8%, with the average price for a barrel of crude tumbling by .56 a barrel to .02. However, that decline was negated by a record-high 70.9 million-barrel increase in oil imports. The sheer increase in the volume of imports drove the U.S. oil bill up by 3% to .7 billion.

Trade was also dampened by a resurgent dollar, which made U.S. products more expensive to foreign markets. The dollar surged 17% from mid-July to the end of November, reaching its highest level in three years on Nov. 21, Bloomberg reported.

“Trade is going to be a significant drag on fourth-quarter growth,” Dean Maki, co-head of U.S. economic research at Barclays Capital Inc., told Bloomberg. “The slowdown in foreign demand is hitting manufacturing.”

Trade added 1.1 percentage points to U.S. economic growth in the third quarter, when gross domestic product (GDP) actually shrank by 0.5%.

There is only 1 real answer: Simply spend less than you take in! There’s Trillion in US National Debt on the books so far, and counting ( USdebtClock.org ), totaling over Trillion in unpaid for obligations, already signed into US law. Stack T dollars up, and it would go to the moon (238850 miles one-way) and back over 6 1 times! Force politicians to face the NATIONAL DEBT problems! Without decisive government spending cuts, this will certainly ruin all Americans. There is no free lunch… Believe it when credible people are ringing alarm bells, including: former US Comptroller General David Walker (Government Accounting Office), Warren Buffett, Alan Greenspan, Ron Paul, Paul O’Neill, Robert Rubin, Paul Volcker, Bob Bixby. Watch more at www.youtube.com (short movie) or www.ioUSAtheMovie.com or better yet, buy or rent the DVD! IOUSA quote “Wake up, America! We’re on the brink of a financial meltdown. IOUSA boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic proportions.”
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Question by foolishsam: Some questions about the US China trade deficit?
1.What’s America’s attitude to the trade deficit to China?
2.Is there any aggressive moves or measures will be taken by the White House or the law makers to narrow the trade gap?
3.Is China government doing something to show their sincerity to reach the balance?
4.After China abandoned the peg on the US dollar last July and took the so-called “a basket of currencies” measure, is there any influences on the trade between the US and China? And will there be any changes?
5.Is there any solutions to narrow the trade gap?

Best answer:

Answer by Whodaman?
1) Americans are like “OMG, HOW CAN THIS HAPPEN??!! BUSH, WHAT HAVE YOU DONE!!??” and Bush is like “I DIDN’T START THIS YA KNOW, YALL JUST LOVE TO IMPORT STUFF”
2) Bush: “Hu Jintao, if you don’t reduce this trade deficit, we are gonna nuke you.” Hu Jintao “OK OK!!! NO MORE DEFICIT!!!”
3) “Hmmm, how about giving some fortune cookies?”
4) not much i suppose.
5) “LETS START BUYING STUFF FROM SOUTH KOREA!!!”

=] have a nice day

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Sri Lanka’s Trade Deficit Narrows In October
(RTTNews) – Sri Lanka’s trade deficit narrowed to US$ 328.6 million in October from US$ 414.3 million in the same period of last year, the Central Bank of Sri Lanka said on Wednesday.
Read more on INO News

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Are Free Trade Deficits Considered To Be Unconstitutional ?

Posted by admin in US Trade Deficit - (0 Comments)

Many U.S. citizens have been frustrated over the high cost of free trade including 3.6 million manufacturing job losses and its associated massive U.S. tax losses. The culprit is really the trade deficit; it creates unconstitutional tax losses and is ruining America. Additionally foreigners make huge profits from the trade deficit enabling them to buy up U.S. businesses. They now own 14% of U.S. businesses aided by trade deficit profits, but only employ about 3.5% of the U.S. workforce. This poor job creation means more lost jobs and tax revenue and more government debt increasing the national debt. These constant yearly job losses cost serious tax losses adding to the national debt. We estimate roughly trillion in lost U.S. taxes since 1971 due to excessive trade deficits! Recognizing this, the new website http://www.citizensforequaltrade.org is petitioning for an equal (balance) trade policy. The site provides:

1) A Petition you can sign to support Equal Trade to help prevent these large U.S. trade deficits.

