Treasury Securities Quotes

Discourse and critical thinking are essential tools when it comes to securing progress in a democratic society. But in the end, unity and engaged participation are what make it happen.

So let me get this straight – this is a long sentence. We are going to be gifted with a health care plan that we are forced to purchase, and fined if we don’t, which reportedly covers 10 million more people without adding a single new doctor, but provides for 16,000 new IRS agents, written by a committee whose chairman doesn’t understand it, passed by Congress, that didn’t read it, but exempted themselves from it, and signed by a president who smokes, with funding administered by a treasury chief who didn’t pay his taxes, for which we will be taxed for four years before any benefits take effect, by a government which has bankrupted Social Security and Medicare, all to be overseen by a surgeon general who is obese and financed by a country that is broke. So what the blank could possibly go wrong?

The United States thus achieved what no earlier imperial system had put in place: a flexible form of global exploitation that controlled debtor countries by imposing the Washington Consensus via the IMF and World Bank, while the Treasury bill standard obliged the payments-surplus nations of Europe and East Asia to extend forced loans to the U.S. Government. Against dollar-deficit regions the United States continued to apply the classical economic leverage that Europe and Japan were not able to use against it. Debtor economies were forced to impose economic austerity to block their own industrialization and agricultural modernization. Their designated role was to export raw materials and provide low-priced labor whose wages were denominated in depreciating currencies. Against dollar-surplus nations the United States was learning to apply a new, unprecedented form of coercion. It dared the rest of the world to call its bluff and plunge the international economy into monetary crisis. That is what would have happened if creditor nations had not channeled their surplus savings to the United States by buying its Government securities.

The only way that the Treasury can redeem its debt to the Social Security Administration is to borrow the money from the public, run a surplus in its other activities or have the Federal Reserve print the money—the same alternatives that would be open to it to pay Social Security benefits if there were no trust fund.

Paul O’Neill, Bush’s first secretary of the treasury, revealed that at the very first National Security Council meeting the subject of attacking Iraq was on the agenda for discussion. O’Neill lasted in the administration until December of 2002 when he was fired for disagreeing with Bush on the Iraq War and for expressing the danger of the large deficits.

In real life, the monsters are the ones abducting and killing children or flying hijacked airplanes into skyscrapers or looting our treasury and sending our kids off to fight a bullshit war just so they can line their own pockets and the pockets of their corporate buddies or eradicating our Bill of Rights in the name of national security. Those are the real monsters.

From an asset-allocation perspective, when we talk about diversification, we're talking about investing in multiple asset classes. There are six that I think are really important and they are US stocks, US Treasury bonds, US Treasure inflation-protected securities [TIPS], foreign developed equities, foreign emerging-market equities and real estate investment trusts [REITS]. p473

Another view of the Constitution was put forward early in the twentieth century by the historian Charles Beard (arousing anger and indignation, including a denunciatory editorial in the New York Times). He wrote in his book An Economic Interpretation of the Constitution: Inasmuch as the primary object of a government, beyond the mere repression of physical violence, is the making of the rules which determine the property relations of members of society, the dominant classes whose rights are thus to be determined must perforce obtain from the government such rules as are consonant with the larger interests necessary to the continuance of their economic processes, or they must themselves control the organs of government. In short, Beard said, the rich must, in their own interest, either control the government directly or control the laws by which government operates. Beard applied this general idea to the Constitution, by studying the economic backgrounds and political ideas of the fifty-five men who gathered in Philadelphia in 1787 to draw up the Constitution. He found that a majority of them were lawyers by profession, that most of them were men of wealth, in land, slaves, manufacturing, or shipping, that half of them had money loaned out at interest, and that forty of the fifty-five held government bonds, according to the records of the Treasury Department. Thus, Beard found that most of the makers of the Constitution had some direct economic interest in establishing a strong federal government: the manufacturers needed protective tariffs; the moneylenders wanted to stop the use of paper money to pay off debts; the land speculators wanted protection as they invaded Indian lands; slaveowners needed federal security against slave revolts and runaways; bondholders wanted a government able to raise money by nationwide taxation, to pay off those bonds. Four groups, Beard noted, were not represented in the Constitutional Convention: slaves, indentured servants, women, men without property. And so the Constitution did not reflect the interests of those groups. He wanted to make it clear that he did not think the Constitution was written merely to benefit the Founding Fathers personally, although one could not ignore the $150,000 fortune of Benjamin Franklin, the connections of Alexander Hamilton to wealthy interests through his father-in-law and brother-in-law, the great slave plantations of James Madison, the enormous landholdings of George Washington. Rather, it was to benefit the groups the Founders represented, the “economic interests they understood and felt in concrete, definite form through their own personal experience.

Our leaders are cruel because only those willing to be inordinately cruel and remorseless can hold positions of leadership in the foreign policy establishment. People capable of expressing a full human measure of compassion and empathy toward faraway powerless strangers do not become president of the United States, or vice president, or secretary of state, or national security adviser or secretary of the treasury. Nor do they want to.

The George W. Bush administration trotted out all manner of excuses for its invasion of Iraq, but it was clearly mindful of the fact that Saddam Hussein's decision in 2000 to denominate the country's oil sales in euros rather than dollars could hardly set a good precedent. Former treasury secretary Paul O'Neill revealed in his 'as told to' memoir that finding a way to forcibly get rid of Saddam was topic A at the Bush administration's very first National Security Council meeting, a mere ten days after Bush's inauguration.

He would expose, remorselessly, those hypocrites and cynics who publicly denied the catastrophe of climate change while secretly short-selling that very same position and hedging all their bets; the millionaires and billionaires who preached self-reliance while accepting vast handouts in the form of subsidies and easy credit, and who bemoaned red tape while building contractual fortresses to shield their capital from their ex-wives; the tax-dodging economic parasites who treated state treasuries like casinos and dismantled welfare programmes out of spite, who secured immensely lucrative state contracts through illegitimate back channels and grubby, endlessly revolving doors, who eroded civil standards, who demolished social norms, and whose obscene fortunes had been made, in every case, on the back of institutions built with public funding, enriched by public patronage, and rightfully belonging to the public, most notably, the fucking Internet; the confirmed sociopaths who were literally vampiric with their regular transfusions of younger, healthier blood; the cancerous polluters who consumed more, and burned more, and wasted more than half the world’s population put together; the crypto-fascist dirty tricksters who pretended to be populists while defrauding and despising the people, who lied with impunity, who stole with impunity, who murdered with impunity, who invented scapegoats, who incited suicides, who encouraged violence and provoked unrest, and who then retreated into a private sphere of luxury so well insulated from the lives of ordinary people, and so well defended against them, that it basically amounted to a form of secession.

