Saturday, February 26, 2005
The Credit Bubble
From Investment Outlook by Bill Gross | March 2005, we see that the supply of Treasurys has increased four-fold since 1985, and almost 70% of the new debt is purchased by foreigners.
The second chart shows net purchases rising at a parabolic rate. Because we are flooding the world with our dollars, foreign countries are recycling those dollars into the purchase of our debt at an ever increasin quantity. Parabolic curves do not end well!
It seems to me that we are between a rock and a hard place. We can complain about the ever increasing debt of the federal government and individuals using home equity to finance purchases, but we are like an animal on a tread mill. We will not like the consequences of slower debt creation.