2) An INFO Center to understand:

a. Why the trade deficit causes tax losses that are unconstitutional, unethical, and unfair.(it violates: Article 1, Section 9, Clause 5):

b. Why the trade deficit allows foreigners to buy up America.

Citizens for Equal Trade supports the Balance Trade Restoration Act of 2006 (that was never voted on) or a similar equal trade act. This site provides a great opportunity to understand these facts and act by signing this new petition, instead of just watching America being purchased by foreigners and your job outsourced!

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New York, NY (PRWEB) November 16, 2005

The deficit with China is running at an annual rate nearing $ 200 billion through September, trouncing last year’s record deficit of $ 162 billion.

Critics say the deficit is the result of free trade agreements that reduce the cost of products for U.S. consumers but send American jobs overseas, where labor costs are lower.

“Such criticism fails to tell the other side of the story,” says Dr Mark Skousen, an adjunct professor at Columbia University and chairman of http://www.investmentu.com

“Stop worrying about the trade deficit and buy China’s cheap goods. It stimulates job creation, not job loss,” says Dr Skousen.

“What is seen is the loss of manufacturing jobs to overseas jobs…but what is not seen is the creation of millions of new jobs as a result of lower consumer prices for products made by foreigners, such as the Chinese. Lower prices mean consumers have more discretionary income to spend on other things, which stimulates job creation in other areas. In fact, we’ve seen an increase in servicing, mining, construction and trade,” he says.

Consider that:


     According to the McKinsey Quarterly Report, only about 314,000 (11% of the manufacturing jobs lost) were lost as a result of trade, and that falling exports, not rising imports, were responsible.

     “Service sector offshoring destroyed even fewer jobs. These figures are tiny relative to the millions of positions lost and created every year in the United States by normal market forces,” the report adds.

     On a net basis, employment overall is on the rise. New data released by the National Statistics Office show the number of people in full-time employment increased, and the number in part-time employment (as a primary job) increased significantly yet again. Additionally, self-employment continued to rise while employment in government departments continued to fall.

     Unemployment rates are historically low (5%), indicating that despite the high trade deficits, we are enjoying virtually full employment, and better net job creation than Europe.

Bottom line: The record trade deficit with China is good news for U.S. jobs.

Dr. Mark Skousen is an economist and has taught economics at Columbia University. He has been editor in chief of Forecasts & Strategies — an award-winning investment newsletter — and three trading services. He recently joined us as the Chairman of Investment U., a free educational advisory with over 300,000 subscribers. For more information about our editors, or to set up an interview, please contact Juan Muñoz at 410.223.2693 or jmunoz@oxfordclub.com , or visit http://www.investmentu.com

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Question by gatoraaaa: what is the US trade deficit by product line?
I am seeking what is our trade deficit by product line, that is autos, oil, forrest products, etc.

Best answer:

Answer by RuffRuff
See the following: https://www.cia.gov/library/publications/the-world-factbook/geos/us.html

Current account balance:
-$ 862.3 billion (2006 est.)

Exports:
$ 1.024 trillion f.o.b. (2006 est.)
Exports – commodities:
agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% (2003)

Imports:
$ 1.869 trillion f.o.b. (2006 est.)
Imports – commodities:
agricultural products 4.9%, industrial supplies 32.9% (crude oil 8.2%), capital goods 30.4% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery), consumer goods 31.8% (automobiles, clothing, medicines, furniture, toys) (2003)

exports-imports = trade balance (which is currently a deficit!)
So, for agricultural products it would be: (1.024 trillion) (.092)- (1.869 trillion)(.049) = -.089 trillion = -$ 89 billion

You can do the math for the rest…

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What Are The Best Available Federal Government Grants

Posted by admin in Federal Government - (0 Comments)

 

With the average cost of a college education rising steadily each year, it is no wonder that more and more students are having a difficult time with paying for college. As more and more families struggle with making ends meet, it becomes a challenge with paying for college. College grants and Federal Government Grants, along with student loans are becoming more and more popular. The trick is in finding where the money is, and how to put in a quick application to get the funds. This article will help explain some tips on Federal Government Grants, college scholarships, and student loans.