The US Empire received a big boost from the 9/11 attack. Paul O’Neill, George W. Bush’s first secretary of the treasury, reported he was shocked that in the very first National Security Council meeting—ten days after Bush’s January of 2001 inauguration—the discussion was about when, not if, the US should invade Iraq. We also know that the PATRIOT Act was written a long time before 9/11, when the conditions were not ripe for its passage. Nine-eleven took care of that. The bill quickly passed in the US House and Senate with minimal debate and understanding. Bush signed the bill into law on October 26, 2001, a mere 45 days after the attack. Making use of a crisis is established policy.

What was critical to my father was that we not "go into government". His father and mother had both worked in the Treasury Department; and to him, "going into government" meant getting "hooked" on the salary and job security, and spending the rest of one's life in predictable, routinized labor that stunted the mind and sapped the spirit. My father would tell us of accountant friends who had passed their C.P.A. exam, then gone to work for the generous starting salaries offered by the I.R.S. While he was struggling in his mid-twenties, they were bragging about the cash they were taking home. Now, he said, he rarely saw them. Now, they had a defeated look; now, they were taking orders from some bureaucrat, and would be taking orders for the rest of their lives. He admired the disposition to roll the dice and risk everything that his Jewish friends and clients, Benny Ouresman, the Chevrolet dealer, and Harry Viner and his son Melvin, who had made a fortune with Sunshine Laundry, had exhibited. "They didn't have a damn dime when they started," Pop would tell us, emphatically. "They went to friends, borrowed money, started a business, went broke, went back to their friends, borrowed again, went broke again. Finally, they made it. They built something of their own. Now they work for themselves, and everybody else works for them. Be your own man!" That was the attitude we should adopt.

Obama’s mother was a CIA operative in Indonesia.  She was trained at the East –West Center in Hawaii in both Russian and Indonesian . She volunteered to go into a dangerous zone where military coups occurred on a daily basis.                Obama’s grandmother worked in a bank in Hawaii that was a front for the CIA where she was in effect a ‘paymaster’ for CIA assets. This fact was also true of his maternal grandfather.                 So Obama who was sold as 'community organizer’ and Lecturer in Government had given of himself by also working as an asset for the CIA.  His mentor was none other than Peter Geitner,  the father of Tim Geitner, our present Secretary of the Treasury. Obama’s history was correctly blacked out for ‘national security reasons' which I don’t happen to agree. 

The difference gave China a $420 billion trade surplus (the US carried the opposite, a $420 billion trade deficit with China). Americans paid for those goods with US dollars, and those payments were credited to China’s bank account at the Federal Reserve. Like any other holder of US dollars, China has the option to sit on those dollars or use them to buy something else. Uncle Sam doesn’t pay interest on the dollars China keeps in its checking account at the Fed, so China usually prefers to move them into what is effectively a savings account at the Fed. It does this by purchasing US Treasuries. “Borrowing from China” involves nothing more than an accounting adjustment, whereby the Federal Reserve subtracts numbers from China’s reserve account (checking) and adds numbers to its securities account (savings). It’s still just sitting on its US dollars, but now China is holding yellow dollars instead of green dollars. To pay back China, the Fed simply reverses the accounting entries, marking down the number in its securities account and marking up the number in its reserve account. It’s all accomplished using nothing more than a keyboard at the New York Federal Reserve Bank.

With regard to the price then of the men themselves, it is obvious that the public treasury is in a better position to provide funds than any private individuals. What can be easier than for the Council to invite by public proclamation all whom it may concern to bring their slaves, and to buy up those produced? Assuming the purchase to be effected, is it credible that people will hesitate to hire from the state rather than from the private owner, and actually on the same terms? People have at all events no hesitation at present in hiring consecrated grounds, sacred victims, houses, etc., or in purchasing the right of farming taxes from the state. To ensure the preservation of the purchased property, the treasury can take the same securities precisely from the lessee as it does from those who purchase the right of farming its taxes. Indeed, fraudulent dealing is easier on the part of the man who has purchased such a right than of the man who hires slaves. Since it is not easy to see how the exportation of public money is to be detected, when it differs in no way from private money. Whereas it will take a clever thief to make off with these slaves, marked as they will be with the public stamp, and in face of a heavy penalty attached at once to the sale and exportation of them. Up to this point then it would appear feasible enough for the state to acquire property in men and to keep a safe watch over them.

If you want to know the real reasons why certain politicians vote the way they do - follow the money. Arch Brexiteer Jacob Rees-Mogg (a.k.a. JackOff Grease-Smug) stands to make billions via his investment firm - Somerset Capital Management - if the UK crashes unceremoniously out of the European Union without a secure future trade deal. Why ? Because proposed EU regulations will give enforcement agencies greater powers to curb the activities adopted by the sort of off-shore tax havens his company employs. Consequently the British electorate get swindled not once, but twice. Firstly because any sort of Brexit - whether hard, soft, or half-baked - will make every man, woman and child in the UK that much poorer than under the status quo currently enjoyed as a fully paid up member of the EU. Secondly because Rees-Mogg's company, if not brought to heel by appropriate EU wide legislation, will deprive Her Majesty's Treasury of millions in taxes, thus leading to more onerous taxes for the rest of us. It begs the question, who else in the obscure but influential European Research Group (ERG) that he chairs and the Institute for Economic Affairs (IEA) that he subscribes to, have similar vested interests in a no-deal Brexit ? It is high time for infinitely greater parliamentary and public scrutiny into the UK Register of Members' Financial Interests in order to put an end to these nefarious dealings and appalling double standards in public life which only serve to further corrode public trust in an already fragile democracy.

