Central Bank Balance Sheets: U.S., Eurozone, Japan

This page is created to monitor the balance sheet of the U.S., Eurozone and Japan.

There is a strong correlation between the price of gold and the expansion of the total sum of all central bank balance sheets in the world.

ECB = blue

U.S. Federal Reserve = red

Bank of Japan = green

(The Chinese balance sheet is not included in this graph as it is not available on FRED)

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Money Velocity Vs. Bond Yield

This page is created to monitor the Money Zero Maturity Velocity (MZM velocity) Vs. 10 Year U.S. Treasuries.

Historically, both are correlated. If money velocity picks up (blue chart), 10 Year U.S. Treasury Yields will rise (red chart).

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Gold Vs. 10 Year U.S. Bond Yield

This page is created to monitor the Gold Price Vs. Bond Yields.

Historically, when the 10 Year U.S. Bond Yield declines (blue chart), gold will have an up move (red chart).

The blue chart is actually the equivalent of the TIPS yield (Treasury Inflation Protected Securities), which is the Treasury Yield of U.S. Bonds minus the rate of expected inflation. The correlation between TIPS and gold is best visible when we invert the TIPS yield. Source: blog.yardeni.com

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China Boosts U.S. Treasury Holdings

China buys more U.S. treasuries to keep the yuan from rising.

Chart 1: China U.S. Treasury Holdings

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The Leverage in COMEX Silver is about to Explode

Why is the eligible silver going up at such high pace and open interest going up at the same time?

As I told people before, eligible silver is not allocated. People think they own it, but it is not available for delivery. The ratio of registered to eligible is now: 29.7%. Down from 33% the last time I looked.

As this ratio between registered and eligible goes down, the leverage is going up and up. And when this leverage breaks (due to a short squeeze), the non-eligible supply of smaller bars and coins is going to disappear in front of you.

Chart 1: COMEX Silver

People know this, and as a result are buying physical silver in record quantities. The U.S. Mint just sold a never seen record of 3.37 million ounces in February 2013.

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China Ups U.S. Bond Holdings

Surprisingly, China bought even more U.S. bonds and is now again the champion, just before Japan. Almost every foreign country increased its U.S. bond holdings in December 2012.

And now realize they are making a loss on that purchase as yields went up.

Chart 1: China U.S. Treasury Holdings

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PMI Suggesting Further Euro Strength

GDP growth in the U.S. was 0% the last quarter and that is consistent with the PMI going below 50 in the U.S. While the U.S. economy is deteriorating, the PMI in the eurozone is in a rising trend again and soon will catch up to the PMI of the U.S. Maybe we can even get a positive GDP growth in the eurozone at some point.

This trend is positive for the euro going forward. But we need to be aware that the ECB has some bullets left to devalue the euro soon...

Chart 1: PMI Eurozone Vs. PMI U.S.

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U.S. Bond Market About to Implode

I just wanted to give an update on the status of the U.S. treasury market. I warned about a bond bubble here, stating that short interest in the commercials was going up dramatically. The last months we have seen weakness in the bond market as a result, but if you think it's already over, I have to disappoint you.

The bond bubble collapse hasn't even started yet. On Chart 1 we can see that since that article, the net short positions for the commercials has even gone up (pointing to a weak bond market and a bottoming out of yields), and the non-commercials have kept buying more and more bonds, thinking it would be a good investment. If these non-commercials unwind their long positions, we will start to see the real bond bubble collapse.

Chart 1: Commercial Open Interest in Treasury Notes

Even though non-commercials are buying like crazy, the yields haven't gone down. On Chart 2 we see that yields have risen even when long positions in non-commercials went up. This is not a normal event.

Chart 2: 10 year U.S. bond yields

To find out more, go here.

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China keeps buying U.S. Treasuries

I had expected that China wouldn't buy as much U.S. treasuries in November 2012 because they bought a lot of gold (62 tonnes or $3.2 billion). But they did increase their U.S. treasuries by $200 million to $1.17 trillion.

Though, I think that China hasn't bought a lot of treasuries in December 2012 as yields were rising that month. But no worries, Japan is going to buy all the leftovers from China. Japan is almost overtaking China with its $1.133 trillion in U.S. treasuries, supposedly to devalue the yen to increase exports.

Chart 1: China U.S. treasury holdings

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Jim Rogers is Shorting Bonds

If Jim Rogers is shorting U.S. treasuries, you better watch out as he is mostly right.

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China U.S. Treasury Holdings August

Numbers are out on the Chinese U.S. treasury holdings.