 

Federal Government Grants-Finding The Best Federal Grants

 

Probably one of the best college grants out there is the Federal Government Grant. With this particular type of funding, the student receives the money, and is not obligated to pay it back. Wow, that sounds great, but there is some careful “scrutiny” prior to handing out the cash. The grant is determined by the financial need of the student, and an application has to be “honestly” filled out. The application (F.A.F.S.A.), Free Application For Federal Student Aid will ask for such things as income, and the total amount of assets you own.

 

Federal Government Grants-Finding The Best Federal Grants

 

Remember, there’s a “need” determination that the government will assess for each student who is interested in obtaining a Federal Government Grant for school, and there is that little tricky part of “Expected Family Contribution” that comes into play. That’s true, the government doesn’t want to be the only one’s that is sharing the burden of paying your college tuition, so it makes a determination if your family has enough money to “divvy” up the bill so to speak. College loans, college grants, college scholarships are becoming more and more frequent these days, as there aren’t too many applicants who have thousands of dollars laying around to pay for a semester in college.

 

Federal Government Grants-Finding The Best Federal Government Grants

 

Keep in mind that it is not only the Federal Government who is involved in handing out grants and loans for college tuition.  Some other contributors could be Federal and State and Local Governments. Some private and public organizations and corporations, and many private and public colleges as well are actively providing funding.

 

Conclusion: Federal Government Grants

 

Remember to keep in mind that these Federal Government Grants are quite different from your typical student loan or school scholarships based on the fact that they are “free school money”, and do not have to be repaid.

 

Additional Help:  We have compiled more resources for you on where to look for money for your education.

 

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What Is Currency Hedging And Can it Help Or Hurt You?

Posted by admin in US Currency - (1 Comments)

Currency hedging is an approach that aims to control the degree of risk that may be present when you participate in some type of foreign investment strategy. Essentially, the structure of a currency hedging process is an attempt to compensate for possible variations in the relative value of such currency in the investment plan. There is a hope that by minimizing the exposure of the investor from adverse changes in the money market, a reasonable return on investment be achieved even if the currency in question drops.Currency hedging is a method used to attempt to manage the degree of risk that may be present when making a transaction involving foreign currency exchange. For example, when you are dealing for property abroad, you might face some risky situations due to fluctuations in  Before currency hedging method there were only two ways to manage such currency exchange risk.

1) Wait until you need to make a foreign exchange transaction or payment with  and accept prevalent currency rate.

2) To fix the exchange rate with forward contract with the help of currency broker.

Now there is third alternative, Hedging strategies that are designed to manage exchange risk, that protects you from rate movement variations.  Currency hedging minimizes the exposure to holder of the money being transferred to unfavorable future shifts in the exchange rate.

Basic idea of hedging is to convert the currency when the rate of exchange is good and then invest with the native currency of the country where you want to invest. If investor wants to invest in US based company shares, the investor would  considering the exchange rates in uk and then use that sterling for purchase.

To protect against possible changes in exchange rates, the investor should normally agree to sell shares after a given period. The speed at which shares are sold, may be slightly lower than the exchange rate between the pound and the euro, which was in force when the shares were purchased. This creates a situation where the investor is able to make a substantial profit if the euro appreciates against the pound in the meantime. Conversely, if the euro weakens against the pound during this period, the loss is minimized by contract to sell the shares, which prevents a total loss for the investor. Overall, the Hedging mechanism offers investors some protection against currency fluctuations.

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Question by Kaydell: What two denominations of current US currency don’t have images of past presidents?
What two denominations of current US currency don’t have images of past presidents?

Who are they? And what did they do to deserve to have their images on US currency?

Best answer:

Answer by DodgerDave
One Dollar Coin – Sacagawea
$ 10 Bill – Alexander Hamilton

Silver dollars have been minted and issued at various times since 1794. Dollar coins were discontinued in 1935, then resumed in 1971 with the introduction of the silverless Eisenhower dollar. The silverless Susan B. Anthony coin, honoring the famed women’s suffrage advocate, replaced the Eisenhower dollar in 1979. The current dollar coin, which replaced the Susan B. Anthony coin in 2000, depicts Sacagawea, the Native American woman whose presence was essential to the success of the Lewis and Clark expedition. The coin has a copper core clad in an alloy of copper, zinc, manganese, and nickel, which gives the coin a golden color.