Hamilton argued that the security of liberty and property were inseparable and that governments should honor their debts because contracts formed the basis of public and private morality: “States, like individuals, who observe their engagements are respected and trusted, while the reverse is the fate of those who pursue an opposite conduct.”The proper handling of government debt would permit America to borrow at affordable interest rates and would also act as a tonic to the economy. Used as loan collateral, government bonds could function as money—and it was the scarcity of money, Hamilton observed, that had crippled the economy and resulted in severe deflation in the value of land. America was a young country rich in opportunity. It lacked only liquid capital, and government debt could supply that gaping deficiency. The secret of managing government debt was to fund it properly by setting aside revenues at regular intervals to service interest and pay off principal. Hamilton refuted charges that his funding scheme would feed speculation. Quite the contrary: if investors knew for sure that government bonds would be paid off, the prices would not fluctuate wildly, depriving speculators of opportunities to exploit. What mattered was that people trusted the government to make good on repayment: “In nothing are appearances of greater moment than in whatever regards credit. Opinion is the soul of it and this is affected by appearances as well as realities.” Hamilton intuited that public relations and confidence building were to be the special burdens of every future treasury secretary.

set aside more preserves, extinguished fewer species, saved the ozone layer, and peaked in their consumption of oil, farmland, timber, paper, cars, coal, and perhaps even carbon. For all their differences, the world’s nations came to a historic agreement on climate change, as they did in previous years on nuclear testing, proliferation, security, and disarmament. Nuclear weapons, since the extraordinary circumstances of the closing days of World War II, have not been used in the seventy-two years they have existed. Nuclear terrorism, in defiance of forty years of expert predictions, has never happened. The world’s nuclear stockpiles have been reduced by 85 percent, with more reductions to come, and testing has ceased (except by the tiny rogue regime in Pyongyang) and proliferation has frozen. The world’s two most pressing problems, then, though not yet solved, are solvable: practicable long-term agendas have been laid out for eliminating nuclear weapons and for mitigating climate change. For all the bleeding headlines, for all the crises, collapses, scandals, plagues, epidemics, and existential threats, these are accomplishments to savor. The Enlightenment is working: for two and a half centuries, people have used knowledge to enhance human flourishing. Scientists have exposed the workings of matter, life, and mind. Inventors have harnessed the laws of nature to defy entropy, and entrepreneurs have made their innovations affordable. Lawmakers have made people better off by discouraging acts that are individually beneficial but collectively harmful. Diplomats have done the same with nations. Scholars have perpetuated the treasury of knowledge and augmented the power of reason. Artists have expanded the circle of sympathy. Activists have pressured the powerful to overturn repressive measures, and their fellow citizens to change repressive norms. All these efforts have been channeled into institutions that have allowed us to circumvent the flaws of human nature and empower our better angels. At the same time . . . Seven hundred million people in the world today live in extreme poverty. In the regions where they are concentrated, life expectancy is less than 60, and almost a quarter of the people are undernourished.

extent, Polly Lear took Fanny Washington’s place: she was a pretty, sociable young woman who became Martha’s closest female companion during the first term, at home or out and about, helping plan her official functions. The Washingtons were delighted with the arrival of Thomas Jefferson, a southern planter of similar background to themselves, albeit a decade younger; if not a close friend, he was someone George had felt an affinity for during the years since the Revolution, writing to him frequently for advice. The tall, lanky redhead rented lodgings on Maiden Lane, close to the other members of the government, and called on the president on Sunday afternoon, March 21. One of Jefferson’s like-minded friends in New York was the Virginian James Madison, so wizened that he looked elderly at forty. Madison was a brilliant parliamentary and political strategist who had been Washington’s closest adviser and confidant in the early days of the presidency, helping design the machinery of government and guiding measures through the House, where he served as a representative. Another of Madison’s friends had been Alexander Hamilton, with whom he had worked so valiantly on The Federalist Papers. But the two had become estranged over the question of the national debt. As secretary of the Treasury, Hamilton was charged with devising a plan to place the nation’s credit on a solid basis at home and abroad. When Hamilton presented his Report on the Public Credit to Congress in January, there was an instant split, roughly geographic, north vs. south. His report called for the assumption of state debts by the nation, the sale of government securities to fund this debt, and the creation of a national bank. Washington had become convinced that Hamilton’s plan would provide a strong economic foundation for the nation, particularly when he thought of the weak, impoverished Congress during the war, many times unable to pay or supply its troops. Madison led the opposition, incensed because he believed that dishonest financiers and city slickers would be the only ones to benefit from the proposal, while poor veterans and farmers would lose out. Throughout the spring, the debate continued. Virtually no other government business got done as Hamilton and his supporters lobbied fiercely for the plan’s passage and Madison and his followers outfoxed them time and again in Congress. Although pretending to be neutral, Jefferson was philosophically and personally in sympathy with Madison. By April, Hamilton’s plan was voted down and seemed to be dead, just as a new debate broke out over the placement of the national capital. Power, prestige, and a huge economic boost would come to the city named as capital. Hamilton and the bulk of New Yorkers and New Englanders

Treasury securities issued with a maturity of one year or less are called “bills”; from one to 10 years, “notes”; and over 10 years, “bonds.” Notes and bonds yield an interest coupon every six months. Bills do not—rather, they are issued at a discount and redeemed at par; the difference is their “yield.”)

His order cited "credible evidence" that a takeover "threatens to impair the national security of the US".Qualcomm was already trying to fend off Broadcom's bid.The deal would have created the world's third-largest chipmaker behind Intel and Samsung.It would also have been the biggest takeover the technology koo50 sector had ever seen.The presidential order said: "The proposed takeover of Qualcomm by the Purchaser (Broadcom) is prohibited. and any substantially equivalent merger. acquisition. or takeover. whether effected directly or indirectly. is also prohibited."Crown jewelSome analysts said President Trump's decision was more about competitiveness and winning the race for 5G technology. than security concerns.The sector is in a race to develop chips for the latest 5G wireless technology. and Qualcomm was considered by Broadcom a significant asset in its bid to gain market share.Image captionQualcomm has already showcased 1Gbps mobile internet speeds using a 5G chip"Given the current political climate in the US and other regions around the world. everyone is taking a more conservative view on mergers and acquisitions and protecting their own domains." IDC's Mario Morales. vice president of enabling technologies and semiconductors told the BBC."We are all at the start of a race. and you have 5G as a crown jewel that everyone wants to participate in - and every region is racing towards that." he said."We don't want to hinder someone like Qualcomm so that they can't provide the technology to the vendors that are competing within that space."US investigates Broadcom's Qualcomm bidQualcomm rejects Broadcom takeover bidHuawei's US smartphone deal collapsesSingapore-based Broadcom had been pursuing San Diego-based Qualcomm for about four months.Last week however. Broadcom's hostile takeover bid was put under investigation by the Committee on Foreign Investment in the US. a multi-agency led by the US Treasury Department.The US company had rejected approaches from its rival on the grounds that the offer undervalued the business. and also that any takeover would face antitrust hurdles.Earlier this year. Chinese telecoms giant Huawei said it had not been able to strike a deal to sell its new smartphone via a US carrier. widely believed to be AT&T.The US also recently blocked the $1.2bn sale of money transfer firm Moneygram to China's Ant Financial. the digital payments arm of Alibaba.

