TradecoHoldco

Killing it like a hooker in Hong Kong

The world’s biggest carry trade…

It’s occurred to me that the US and the Fed are now officially engaged in the world’s biggest carry trade. They’re borrowing money at the risk free rate and pumping it to the economy, whether it’s through the TARP or the Fannie or Freddie.

Here’s a thought, you don’t think Citi, or Goldman or BofA are good enough credits to lend them money at say 5% interest, so instead you lend money to the US government at 2%, and the government then onlends this to the banks at 5%. Ludicrous. All that money has to come from somewhere, so first you borrow it, and then you print paper money till the real value of those debts that you incurred is impaired.

Sooner or later the rest of the world is going to wise up to this. TANSTAAFL

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January 16, 2009 - Posted by | Uncategorized | ,

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