Alexander Hamilton (January 11, 1755 or 1757 – July 12, 1804) was an Army officer, lawyer, Founding Father, American politician, leading statesman, financier and political theorist. One of America’s first constitutional lawyers, he was a leader in calling the Philadelphia Convention in 1787; he was one of the two chief authors of the anonymous Federalist Papers, the most cited contemporary interpretation of intent for the United States Constitution.

Add your own answer in the comments!
US Dollar Index Sees Buying Interest
The US Dollar Index is starting to move up on buying interest.
Read more on Daily FX via Yahoo! Finance

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Are U.S. Treasuries The Next Bubble To Burst?

Posted by admin in US Treasury - (0 Comments)

We’ve survived the tech bubble and the housing bubble, but are we headed for something more catastrophic than either of those? Some experts are beginning to fear the worst.

Let’s review recent financial events. The meltdown in the global financial markets created a wave of panic and a surge of money has poured into what has always been considered safe—short-term U.S. Treasury securities. This basically means that investors are willing to put faith in and lend money to the government. Primarily because, even though our national debt stands at staggering .59 trillion, and is still growing, the U.S. has never failed to meet a debt payment. This sudden appetite for Treasuries has driven yields down to their lowest levels since the Great Depression.

Over the past couple of months, the Feds have funneled massive amounts into bailout packages upsetting the government’s balance sheet. When you add a soaring U.S. deficit into the mix, you get a situation that’s causing sleepless nights for anyone that’s paying attention.

How Low Can They Go?

We’ve been waiting to see just how low interest rates on Treasury securities could go before the rapid stream of investments would dry up. It now appears that even zero is not too low. One day during the second week of December, the annualized yield on three-month T-bills in the secondary market hit the minus zero level, down to negative 0.01%, then later that same day it rose to positive 0.01%.

This means that investors are so fearful of the markets, but still have enough faith that the U.S. government, they are willing to risk getting less money upon maturity than they originally invested, and earn no interest along the way.

The Treasury hasn’t had to auction new T-bills at a negative rate yet, but on December 8, they actually sold billion in four-week T-bills at a yield of exactly zero. Anyone who bought those can sell them in four weeks, but not for one penny more than they paid for them. At that rate, you could have just as easily stuffed a fistful of 0 bills into a coffee can and buried it in the back yard.

You might be wondering who would be willing to buy Treasury debt for little or no return? It turns out that there were plenty lined up to buy—some who probably no longer have back yards—so many in fact that the Feds reportedly could have sold up to four times as much as they did. Actually, while there are plenty of individual investors, it’s the big institutional investors like pension funds, and international central banks that are the biggest players in the market for Treasury securities.

How Long Can it Last?

There is so much money shifting into Treasuries, it can’t last forever. Investors seem to be pouring money into government securities with the same fervor that they did during the housing surge and the dotcom mania. U.S. government debt has always been considered the safest investment in the world. But now some fear the Treasury market is venturing into bubble territory.

The big question becomes, “How long can it last?” Were a bubble of this size to implode, there wouldn’t be enough sand bags in the world to stop the flood of money that would come gushing out. When the torrent was over, there would be so little left in the Treasury coffers, the government would be forced to pay higher rates on their burgeoning debt.

Our Foreign Debt Holders If such a day of reckoning is coming, it would be a devastating blow to the economy, and the dollar. At the first sign of the stock market entering a sustained period of recovery, investors would shy away from low-yield Treasuries. The Fed could then be forced to monetize Treasury securities, or else boost the rates higher.

But China and other foreign countries hold a major chunk of U.S. debt. In fact, about half of the nation’s .3 trillion in publicly traded debt is held by countries like Japan and China. That means a significant down shift in Treasury prices would lead to the decline of the US dollar, a threat of hyper-inflation and finally, a depression.

And yet, even though the U.S. has the dubious distinction of having kicked off the firestorm of global economic meltdown, our government bonds are still considered the safest investments in the world.

What’s in Store?

Just like we all thought that the price of homes could only go up, we now know that it’s that kind of irrational exuberance that blind us what’s coming. Jim Grant of Grant’s Interest Rate Observer recently commented on CNBC, “There’s more risk in things people think are inherently safe, including cash and Treasuries, vs. the things people perceive as risky.”