Long considered godless vagabonds, professional performers in France had officially been forbidden the sacraments until 1790. Many, in past centuries, had never bothered to secure the necessary dispensations—obtainable through confession to a sympathetic priest and a few discreet bribes—that would have allowed them to marry with the blessing of the Church, and so the immorality of actors had become notorious.

30 percent—Domestic equities: US stock funds, including small-, mid-, and large-cap stocks 15 percent—Developed-world international equities: funds from developed foreign countries, including the United Kingdom, Germany, and France 5 percent—Emerging-market equities: funds from developing foreign countries, such as China, India, and Brazil. These are riskier than developed-world equities, so don’t go off buying these to fill 95 percent of your portfolio. 20 percent—Real estate investment trusts: also known as REITs. REITs invest in mortgages and residential and commercial real estate, both domestically and internationally. 15 percent—Government bonds: fixed-interest US securities, which provide predictable income and balance risk in your portfolio. As an asset class, bonds generally return less than stocks. 15 percent—Treasury inflation-protected securities: also known as TIPS, these treasury notes protect against inflation. Eventually you’ll want to own these, but they’d be the last ones I’d get after investing in all the better-returning options first.

This story is not being told as much as it should be. In the late ’70s, the spread [or difference in interest rates] between mortgages at the consumer level and the 10-year US Treasury bond was about 450 basis points, or four and a half percent. Through securitization, we brought down that spread to about 150 basis points, or one and a half percent. When you think about the savings of America and the mechanism for home ownership, securitization was a foundational reason why more Americans were able to buy homes.III Changes to government-influenced underwriting characteristics, which first occurred in 2004, focused on having more people have home ownership and on reducing down payments. The result was that individuals with lower-quality credit would be able to get mortgages that previously would not have been available to them. These were typically called “subprime mortgages.” That led to the financial crisis. The structure of mortgage-backed securities remained strong and good and helpful for society. All good things, if not properly governed, can lead to bad outcomes. That’s what really happened.

Following the tour, the guides usher the visitors into a cavernous hall where interactive displays invite them to press buttons to learn about the different parts of the dollar or to hear about its history. Children press the buttons, but the lights do not go on, and so none of the questions are answered. They rush to the next interactive display only to find that it too no longer interacts. The large room also offers souvenirs for sale, such as a souvenir pen filled with shredded money. In a corner, Japanese tourists buy sheets of uncut American currency from women behind security windows of thick glass. They take the money home with them to use as novelty wrapping paper for gifts and flowers. The twentieth century became the era of paper money. Never before had so much of it been manufactured in so many countries and in so many denominations. Behind the perpetually operating machines of the U.S. Treasury lay a long process whereby paper money won the confidence of ordinary people.

But at some point a strengthening economy and rising inflation pressures would presumably force us to raise short-term interest rates. It was possible to end up temporarily paying more interest on banks’ reserves than we earned on the securities we held, which in turn might lead to several years in which we had little or no profits to remit to the Treasury.

The Fed is normally very profitable, since we typically earn a higher interest rate on our Treasury and mortgage-backed securities than we pay on the bank reserves that finance our holdings

It was possible to end up temporarily paying more interest on banks’ reserves than we earned on the securities we held, which in turn might lead to several years in which we had little or no profits to remit to the Treasury.

AT ONE END OF FOURTEENTH STREET IN WASHINGton, D.C., prostitutes and drug dealers brazenly ply their trade night and day. At the other end, near the White House and the bridge into Virginia, the federal government prints money night and day in the workrooms of the Bureau of Engraving and Printing, a part of the Treasury Department that advertises itself to tourists as “the money factory.” On weekday mornings tourists begin lining up well before the opening hour of 9:00 A.M. to see how America prints its paper money. The visitors enter the building through a sequence of security checks leading into a dilapidated wooden corridor. Large color portraits of the president,

Overall, the success of a Treasury auction depends on investor demand. Institutional investors such as insurance companies, foreign central banks, hedge funds, money funds, states, municipalities, Savings and Loans, credit unions, pension funds, and small local banks are all major participants. Depending on who buys a certain Treasury determines how much supply is available in the Repo market. For example, if a large amount of the auction is purchased by securities dealers and hedge funds, there’s plenty of supply around the Repo market. Dealers and hedge funds are leveraged players who loan their securities into the Repo market to finance their purchases. That keeps those securities readily available in the market. If, on the other hand, a large amount is purchased by end-user portfolios, such as investors who are more retail and less sophisticated, then there’s less supply available in the Repo market.

There’s a price to be paid for liquidity and it’s reflected in the security’s yield. The yield of the current issue is always a little bit lower than other Treasury issues with similar maturities. That’s what’s called the liquidity premium. When investors buy the current issue, they are giving up a little yield in order own the current, which they can buy and sell with smaller bid/offer spreads, and there’s plenty of liquidity to move large sizes. However, this liquidity premium fades over time.

Repo is a true market. Repo rates are determined by the interaction of supply and demand. Supply is the number of securities outstanding and the amount of those securities available in the marketplace. Demand is the amount of cash in the market. It’s also the number of shorts in the market – the traders who have sold Treasury securities short and must borrow them. Repo stands for “Repurchase Agreement,” which means that if I loan a security to you, you agree to give it back. The opposite of that is officially called a Reverse-Repurchase agreement. It’s the opposite of a Repo. If I borrow a security from you, I agree to return it back to you. In basic terms, Repo is a collateralized loan. One party borrows cash and holds a security as collateral.

Repo is the oil that lubricates the engine of the financial markets. It keeps it running smoothly; it’s the plumbing of the financial system. You might even say it’s the oil that lubricates the engine of the entire economy. Here are some important characteristics of the Repo market: In one respect, Repo is a popular instrument for short-term cash investments for institutional investors, with “short-term” meaning from overnight through one year. It’s an ultra-safe investment. It’s an investment collateralized with a Treasury security at a competitive market rate of interest. In another respect, Repo is a mechanism for market participants to cover short sales of U.S. Treasurys. This is a big part of the Repo market and arguably the most interesting part. In another respect, it provides collateralized funding for large leveraged investors. OK, let’s just get this said up front. Yes, the Repo market is the way hedge funds can highly leverage their trading positions. More on this later.

