James West makes the case the USD collapse and, by extension, a bond default.
Critics argue that it just can't happen .... have they crunched the numbers?
Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.
Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.
Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009. The further out the maturities on notes, the more bearish the sentiment towards them. The only way to entice buyers is through the increase in yields.
But with yields at 1.82 per cent, five-year notes were met with a demand for 1.98 times the amount offered - the lowest bid-to-cover ratio since September. A sell-off in treasuries began in earnest upon the conclusion of that auction.
The U.S. Federal Reserve suggested last week that it was going to step up its treasury-buying activity, and the mainstream media interprets this as a form of market support. What it actually is evidence of growing anxiety and desperation on the part of the Fed as the realization dawns that demand for treasuries is progressively evaporating.
With long term yields moving up ... who's buying? who's selling?