Strong Economic Data for USA

We have posted in the past about the USA being the "least worst" place to invest in this very volatile world and currently we are benefiting from this. 

The headline today is that there is so much demand for U.S. Treasury bonds that the Federal Reserve will not have to go to the auction this week and "buy" anymore.

In the past few years with the federal deficit at $15 trillion plus, and no spending cuts in sight....if the U.S. Treasury needed to come up with cash for Uncle Sam's checkbook, they sold IOU's called Treasury bonds.  If there weren't enough buyers to satisfy the supply, or if interest rates were deemed "too high" by the powers that be....then the Federal Reserve would step in with fake money and "buy" up the slack.

Now today we find out that the rest of the world can't buy U.S. Treasuries fast enough...because they are so scared of what's going on in Europe that everyone is fleeing for the safety of the USA.

Why do I have a sinking feeling that this may not end well?

Strong data damps Fed need to buy bonds: Bullard

CHICAGO (Reuters) - Signs the recovery is gaining strength suggest the Federal Reserve may not need to buy any more bonds to spur growth, a top policymaker said on Saturday.

"I don't think it's very likely right now because the tone of the data has been pretty strong" through the end of 2011 and up to now, St. Louis Fed President James Bullard told reporters after a speech at an economics conference. "We can probably wait and see for now."

The Federal Reserve cut benchmark rates to near zero more than three years ago and has bought $2.3 trillion in bonds to boost growth.


While the Fed has left the door open to further accommodation, the U.S. economy has shown signs of accelerating growth in recent months, leaving many to wonder whether the central bank needs to do any more.

Adding to a sense of pickup, the government said on Friday that employers added 200,000 jobs in December and the unemployment rate eased to 8.5 percent, near a three-year low.

Here;  http://news.yahoo.com/strong-data-damps-fed-buy-bonds-bullard-015447697.html

I'm going to ask you a question;  When real estate in the USA went up by 15% in 2001 and seemed to do it every single year....was that "good" news for everybody??  Then everyone flooded into real estate and seemed convinced that it would NEVER go down.  We had people buying condos in MN for $230,000 and they are now selling for $60,000.  So when did the "good" news of the real estate boom turn into "bad" news?


In the same way, if the world seems convinced that the U.S. Government is the least risky place in all the world....is that "good" news or should this be labeled as "scary" news since you and know dang well how poor the U.S balance sheet truly is.

Is it possible we are witnessing a big MONEY TRAP that will be the final straw and the world floods into U.S. Treasuries believing they are safe (just like they did real estate) only to have something calamitous happen to the U.S. Treasury market?

I guess we better keep watching....but for now I am going to label this article "good" news.