Rebels captures Mosul, Iraq’s 2nd largest city

[boneyard bill]

If China wants to bring down the dollar all they have to do is start selling all those US Treasuries that they're holding.

Why would the sale of already-issued Treasuries affect the dollar exchange rate?

(I could see the sale of China's dollar reserves having an effect....)

The sale of existing treasuries would have a severe impact on the sale of new treasuries. That would in turn have a severe impact on the interest rate of treasuries. That would then impact the value of the dollar, which would then impact the dollar exchange rate.

The US pays interest on their Treasuries? Isn't it ridiculously low as it is?

Yes, but it's important to distinguish between the face value interest rate and the yield. The yield is the interest rate that you actually receive in accordance with what you paid for the bond. So if you bought the bond at a discount or a premium, the yield will not be the same as the interest rate on the bond. For example, if you bought a $100,000 bond yielding 10% at a 50% discount, then you're yield would be 5% (+ the adjustment for the additional $50,000 that you would receive at maturity).

As a result, the interest rate that the Treasury Department will offer on new issues will be determined by the current yield (not the interest rate) on old treasuries that are being traded. So if previously-issued treasuries that had five percent interest rate are now yielding 2.5%, new treasuries will be offered at something close to 2.5%.

But this means the market can be manipulated by a large enough buyer, and the Federal Reserve is large enough to do that. So if the Fed buy treasury bonds in the open market (quantitative easing), it can force the price of bonds up and this forces the yield down. This enables the Treasury Department to issue new bonds at the same rate as the low yield that is induced by the Fed buying.

So the Chinese can play this game as well. They can manipulate the value of treasuries (and therefore the value of the dollar) by intervening in the markets themselves if they choose to do so. The difference is that when the Fed intervenes, it creates the money to do so and that, in itself, lowers the value of the dollar. So long term, Fed intervention weakens the dollar and cheats those foreign central banks that hold dollars as a reserve. That's why Obama is barely welcome at meetings of the G-20 anymore. The BRICS and associate nations are plotting the downfall of the dollar as we speak. It isn't that they want the dollar to fall, particularly, but they need to find ways to protect themselves from our cheating. They are proceeding cautiously and the Chinese, especially so. The Russians, on the other hand, are anxious to bring the dollar down as they have much to gain and very little to lose.

 

[boneyard bill]

Yes, quite low. In fact, I would say that if treasuries were at actual market values then the interest rate would be much higher.

Good point. Wait.. what? The US is forcing others to buy at these low rates?

No. That's the problem. No one is buying. At least, no one is buying any more treasuries. They are still rolling over the old debt; but the Fed is the main buyer of the deficit. The US must borrow $4 trillion a year. $1 trillion finances the added deficit. The other $3 trillion goes to pay off old bonds that have matured. If China, Japan, Saudi Arabia, Brazil, Russia, and the mystery Belgian buyer would cease to roll over the old debt, we'd be in very serious trouble because no one would be buying our bonds. If we can't borrow money we can't pay our bills. Worse yet, we couldn't even redeem our bonds that have matured. The problem for these countries is, if they don't roll over the old debt we can't redeem our debt to them, and they don't want to write that debt off.

The option, of course, is that we could print the money to redeem the old bonds, but that also would collapse the dollar. No one would lend to us anymore. We'd have to print money to run the government and that would lead to inflation and an eventual collapse as well.

So no. They're not FORCED to lend us money, but they have to roll over the old debt or face the prospect of never being paid back. (In fact, they never will be paid back except, perhaps, in worthless printed money). But everyone is maintaining the fiction that US is good for all that debt because acknowledging otherwise would be worse.

 

[boneyard bill]

If China wants to bring down the dollar all they have to do is start selling all those US Treasuries that they're holding.

Why would the sale of already-issued Treasuries affect the dollar exchange rate?

(I could see the sale of China's dollar reserves having an effect....)

The sale of existing treasuries would have a severe impact on the sale of new treasuries. That would in turn have a severe impact on the interest rate of treasuries. That would then impact the value of the dollar, which would then impact the dollar exchange rate.

China holds $1216 billion in treasury bonds (http://usa.chinadaily.com.cn/2014-06/17/content_17595524.htm)

Daily volume in the treasury bond market this past May was $468 billion (
https://www.google.com/url?sa=t&sou...r47hcj7WDSxJ8_qbg&sig2=UiKp-HgMhE4yMihaCRaQzA)

So China could totally divest and a week later nobody would have noticed...

Daily volume isn't relevant. Banks, hedge funds, insurance companies, and pension funds are buying and selling US Treasuries all the time as a normal part of their portfolio management. US debt is $17 trillion. About half of that is held overseas. So China holds about 8% of all overseas dollars. That is what matter is in the FOREX markets. If she dumped her holdings the dollar would fall sharply. Where would all those dollars go? They wouldn't get recycled back to the US because anything anybody wants from the US has already been bought. That's why there's a surplus of US dollars in the first place. We've been running Forex deficits of $800 billion a year. More dollars chasing the same number of goods means a cheaper dollar.