The Banking Act of 1933, also known as Glass-Steagall, regulated the stock market, separated securities dealers from banks, and established the Securities and Exchange Commission (SEC). Though the SEC regulated many securities markets, government securities were considered exempt. That meant that federal securities laws did not apply. The thinking at the time was to let those markets operate free of government regulation, which would allow the Treasury and municipalities to sell debt at a lower cost. Oh, and one more thing. There was a clause known as Regulation Q, which prohibited banks from paying interest on savings accounts.

Overall, it was a pretty good trading strategy. He made money in two out of three possible scenarios. If bond prices went down, he made a lot of money. If the market stayed the same, he earned free interest on the cash. If the Treasury market rallied, he risked a pretty big loss. And guess what? Between February 1982 and May 1982, the Treasury market reversed its decline and started to rally. This was the one chance in three that he wasn’t hoping for. When the May 15, 1982, coupon interest payments were due on a Monday, Drysdale was wiped out and didn’t have enough money to make the payments. That Sunday evening, Heuwetter called Drysdale's clearing bank, Chase Manhattan, and informed them that "we may have a problem" meeting the $160 million interest payment due the next day. Could Chase possibly lend Drysdale $200 million to tide them over? What he didn’t tell them was that, yes, the market rally had wiped them out, but the problem was even worse than that. Drysdale had conducted its Repo trading mostly through Chase's Securities Lending Department.

It’s importance, however, is bigger than that. Treasury securities are the risk-free yield curve for all of the financial markets. That’s right, the yields of Treasury Bills, Notes, and Bonds from overnight to 30 years make up a yield curve that is used to price all other fixed-income securities. The Treasury market is the reference rate for interest rates. Treasurys are a tool for pricing corporate bonds, municipal bonds, emerging market bonds, federal agencies, mortgage-backed securities, and other dollar assets. On top of that, they’re also a tool for speculation and hedging risk.

Treasury Bills are the shortest securities, and they’re discount securities[8]. The Treasury regularly issues 1 Month, 2 Month, 3 Month, 6 Month, and Year Bills. Treasury Notes are securities that were originally issued with maturities between 2 years and 10 years. Currently, the Treasury issues 2 Year Notes, 3 Year Notes, 5 Year Notes, 7 Year Notes, and 10 Year Notes. In the past, there was a 4 Year Note, but it was discontinued. Treasury Bonds[9] are securities originally issued with maturities of either 20 or 30 years. Treasury securities are issued on a very regular schedule. Auction schedules are announced by the Treasury and don’t change very often. Keeping Treasury securities regular and predictable helps keeps the market liquid, and therefore reduces funding costs, in theory, for the government. On top of that, large liquid Treasury issues are good for the financial markets. Just remember, large and liquid is certainly better than small and illiquid! Small issues can experience price distortions, so the Treasury will make adjustments in their debt sales to keep the market liquid, running smoothly and predictably.

The Government Securities Act (GSA) of 1986 was passed and signed by President Reagan, which required government securities dealers to register with the SEC or be regulated as subsidiaries of banks. The Secretary of the Treasury had the authority to make rules for custody, the proper use of customer securities, net capital ratios, and the allowable leverage for Repo transactions. Not surprising, customers were still unwilling to invest their cash in hold-in-custody Repo after 1984.

David Heuwetter was the head trader at Drysdale Government Securities and had a great trading idea. It was really more of a scheme to take advantage of the difference in the market convention between outright Treasury purchases and Repo trades. Still at this time, when someone bought and sold a U.S. Treasury outright, the securities settled with the coupon accrued interest added to the purchase price. That is, when you bought a U.S. Treasury, you had to pay for the amount of interest which had already accrued on the security since the last coupon payment date. When interest rates were low, the accrued interest was small, even negligible. However, in the early 1980s, interest rates shot up above 10%, which meant there was a lot of interest accruing on bonds each day.  Heuwetter realized he could short-sell U.S. Treasurys outright and deliver the securities to the buyer and receive the price plus the accrued interest. Then, when he borrowed the securities in the Repo market, he only had to pay the purchase price. He was getting the full use of the accrued interest on the bonds at no cost.

The securities lending business boils down to one concept: exchanging a security that someone needs for a different security or cash. The business is driven by the need of the dealer community to cover short positions, be it in stocks, Treasurys, agencies, corporate bonds, ADRs, or even ETFs. When a dealer is looking to cover a short position, they first check what are colloquially known as the “sec lenders.” The securities lending group will pull the security out of the end-user portfolio and lend it into the Repo market. When a securities lending group loans a security, they either receive cash or bonds in return. If they receive cash, they reinvest the cash. If they receive a bond, they earn a fee on the spread between where they loan the bond and borrow the other. In the case of cash, they need to invest it. They need an investment that generates a sufficient return to make the business viable, yet, at the same time, without taking too much risk. The safest and easiest way to invest is in overnight Treasury repo. The problem is that there’s very little profit lending a Treasury and reinvesting in a Treasury. In order to enhance returns, the securities lending groups take some risk. It’s not necessarily a lot of risk, but increasing returns involves increasing risk. It can be either interest rate risk, credit risk, or liquidity risk. Technically a combination of all three is possible, too, but that’s pretty dangerous. The yield curve is upward sloping most of the time, so investing for a longer period of time generally generates a higher yield. Let’s say the overnight rate is 2.00%, the one-month rate is 2.05%, and the three-month rate is at 2.15%. Instead of reinvesting cash overnight, there’s an extra 15 basis points for investing for three months. Since the end-investor clients usually hold their bonds to maturity, there’s only a small chance they will sell a bond during that three-month period. On top of that, the securities lending groups run multi-billion dollar portfolios, so they can ladder their investments.

When the Fed makes a loan, taking securities or bank loans as collateral, the recipient of the loan deposits the funds in a commercial bank. The bank in turn adds the funds to its reserve account at the Fed. When banks hold substantial reserves, they have little need to borrow from other banks, and so the interest rate that banks charge each other for short-term loans—the federal funds rate—tends to fall. But the FOMC targets that same short-term interest rate when making monetary policy. Without offsetting action, our emergency lending—by increasing the reserves that banks held at the Fed—would tend to push down the federal funds rate and other short-term interest rates. Since April, we had set our target for the federal funds rate at 2 percent—the right level, we thought, to balance our goals of supporting employment and keeping inflation under control. We needed to continue our emergency lending and at the same time prevent the federal funds rate from falling below 2 percent. Thus far, we had successfully resolved the potential inconsistency by selling a dollar’s worth of Treasury securities from our portfolio for each dollar of our emergency lending. The sales of Treasuries drained reserves from the banking system, offsetting the increase in reserves created by our lending. This procedure, known as sterilization, allowed us to make loans as needed while keeping short-term interest rates where we wanted them.