In August 2012 China held $1.154 trillion in U.S. treasuries. Nothing much has changed other than that Japan almost has more U.S. treasuries than China.

Chart 1: China U.S. Treasury Holdings

As China holds its U.S. treasury holdings steady, the Chinese yuan has rallied somewhat against the U.S. dollar. I wonder what they will buy with these valuable yuan if they are not buying U.S. treasuries.

Chart 2: USD/CNY

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U.S. Debt at 16 Trillion

It's official, U.S. debt has exceeded 16 trillion dollars. It's like having a birthday or something, but we shouldn't celebrate.

Chart 1: Total Public Debt

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China U.S. Treasury Holdings Steady in June 2012

Nothing special has been reported in Chinese U.S. treasury holdings. The amount of U.S. treasuries held by China are almost unchanged at $US 1.164 trillion.

http://www.china.org.cn/video/2012-08/16/content_26252410.htm

Chart 1: Chinese U.S. treasury holdings

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U.S. Second Quarter GDP Growth Slows Down

Today the second quarter GDP numbers came out. Real GDP growth slowed down to 1.5% from 2% in the first quarter (Chart 1).

Chart 1: U.S. GDP Growth

This is a significant drop in GDP growth and is conform with the slowdown in the U.S. PMI of which I talked here. As the U.S. PMI went below 50 for the month of June 2012, we can expect a further contraction in GDP growth in the months ahead of us.  This bad news increases the odds of further quantitative easing from the federal reserve to prevent an entire collapse in GDP as we saw in 2008.

To see more about zero hour debt, read the analysis here.

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Bankrupt Cities in the U.S.

Let's follow the bankruptcy of cities in the U.S. Maybe a trend can be found.

Table 1: Bankruptcies in U.S.

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The Effect of Government on the Economy of a Country

I believe government is an important institution to keep order in a society of a country. It should focus mainly on the country's defense and should obey the constitution of the country. By no means it should involve with the economy of a country as the government is always less efficient as free market capitalism. Governments should be as small as possible, in order to let the private economy flourish. Today, governments are standing in the way of free market capitalism through taxation, regulations and counterproductive measures. What governments don't know are the unintended consequences they cause. I'm sure that governments are the root cause of all the problems in Europe and soon in the United States.

In this article I want to give an overview of several countries and their government involvement. The best measure to rate government involvement would be the amount of spending as a percentage of the country's GDP. We will discuss the effects of a big government on the country's economy and give advice to investors on how to act on this knowledge. We will see that there is a direct correlation between government size and unemployment/debt/tax rate.

To read the article go to: The size of governments and the effect on their economies.

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An Analysis of U.S. Treasury Maturities

While many investors want to believe that U.S. treasuries (TLT, DTYL) are a safe haven, I will use this article to debunk that myth with plain hard evidence. I believe holding U.S. bonds is the worst investment going forward.

I will make an in depth analysis on debt maturities in this article. I think all investors need to be aware of this trend that indicates looming default in U.S. bonds.

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Who is Holding the U.S. Bonds?

These days, we hear much talk about how low the interest rates are on U.S. government bonds (TLT, DTYL). Many say that this is because the Federal Reserve is printing money to buy up its own bonds. But actually, it's the foreigners that are buying up all the treasury debt.

In this analysis I will go through the most recent facts about U.S. government bonds and we will see that one of the most important charts to follow is this one. It will tell you the exact time when to sell U.S. government bonds.

Chart 1: Debt held by Foreigners

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China U.S. Treasury Holdings March 2012

Time for a China U.S. treasury holdings update. Apparently the February release of China's holdings of U.S. bonds was revised downward from $US 1.17 trillion to $US 1.155 trillion. But in March, China recorded the highest amount of treasury holdings, namely $US 1.17 trillion (Chart 1).

So China isn't only buying record amounts of gold, but at the same time is continuing to buy U.S. treasuries. Where on earth does China get all this money from... Right, because of production and savings.

Chart 1: China U.S. treasury holdings (billion USD)

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By 2013: Another Increase in U.S. Debt Ceiling

Everyone is saying how great the United States is growing with a positive purchasing manager index and positive GDP. But the fact is that U.S. public debt is growing much faster as GDP. But this happened only just recently.

Before 2008 (the economical crisis), debt was increasing at a slower pace as GDP. The slope at which debt rose was moderate. Notable is that for each unit increase of debt, we got more than one unit increase in GDP.

After 2008 though, we get a very different picture. Please go here to read my analysis. 

Chart 1: U.S. Total Public Debt VS. U.S. Debt Ceiling

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