 

[boneyard bill]

It is true that a collapsed dollar will hurt China, but the big question is who would get hurt more?

If one acts on the premise that no country would ever do something that would cause itself harm, then no country ever goes to war because even the victor is harmed by the war ... just not as much as the loser of the war is. Wars are expensive in both dollars and blood, so if no country would ever do something that hurts itself all countries would act to avoid war at all costs. Even massively powerful ones that are bullying some smaller country, because even actions like that have some small cost of blood and money.

Yep, a collapsed dollar would hurt China. So? The question is - do the leaders of China think it is worth it?

The US debt will never be collected. Everyone knows that. If they act to enforce payment we might give the printed dollars but that's essentially the same thing as a default. So China knows the day of reckoning will arise and so does everyone else. The question is when. The question is how to time it to do the least damage. For China that means diversifying its export market a much as possible to prepare for the loss of the US market. It means creating dollar substitutes (the currency swap agreements), and creating non-dollar financial infrastructure (the new Shanghai banking structures, the BRICS development bank, the convertibility of the yuan). All of these things are in the works.

The dollar will not collapse. It is in the process of collapsing.

 

[tupac chopra]

So China could totally divest and a week later nobody would have noticed...

It's not that the market could not absorb it but the message it would send.
But as I mentioned the FED and Beligium ..lol... have been the two biggest buyers. The FED's (the largest hedge fund in history according to Buffet) balance sheet is way to stretched, and Belgium...lol

 

[metacristi]

But I thought we brought them freedom and democracy and everything is great now?

Yeah, well things can change with our troops gone for now over 2 long years. Can't wait for the Afghan sequel...I hear it should hit the theaters in about 2 years.

We can be almost sure of that. Yet this (almost) total failure has little to do with the policies of the 'evil' West. The bulk of the problem is of course the theology of islam itself (those capable to learn something from the American or Western occupation did it easily: Germany, India, Japan, South Korea and so on). Add this theological factor into equation and the solution to the problem may be within easy reach, ignore it totally and a never ending series of ISISs & Talibans is very plausible...Secular problems have secular solutions but problems with very important religious dimensions cannot be solved durably without addressing the religious aspects.

What islam needs is a rehabilitation of Human Reason and a change in the religious educational system to the extent that people become capable to confront not only Islamic jurisprudence and Hadith (done on a rather modest scale even today) but also the quran itself (source of important problems 'imported' in sharia; around 20 percent of sharia comes from the quran). In other words the creation of a liberal islam on a par with liberal Christianity, a process validated by History (even the quran should not be considered inerrant, leaving the doors wide open to important changes)*. This can also stop once and forever the bloodshed of muslims by muslims (for these attempts to purge islam of the 'unbelievers', even if only petty differences are involved, shia vs sunni case, comes from the fundamentals of islam, Salafism and Khomeini's shia islam are closer to 'undiluted' islam not something alien to it).


*the attempts to claim that this is 'bigotry' and 'islamophobia' can only show the poverty in argumentation of some people, real counterarguments do not need this approach

 

[funinspace]

I thought this was a really good read on the years of machinations and squabbling over oil, primarily within Iraq; with snippets of what I found interesting by Michael Schwartz (an article within Tom’s article).
http://www.tomdispatch.com/blog/175860/

Under the seething ocean of Sunni discontent lies a factor that is being ignored. The insurgents are not only in a struggle against what they see as oppression by a largely Shiite government in Baghdad and its security forces, but also over who will control and benefit from what Maliki -- speaking for most of his constituents -- told the Wall Street Journal is Iraq’s “national patrimony.”
<snip>
So here’s where Iraqi oil, or the lack of its revenues at least, comes into play. Communities across Iraq, especially in embittered Sunni areas, began demanding funding for reconstruction, often backed by local and provincial governments. In response, the Maliki government relentlessly refused to allocate any oil revenues for such projects, choosing instead to denounce such demands as efforts to divert funds from more urgent budgetary imperatives. That included tens of billions of dollars needed to purchase military supplies including, in 2011, 18 F-16 jets from the United States for $4 billion.
<snip>
There was nothing new about local guerrillas attacking oil facilities. In late 2003, soon after the U.S. occupation cut off the flow of oil revenues to Sunni areas, residents resorted to various strategies to stop production or export until they received what they felt was their fair share of the proceeds. The vulnerable pipeline to Turkey was rendered useless, thanks to more than 600 attacks. The Baiji and Haditha facilities held insurgents at bay by allowing local tribal leaders to siphon off a share -- often as much as 20% -- of the oil flowing through them. After the U.S. military took control of the facilities in early 2007 and ended this arrangement, the two refineries were regularly subjected to crippling attacks.