The credit spread refers to the difference between Treasuries, which were paying around 4.5 percent, and the yields of corporate bonds and the mortgage-backed securities, which were probably around 7 to 8 percent.

In fact, what’s been happening is that there’s been a flow of investor funds to the United States, to Treasury securities, which are regarded as a safe haven now, which has a mixed effect for the United States.3 It tends over time to raise the value of the dollar and harm exports. So it’s not good for a healthy economy.

In retrospect, I think our view of market expectations was too dependent on our survey of securities dealers. Futures markets gave us a reliable read of where markets thought the federal funds rate was going—but not for our securities purchases. For that, economists at the New York Fed asked their counterparts at the securities firms, who paid careful attention to every nuance of Fed policymakers’ public statements. In effect, our PhD economists surveyed their PhD economists. It was a little like looking in a mirror. It didn’t tell us what the rank-and-file traders were thinking. Many traders, apparently, didn’t pay much attention to their economists and were betting our purchases would continue more or less indefinitely. Some called it “QE-ternity” or “QE-infinity.” Their assumption was unreasonable and entirely inconsistent with what we had been saying. Nevertheless, some investors had evidently established market positions based on it. Now, like Metternich, they looked at our statements about securities purchases and asked, “What do they mean by that?” Their conclusion, despite the plain meaning of what I said at the press conference, was that we were signaling an earlier increase in our federal funds rate target. They sold their Treasury securities and mortgage-backed securities, driving up long-term interest rates.

Government inflation-protected securities (in the United States, these are Treasury Inflation-Protected Securities, or TIPS) A low-cost total U.S. domestic equity (stock) index fund, either a mutual fund or an exchange-traded fund (ETF—i.e., a sort of mutual fund that can be traded like stocks on an exchange) A low-cost total international equity index fund, either a mutual fund or an ETF Single-premium income annuities Low-cost term life insurance

Mortgage securities. Pooled together from thousands of mortgages around the United States, these bonds are issued by agencies like the Federal National Mortgage Association (“Fannie Mae”) or the Government National Mortgage Association (“Ginnie Mae”). However, they are not backed by the U.S. Treasury, so they sell at higher yields to reflect their greater risk. Mortgage bonds generally underperform when interest rates fall and bomb when rates rise. (Over the long run, those swings tend to even out and the higher average yields pay off.) Good mortgage-bond funds are available from Vanguard, Fidelity, and Pimco. But if a broker ever tries to sell you an individual mortgage bond or “CMO,” tell him you are late for an appointment with your proctologist.

On April 29, Secretary of the Treasury Morgenthau, whom Roosevelt had asked to answer Kennedy’s four-page letter, assembled his chief advisers for a 10:15 meeting. “Now, the reason I have got you fellows in here, this is extra confidential. I got one of these typical Joe Kennedy letters to the President on gold. . . . It is one of these typical asinine Joe Kennedy letters.” Morgenthau was opposed to Kennedy’s recommendation that the British be pressured to sell their securities to fund the war effort, because he feared that dumping those securities on the market would result in a dramatic fall of American stock prices.

balding man in his late 50s. He had a large round gut and pudgy little fingers. Luke knew his story. He was a desk jockey, a man who had come up through the government bureaucracy. On September 11, he was at Treasury running a team analyzing tax evasion and Ponzi schemes. He slid over to counter-terrorism when Homeland Security was created. He had

If you happen to have a U.S. $100 bill in your wallet right now, take it out and look at it. You are holding what has become the international currency for illegal behavior. Today, nearly three-quarters of all $100 bills circulate outside of the United States. Criminals like to hold their wealth in hundreds. Actually, this works to the benefit of the United States in a rather odd way. When the U.S. Treasury issues new banknotes, including $100 bills, it purchases an equal value of interest-bearing securities to cover the notes. When those banknotes are taken out of circulation, the government must pay off those securities, together with earned interest. So when three-quarters of all $100 bills are being secreted outside the United States, the Treasury Department saves money. How? As long as those bills remain in circulation, the government doesn’t have to pay off the securities issued to cover them. How much does that save us? Try about $32.7 billion in interest in the year 2000 alone.2

Happy New Year, Cuban Style In Havana, Christmas of 1958 had not been celebrated with the usual festivity. The week between Christmas and New Year’s was filled with uncertainty and the usual joyous season was suspended by many. Visitations among family and friends were few; as people held their breath waiting to see what would happen. It was obvious that the rebel forces were moving ever closer to Havana and on December 31, 1958, when Santa Clara came under the control of “Che” Guevara and Camilo Cienfuegos, the people knew that Havana would be next. What they didn’t know was that their President was preparing to leave, taking with him a large part of the national treasury. Aside from the tourists celebrating at the casinos and some private parties held by the naïve elite, very few celebrated New Year’s Eve. A select few left Cuba with Batista, but the majority didn’t find out that they were without a President until the morning of the following day…. January 1, 1959, became a day of hasty departure for many of Batista’s supporters that had been left behind. Those with boats or airplanes left the island nation for Florida or the Dominican Republic, and the rest sought refuge in foreign embassies. The high=flying era of Batista and his chosen few came to a sudden end. Gone were the police that had made such an overwhelming presence while Batista was in power, and in their place were young people wearing black and red “26th of July” armbands. Not wanting a repeat of when Machado fled Cuba, they went around securing government buildings and the homes of the wealthy. Many of these same buildings had been looted and burned after the revolt of 1933. It was expected that Fidel Castro’s rise to power would be organized and orderly. Although the casinos were raided and gambling tables overturned and sometimes burned in the streets, there was no widespread looting with the exception of the hated parking meters that became symbolic of the corruption in Batista’s government. Castro called for a general “walk-out” and when the country ground to a halt, it gave them a movement time to establish a new government. The entire transition took about a week, while his tanks and army trucks rolled into Havana. The revolutionaries sought out Batista’s henchmen and government ministers and arrested them until their status could be established. A few of Batista’s loyalists attempted to shoot it out and were killed for their efforts. Others were tried and executed, but many were simply jailed, awaiting trial at a later time.