It appears that even though Treasury yields are at an all time low, even institutional investors are more concerned about preserving capital than they are in getting higher returns. Treasury interest rates are already at or near zero.

If things get worse, and they slip further into negative return territory, would investors actually be willing to pay the government to hold their money for safe keeping? So far, there is no indication that things will get that dire. Although, since none of the rules we’ve lived by these past few decades seem to apply anymore, we can’t speculate on the future.

We think that Treasury interest rates will probably remain low until some time mid-2009, or at least until the recession begins to lighten up. If the skittish market keeps the fear factor alive, people will keep moving money into the Treasury for safekeeping, low interest rates or not.

Question by Claudio F: What is the difference between the US Treasury 10 year bond and the US Treasury 10 year note?
I am looking for a chart that moves together with 30 years mortgage fixed rates.
I read that it moves together with the US Treasury 10 year bond: do you know where I can find a chart of the US Treasury 10 year bond?

Best answer:

Answer by tisbod5
There isn’t much of a practical difference between the 10 year note and bond. Notes can be issued with a maturity between 2 and 10 years, and a bond from 10 to 30 years. If you are looking for something that moves with the mortgage rates, you will want to look at the 10 year note rather than the bond because that is the dominate security quoted when talking about long-term rate movements.

Here is a chart from Yahoo Finance of the 10 year note rate: http://finance.yahoo.com/q/bc?s=%5ETNX&t=5y&l=on&z=m&q=l&c=
You also might find this article helpful:

http://www.urbandigs.com/2007/11/bond_yields_mortgage_rates_no.html

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Is The Wind Energy Industry The Latest To Get Government Spending Review

Posted by admin in Government Spending - (0 Comments)

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Approximately 60,000 proposed jobs will no longer be created as a result of the government’s bid to clear the national deficit. Plans to build three factories which would produce large offshore wind turbines set out by the previous Labour administration have been set aside by the coalition.

 

The previous government had allocated £60 million for the upgrade of the ports, mainly in the north-east, in order for them to accommodate the next generation of giant wind turbine production. It is believed that staff at the DECC (Department of Energy and Climate Change) continue to fight for the funding required to go ahead with the project, albeit with minimum support from the Department of Business. Both the DECC and Department of Business were initially set to provide half of the £60 million each, but this is now looking highly unlikely.

 

Furthermore, the nuclear industry has successfully secured its future budget to decommission the country’s old reactors, a process undertaken by the Nuclear Decommissioning Authority (NDA). In 2010, approximately 60% of the NDA’s budget derived from the DECC. This equates to some £1.7 billion, or roughly 40% of the DECC’s entire budget.

 

It has also emerged that both Siemens and General Electric have pledged to invest £180 million in two new manufacturing facilities in Britain, however, this promise is conditional on the necessary work on nearby ports.

 

As a means of raising the requisite funds, energy secretary Chris Huhne has founded a Green Investment Bank which will need to take public funds for existing renewable and low-carbon initiatives in order to raise enough capital.

 

The scrapping of these plans would not only prove to be a huge dent in the UK’s climate change objectives, but will also reflect badly on the Prime Minister, whose promise to lead the ‘greenest government ever’ looks to have been undermined. Although the matter has not yet been finalised (there will be a parliamentary debate held on the issue on Tuesday 12th October), it seems that the best anyone can hope for is the securing of funds sufficient to upgrade just one of the three ports.

 

With the apparent indifference of the government towards the development of a leading wind energy development programme, the burden may fall more heavily on the public. Already there has been a rise in the level of small wind turbines cropping up across the country, and this trend will only become more popular in times to come in line with the general move towards creating a greener, eco-friendly society.

 

The decision of the coalition to scrap such innovative programmes has been seen by many commentators as an indication that the government are not providing a stable platform from which to grow out of the recession. Recently, an £80 million loan to the Sheffield Forgemasters firm was axed by the government, and it seems a similar fate awaits the port modification projects in the north-east of England.

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Are U.S. Treasuries Going to Be Hot Or Not This Year?

Posted by admin in US Treasury - (26 Comments)

Wall Street’s sleepiest investment is all of a sudden its hottest one: Treasury bonds. The European debt crisis and stock-market volatility are combining to power Treasury bonds to one of their best years ever.