The pipeline and refineries returned to continuous operation only after the U.S. left Anbar Province and Maliki once again promised local tribal leaders and insurgents (often the same people) a share of the oil in exchange for “protecting” the facilities from theft or attack. This deal lasted for almost two years, but when the government began cracking down on Sunni protest, the “protection” was withdrawn.

 

[Jimmy Higgins]

Nothing is ever as it seems at the surface.

The Obama Admin has been on Maliki to stop this crap. He hasn't and it has made it easier for ISIS to make in roads into areas that have had enough of the face palming.

 

[funinspace]

Nothing is ever as it seems at the surface.

The Obama Admin has been on Maliki to stop this crap. He hasn't and it has made it easier for ISIS to make in roads into areas that have had enough of the face palming.

In my post #36, I cited an interesting article about Chelsea Manning, and her leaking of classified information from 2010, about our military cooperating with Maliki’s security thugs in suppressing peaceful dissent against the government (if she is to be believed). Of course, the President certainly can’t control the military top to bottom, so I’m not trying for a big blame game against him. This is especially true if the military had been doing this for many years. But even if the administration was trying to lean on Maliki to be more inclusive and less repressive, it won’t get very far if our military on the ground doesn’t give a shit.

 

[funinspace]

Ok, I have officially decided that Pres. Obama has lost his mind and has become a true neocon. This is just somewhat less a totally fucked up idea as the Shrub’s invasion of Iraq. A “Stabilization Initiative” to destabilize Syria…brilliant language. One cannot fund a civil war in Syria at the same time hoping to reduce ISIS influence. And wonderful, people are now talking about giving stinger missiles to “vetted moderate" terrorists. Yeah, those stingers would never fall into ISIS hands…fuck…double fuck. A stinger would do one hell of job on a passenger jet just after takeoff…hopefully Obama is not so stupid as to supply stingers.
http://www.bloomberg.com/news/2014-...illion-to-arm-moderate-syrian-opposition.html

President Barack Obama asked Congress to approve $500 million to arm and train “moderate” Syrian rebels fighting Bashar al-Assad’s regime, as the administration seeks to rein in Sunni extremists whose fight has spilled across the Syrian border into Iraq.
<snip>
The money, for the fiscal year that begins Oct. 1, would be part of Obama’s $1.5 billion plan for a Regional Stabilization Initiative…
<snip>
Perhaps the most effective weapon the U.S. could provide the Syrian rebels is Stinger missiles that can shoot down aircraft, said Michael Pillsbury, a senior fellow at the Hudson Institute in Washington.

“It would have the same kind of dramatic impact it did on the Afghan rebels” who fought the Soviet Union in the 1980’s, said Pillsbury, who as a Pentagon official in President Ronald Reagan’s administration was responsible for military support of covert action.

 

[Nexus]

Ok, I have officially decided that Pres. Obama has lost his mind and has become a true neocon.

He always was one. Obama serves the military industrial complex period. So always expect him to support more war and more chaos which enriches his employers.

 

[funinspace]

Ok, I have officially decided that Pres. Obama has lost his mind and has become a true neocon.

He always was one. Obama serves the military industrial complex period. So always expect him to support more war and more chaos which enriches his employers.

Your right, I should have said "is a true neocon" not "has become"... Yeah I knew he prostituted himself to the military industrial complex, I just had a tiny bit of hope that he wasn't this deep in...

 

[funinspace]

I don’t read Pepe Escobar’s writings too often, as he has a rather flamboyant style (Oh he has a strong dislike for the US govt as well). Anywho, he wrote something that I’ve been pondering. What if ISIS is drawn to a standstill, or even starts loosing territorial control of areas they have now. Will the wolves turn on those powers that have been arming them in the past? It would be pretty ugly, if ISIS could start destabilizing SA. I know they have an iron security grip on their country, but it is amazing how fast autocratic governments can crumble. And dang those House of Saud leaders are really old farts. Even if they could keep a lid on extreme violence, once people sense that control is lost, there are shitloads of oil facilities to have to protect from attack.
http://www.atimes.com/atimes/Middle_East/MID-02-270614.html

ISIS won't take over Baghdad. But like a freak mutant, in a Hardcore Sunnistan goes Hollywood fashion, it might go even more bonkers and try to take over Amman, Doha and even Riyadh.

The Empire of Chaos will keep betting on - what else - chaos. And it's going swimmingly its way - from the real possibility of a final push towards a Great Kurdistan (in Syria, Iraq, Turkey and even Iran) to sectarian militia hell all across Iraq, Syria, Lebanon, Turkey and Yemen. Not to mention all possible ramifications in Northern Africa, Central Asia and the North Caucasus.