The Westminster system understandably produces governments with more formal powers than in the United States. This greater degree of decisiveness can be seen clearly with respect to the budget process. In Britain, national budgets are not drawn up in Parliament, but in Whitehall, the seat of the bureaucracy, where professional civil servants act under instructions from the cabinet and prime minister. The budget is then presented by the chancellor of the exchequer (equivalent of the U.S. treasury secretary) to the House of Commons, which votes to approve it in a single up-or-down vote. This usually takes place within a week or two of its promulgation by the government. The process in the United States is totally different. The Constitution grants Congress primary authority over the budget. While presidents formulate budgets through the executive branch Office of Management and Budget, this office often becomes more like another lobbying organization supporting the president’s preferences. The budget, put before Congress in February, works its way through a complex set of committees over a period of months, and what finally emerges for ratification (we hope) by the two houses toward the end of the summer is the product of innumerable deals struck with individual members to secure their support. The nonpartisan Congressional Budget Office was established in 1974 to provide Congress with greater technocratic support in drawing up budgets, but in the end the making of an American budget is a highly decentralized and nonstrategic process in comparison to what happens in Britain.

The notion of mental accounts is absent in traditional economic theory, which holds that wealth in general, and money in particular, should be fungible: That is, $100 in roulette winnings, $100 in salary, and a $100 tax refund should have the same significance and value to you, since each C-note could buy the same number of downloads from iTunes or the same number of burgers at McDonald’s. Likewise, $100 kept under the mattress should invoke the same feelings or sense of wealth as $100 in a bank account or $100 in U.S. Treasury securities (ignoring the fact that money in the bank, or in T-bills, is safer than cash under the bed). If money and wealth are fungible, there should be no difference in the way we spend gambling winnings or salary.

To understand what that means in commonsense terms, consider a person who plans to live off the income from $1 million invested in T-bills. Suppose he retires in a given year and converts his investments into an inflation-protected annuity with a return of 4% to 5%. He will receive an annual income of $40,000 to $50,000. But now suppose he retires a few years later, when the return on the annuity has dropped to 0.5%. His annual income will now be only $5,000. Yes, the $1 million principal amount was fully insured and protected, but you can see that he cannot possibly live on the amount he will now receive. T-bills preserve principal at all times, but the income received on them can vary enormously as return on the annuity goes up or down. Had the retiree bought instead a long-maturity U.S. Treasury bond with his $1 million, his spendable income would be secure for the life of the bond, even though the price of that bond would fluctuate substantially from day to day. The same holds true for annuities: Although their market value varies from day to day, the income from an annuity is secure throughout the retiree’s life.

Still, one could argue—and many did—that Greenspan, at least, had no business being quite so shocked. Over the years, countless people had challenged his deregulatory dogma, including (to name just a few) Joseph Stiglitz and Paul Krugman, both Nobel Prize–winning economists, and Brooksley Born, who was head of the Commodity Futures Trading Commission from 1996 to 1999. Born eventually became something of a Cassandra figure for the crisis, since she repeatedly called for regulating the market for derivatives, those ultracomplex financial products that eventually helped bring down the economy. Those calls were silenced when Greenspan, along with then-Treasury Secretary Robert Rubin and then-Securities and Exchange Commission Chair Arthur Levitt, took the extraordinary step of convincing Congress to pass legislation forbidding Born’s agency from taking any action for the duration of her term.

Bond market investors are a downbeat lot. They live in an asymmetric world because bonds can go down much more than they can go up. And investors in Treasury securities are the most downbeat and risk averse of all since they prize safety above all else.

There are six that I think are really important and they are US stocks, US Treasury bonds, US Treasury inflation-protected securities [TIPS], foreign developed equities, foreign emerging-market equities, and real estate investment trusts [REITs].

Given the difficulty of quantifying the probability of loss, investors who want some objective measure of risk-adjusted return—and they are many—can only look to the so-called Sharpe ratio. This is the ratio of a portfolio’s excess return (its return above the “riskless rate,” or the rate on short-term Treasury bills) to the standard deviation of the return. This calculation seems serviceable for public market securities that trade and price often; there is some logic, and it truly is the best we have. While it says nothing explicitly about the likelihood of loss, there may be reason to believe that the prices of fundamentally riskier securities fluctuate more than those of safer ones, and thus that the Sharpe ratio has some relevance. For private assets lacking market prices—like real estate and whole companies—there’s no alternative to subjective risk adjustment.

Those who think that politics and history “are just all about power” might wish to reflect on the Late Republic. The wealthy class did not pursue power as an end in itself. Power was and still is an instrumental value; it enables the rich to secure and advance their opportunities to profit off human labor, exercise decisive control over disadvantaged groups, monopolize public resources and private markets, expand overseas holdings, and plunder government treasuries. Power enables them to preserve their precious privileges, their fabulous way of life, and the one thing that makes such a life possible, their immense wealth.

Far from the political limelight, however, on the National Security Council, a handful of discreet officials led by Matt Pottinger, a former journalist and Marine, who eventually rose to become Trump’s deputy national security advisor, were transforming America’s policy toward China, casting off several decades of technology policy in the process. Rather than tariffs, the China hawks on the NSC were fixated on Beijing’s geopolitical agenda and its technological foundation. They thought America’s position had weakened dangerously and Washington’s inaction was to blame. “This is really important,” one Trump appointee reported an Obama official telling him during the presidential transition, regarding China’s technological advances, “but there’s nothing you can do.” The new administration’s China team didn’t agree. They concluded, as one senior official put it, “that everything we’re competing on in the twenty-first century… all of it rests on the cornerstone of semiconductor mastery.” Inaction wasn’t a viable option, they believed. Nor was “running faster”—which they saw as code for inaction. “It would be great for us to run faster,” one NSC official put it, but the strategy didn’t work because of China’s “enormous leverage in forcing the turnover of technology.” The new NSC adopted a much more combative, zero-sum approach to technology policy. From the officials in the Treasury Department’s investment screening unit to those managing the Pentagon’s supply chains for military systems, key elements of the government began focusing on semiconductors as part of their strategy for dealing with China.

This meant that the fund would have to fall under the category of mandatory spending. The money would come directly out of the Treasury year after year just like Social Security and would not have to go through the normal annual appropriations process.