“Treasuries have become the place investors are going globally to hold their capital,” says Tony Crescenzi, a portfolio manager at bond-market powerhouse PIMCO. “Investors want liquidity [the ability to buy and sell easily] and the Treasury market has that.”

Treasury bonds have pulled back from their high at the end of last week, but they are still up significantly for the year. And many investors think the Treasury-bond run, despite the pause, will continue. On average, Treasury bonds, which are sold by the government to fund its debt, are up 3.7%, according to Barclays, which tracks bond returns. That might not sound like a lot, but for Treasuries it is. Treasury bonds typically have a lower return than other investments because they are generally lower-risk. The chance of the U.S. government going bankrupt is significantly lower than, say; a company goes bankrupt or a home owner becoming unable to pay her mortgage. Because of that,

Treasuries typically are referred to as a risk-free investment. The average annual return of Treasury bonds from 1802-1995 was 4.9%. That means Treasury bonds this year are on track to more than triple their historical average. What’s more, Treasuries are doing far better than most everything else on Wall Street these days. Stocks continued their recent bumpiness on Tuesday with the Dow Jones industrial average down another 112 points. May was the worst month for stocks in a year and a half. All told, shares have fallen 4% in value in 2010, according to the Standard & Poor’s 500. Treasuries have outperformed most other bonds as well. Corporate bonds, for instance, are down 2.3% in 2010. Municipal bonds, which are sold by state and local governments, are up 3.3%.

Rising Treasury-bond prices are also good news for the economy. When bond prices rise, their yields fall. The yield is what a borrower has to pay on an annual basis to an investor who buys those bonds. On Treasuries, it is the government that is doing the borrowing and paying the yield. And the lower yields are coming at a time when the government is issuing a record amount of debt in order to pay for stimulus bills and fund the growing deficit.

All that borrowing causes some to believe that the rally in Treasury bonds could soon come to an end. At some stage, all the debt that the government is borrowing is likely to increase the risk that Uncle Sam won’t be able to pay its bill. As a result, the thinking goes, the investors will demand higher interest rates for the increased risk. Even before that, the growing supply of Treasury bonds could outstrip demand from investors, pushing prices down and yields up. Lastly, an improving economy, as well as all that debt, could boost inflation, which could also cause Treasury rates to rise and prices, again, to fall.

“When you know the fundamentals, the recent rally in Treasury bonds seems like a disconnect,” says Marilyn Cohen, CEO of Envision Capital and the author of The Bond Bible. “Does a 3.3% rate make a lot of sense with our national debt hitting trillion?”

Nonetheless, Cohen says many are predicting the rate will trade down further throughout the summer, keeping the rally in Treasury prices alive at least for a few more months. And that’s good news not just for investors, but everybody. After all, it’s not just the government that is paying less. Companies and individuals are paying less to borrow as well. Ten-year Treasury bonds serve as a benchmark for lots of borrowing rates, including, most importantly,home loans. So as the yield on the 10-year Treasury bond has fallen from 4% at the beginning of April to a recent 3.3% so too have mortgage rates, which typically average about 1.5 percentage points more than 10-year Treasuries. As a result, 30-year fixed home loans recently averaged 4.9%, according to Bankrate.com. And that has given some people new optimism that housing prices can continue to climb, despite the recent expiration of the home buyer tax credit and other government-sponsored efforts that have boosted residential real estate in the past few months.

“The discussion for most of the winter was that interest rates were going to go up,” says Keith Gum binger, who tracks loan rates at HSH Associates. “This persistent low level of interest rates is providing an unexpected support for the housing market.”

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Question by Charles R: Is the US Treasury an international bank of sorts?
I hear that many countries around the world , especially China and Japan and the European Union buy US treasury bonds and keep their money in the US Treasury. Why is this? I mean the interest rate is okay, but dont they have better options for better returns elsewhere?
Why is the US treasury and US stock market the world’s “investment bank” of sorts?

Best answer:

Answer by dpanic27
Foreign countries buy Treasury bonds as a way of holding American debt, that deficit people are always talking about. Governments aren’t looking for big returns like individuals, they are looking to control our economy. Especially interest rates and the value of U.S. currency verses their currency.

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