What will Hillary Clinton, the Hillarator, do? In this case, one's gotta wait for early 2017. She could always pull another "We came, we saw, he died" and triumphantly stage a second coming in the Levant as a droned Athena singing Light My Fire.

Now I’m stuck with a perverse association with Light My Fire…

 

[Jimmy Higgins]

My favorite part of all of this is that Obama will be criticized by the Right by being too comfy with the terrorists, not doing enough, and losing the won war in Iraq.

Ok, I have officially decided that Pres. Obama has lost his mind and has become a true neocon. This is just somewhat less a totally fucked up idea as the Shrub’s invasion of Iraq. A “Stabilization Initiative” to destabilize Syria…brilliant language. One cannot fund a civil war in Syria at the same time hoping to reduce ISIS influence.

You can if you can overthrow Assad, replace him with a stable moderate democratically elected government who is given a massive military to then wipe out the extremist ISIS group, but then don't go mad with power of disaffect minorities in their own nation.

Getting rid of Assad is easy. The second part could take a "little bit" of thought though.

But certainly, the funding of further instability could lead to stability, because if something becomes too unstable, it may just work itself right up and be fine.

http://www.bloomberg.com/news/2014-...illion-to-arm-moderate-syrian-opposition.html

President Barack Obama asked Congress to approve $500 million to arm and train “moderate” Syrian rebels fighting Bashar al-Assad’s regime, as the administration seeks to rein in Sunni extremists whose fight has spilled across the Syrian border into Iraq.
<snip>
The money, for the fiscal year that begins Oct. 1, would be part of Obama’s $1.5 billion plan for a Regional Stabilization Initiative…
<snip>
Perhaps the most effective weapon the U.S. could provide the Syrian rebels is Stinger missiles that can shoot down aircraft, said Michael Pillsbury, a senior fellow at the Hudson Institute in Washington.

“It would have the same kind of dramatic impact it did on the Afghan rebels” who fought the Soviet Union in the 1980’s, said Pillsbury, who as a Pentagon official in President Ronald Reagan’s administration was responsible for military support of covert action.

This should work just fine. We make the resistance forces sign a pledge that they are moderate and won't let their Stinger missiles fall into the hands of extremists. And if they turn out to be extremists or the weapons get stolen by extremists we fine them $100 per missile. There is no way any of this can go wrong!

 

[funinspace]

My favorite part of all of this is that Obama will be criticized by the Right by being too comfy with the terrorists, not doing enough, and losing the won war in Iraq.

Yup, this is the stuff of Presidential nightmares, even when we don’t have a Jr. High graduating class of Repugs running the House, never mind the Senate food fight.

This should work just fine. We make the resistance forces sign a pledge that they are moderate and won't let their Stinger missiles fall into the hands of extremists. And if they turn out to be extremists or the weapons get stolen by extremists we fine them $100 per missile. There is no way any of this can go wrong!

Dang, you had me thinking you were dead serious, until I got here…

 

[Jimmy Higgins]

Yup, this is the stuff of Presidential nightmares, even when we don’t have a Jr. High graduating class of Repugs running the House, never mind the Senate food fight.

This should work just fine. We make the resistance forces sign a pledge that they are moderate and won't let their Stinger missiles fall into the hands of extremists. And if they turn out to be extremists or the weapons get stolen by extremists we fine them $100 per missile. There is no way any of this can go wrong!

Dang, you had me thinking you were dead serious, until I got here…

According to the right-wing, I'm an Obama apologist, so I must be serious.

This request by Obama is quite discerning. The cow is out of the barn and Obama is pretty much saying we should give him money to give to the Farmer to get better surveillance on the barn. The US only has a few options, all out occupation of the Middle East, try to strengthen resolve of the Iraqi military with a bit of US support but then get cut down by Malaki giving the facepalm to the Sunnis, admit foreign policy incompetence and do nothing under the hope that doing anything usually screws things up more than it helps, award the Republican 2016 convention to Mosul and hope the Republicans didn't notice. The last one won't really help the situation in the Middle East, but could make things more a little smoother in DC.

 

[funinspace]

Moderate Syrian Rebel Application Form

This was a funny take on a sad situation...but I don't want to over quote it:
http://www.newyorker.com/online/blo...e-syrian-rebel-application-form.html?mobify=0

Welcome to the United States’ Moderate Syrian Rebel Vetting Process. To see if you qualify for $500 million in American weapons, please choose an answer to the following questions:

As a Syrian rebel, I think the word or phrase that best describes me is:
A) Moderate
B) Very moderate
C) Crazy moderate
D) Other

I became a Syrian rebel because I believe in:
A) Truth

<and other crazy questions>