The Treasury announced Tuesday that it has sold $30 Billion in four week T-Bills at an interest rate of 0%. That’s right, zero, zip, zilch, nada – you could put your money under your mattress and do as well. In fact, when investors then traded T-Bills with each other, as investors are wont to do, the yield sometimes even went negative! This is the first time since the government started selling these notes in 2001 that this has happened and people all over are shaking their heads over the obvious fact that investors are dying for safety right now over all other things.
Can Japan’s Lost Decade be turning into a reality for the US of A? Will we soon be seeing those Zombie Companies that are propped up by the Fed just to look like they are alive to stop the panic, although they died a while ago and really should be buried? Is that what the emerging deal with the US AutoMakers is really all about? Give them $15 Billion now so the vehicle-consuming public does not realize they are dead and should be buried because nobody wants to buy a new vehicle from a dead AutoMaker and then have to worry about parts, warranties, service and other such things? And, even if Congress saves the US AutoMakers until let’s say next March, it won’t save an awful lot of car dealers who are lining up in droves to file bankruptcies.
Furthermore, if $15 Billion is just handed over as loans, or whatever ‘newspeak’ words they choose to title this give-away, where are the conditions, the oversight, the rational understanding that they won’t be back again in March, and again in August, and again and again, because American AutoMakers do not have a problem selling cars, they have a problem manufacturing them for a profit. All the free money isn’t going to change that one iota. Lest we forget, some of the Congressional members who are now standing in the way of this largesse are from states that feature no US AutoMakers in residence, but, lots of foreign car manufacturers do call their states home.
How come Toyota, Honda, BMW, Mercedes, Volkswagen, Hyundai, and the others can figure this out but American AutoMakers, some of whom have been around for more than Century now, cannot?
Deflation is the other D-word that looms alongside Depression, the big one where commentators are now comparing the current situation to the 1930’s. I heard that “40% is the new 20%” the other day – a new shopping mantra when sniffing out discounts. Many retailers have given up on the concept of profit because it’s all about cash flow right now. There isn’t much to go around.
Deflation is about investing in T-Bills for the pure safety of knowing that your money is untouchable because the US Treasury will not default on T-Bills – no way, no how – not when they can always print more. It is a toxic brew with many other consequences and we need only look to Japan’s experience and how long its Lost Decade persisted before the Japanese economy was up and running again to understand this may not be over soon.
The gurus I read are saying that the only way to combat this is with truly massive infusions of Trillions of dollars into the system, directed at infrastructure improvements on a scale rivaling Eisenhower’s 1950’s-era national highway system, which he made his project after driving up the Autobahn to visit German cities at the close of WWII and marveling at how the US national highway system was still stuck back in the Homer and Jethro days. That, and jobs creation of all kinds, re-fitting federal buildings and modernizing our electrical grid, bridges, tunnels and other public properties, wiring towns and cities and schools for Internet connectivity, so that Americans who are unemployed, underemployed, and who have fallen off the far end of unemployment, can all get back to work and be productive again.
T-Bills for zero interest – who would have thought six months ago when we struggled with $5 per gallon gas that we would see this by Christmas, this year or any other? We live in interesting times all right. It’s a real thrill-a-minute lately.