For most investors, bond funds beat individual bonds hands down (the main exceptions are Treasury securities and some municipal bonds). Major firms like Vanguard, Fidelity, Schwab, and T. Rowe Price offer a broad menu of bond funds at low cost.9

The three main players in the MBS market are: • Government National Mortgage Association, or GNMA (pronounced “Ginnie Mae”), is backed by a federal agency and guarantees mortgage payments on loans issued through federal loan programs (like the VA and the FHA). Unlike other MBS, bonds guaranteed by GNMA are backed by the full faith and credit of the US government, just like Treasury bonds. • Federal National Mortgage Association, or FNMA (“Fannie Mae”), is a private corporation that buys mortgages from large commercial banks, repackages them into bonds, and sells those bonds to investors. FNMA is not backed by the federal government (even though the government created it), so these bonds carry higher credit risk (the risk that you won’t get your money back). • Federal Home Loan Mortgage Corporation, or FHLMC (commonly called “Freddie Mac”), works almost the same way as FNMA. It buys up mortgages from smaller lenders, like savings and loan banks or credit unions, then packages them to create MBS. Freddie Mac bonds are not backed by the US government.

As a sickly, weak child of a wealthy New York family, Theodore Roosevelt (1858–1919) could certainly have found plenty of excuses to fall into a life of rich, idle ease. But that was not his way. With unyielding determination, he committed himself to rigorous physical exercise, turned himself into a devoted outdoorsman, and threw himself into a life of public service. Roosevelt gave this speech in Chicago in 1899, a few months after becoming governor of New York, and it has remained one of his most popular. Here he speaks to a nation just beginning to feel tremendous wealth and power, and he cautions against the temptation of the life of “ignoble ease” that prosperity and security can bring. He reminds us that the character of a nation—like that of an individual—appears through its work.

TIPS: First created in 1997, these Treasury inflation-protected securities protect you against spikes in inflation.

Nobody, except for one firm: Salomon Brothers. In 1991, just as Maxwell had generated a huge scandal in Britain, Salomon Bothers had done the same in the United States. In the previous autumn, the Securities and Exchange Commission (SEC) caught some top Salomon traders trying to manipulate the US Treasury bond market.

When GC is above fed funds, it usually means there's an abundance of Treasury securities in the market. When GC is trading below fed funds, there’s often increased demand for Treasury collateral. In general, things like Flights-To-Quality and customer demand for Treasurys are factors which move Repo rates around, but not fed funds. It usually takes a crisis to move GC well below fed funds.

During the Financial Crisis itself, there was a Flight-To-Quality like no one has ever seen! The demand for Treasury securities was unprecedented, with GC trading 500 basis points below fed funds. GC/Fed Funds Spread During the Financial Crisis 2007-2008 Once the market moved past the crisis and it was time to clean up, Treasury issuance and Fed QE purchases became the main drivers of the spread between GC and fed funds. When Treasury issuance is high, Repo GC rates increase relative to fed funds.

Rather than accumulating the position in the secondary market, borrowing the securities from clients, or buying in the term Repo market, why not just buy the securities right from the start? Why accumulate securities in the secondary market and drive-up prices when you can just buy them directly from the Treasury? Buy the entire new Treasury issue and eliminate the middle-men! Not a bad idea!

once the issue settled, Tiger and Quantum agreed to have Salomon manage their positions. Salomon had complete control of the entire 2 Year Note. By the middle of May, it was clear there was something wrong. The 2 Year Note’s price was completely distorted; it was trading extremely rich and the yield was extremely low. There was no squeeze in the Repo market, however, because Salomon loaned the securities into the market each day. This created one of the strangest squeezes ever. There was no shortage in the Repo market, but there was a huge premium in the cash market. As the squeeze in the April 2 Year Note continued, Salomon submitted large bids again for the next 2 Year Note settling at the end of May. They were able to accumulate an abnormally large position once again. Prices across the entire 2 year sector were now distorted. Prices were abnormally high and yields were abnormally low. Everyone knew that Salomon had the issue and Salomon was not selling. At this point, all of the trading in the market was from one short seller to another. There were no real owners selling. All of the buyers were existing short-sellers who had ridden their losses as far as they could go and got stopped out. All of the sellers were new short-sellers willing to take short positions and higher and higher prices. There was no way for the squeeze to end without Salomon selling. What was Salomon’s goal? They had already achieved a very successful squeeze. Prices moved in their favor and they had a huge win under their belt. The biggest short-squeeze of all time! However, in July things started to unravel. Market participants started complaining to the Fed. Everyone knew that Salomon owned the entire issue. The Fed passed the information to the Treasury Department. Treasury then passed it to the SEC, who immediately launched an investigation. By the end of July, it was all over.

The real significant shortages were caused by one of the following: 1.       Cheapest-To-Deliver (CTD) – A specific security must be delivered to the exchange (CME) to fulfill a futures delivery requirement. If the correct security is not delivered, it’s a very expensive fine. This is a can’t-fail scenario. 2.       Gone From The Market – This was the case with the 3.625% 5/15/2013. There was no supply available and deep shorts. 3.       Settlement Distortion – During the September 11, 2001, period, the entire settlement system broke down. BONY couldn’t clear securities for days. 4.       Flight-To-Quality – End-investors buy-up all of the Treasurys, pack them away in their portfolios, and don’t loan them into the Repo market. These are solid reasons for securities shortages. However, when you take these out, the rest can generally be attributed to the Repo market, assisted by the Repo market, or helped along by the Repo market. A “Repo market squeeze” is a short squeeze that’s orchestrated by someone in the Repo market. The squeezer could be a Primary Dealer, a bank, a broker-dealer, or even a West Coast money manager. The concept is simple: Buy or borrow as much of a Treasury issue as possible and hold that supply out of the market. Don’t loan it to anyone. Then see how low Repo rates go. When the security begins to trade rich in the cash market or term Repo rates decline, sell the position. Or sell as much as possible.

There’s a theory that Treasury yields can be broken down into two components: the expected future path of overnight interest rates and the “term premium.” What’s that? Technically, the term premium is extra yield the investor receives for holding longer-term securities. The return is not just the average of the overnight rates, but a little extra yield just for holding the security for a longer period of time.

Rehypothecation is not risky in large Repo markets like U.S. Treasurys, but it becomes a potential problem in small securities markets. Think of small corporate or municipal bond issues. What happens if one of the counterparties defaults? Think of it like a break in the collateral chain. When one party defaults, the two counterparties on either side must liquidate their securities. One counterparty sells the collateral and the other one buys the collateral, but not necessarily to each other. For highly liquid and large issue securities, like U.S. Treasurys, this is easy. Problems arise when the collateral is non-fungible, a private-label issuer, or a small issue size. In these cases, when the entity in the middle goes bust, it’s hard for the original seller to get back their securities.

Treasury Bills The simplest, safest way to generate future cash from current cash is to buy a short-term, three-month Treasury bill. The purchase price you pay is loaned to the government, which in return promises to pay you a guaranteed rate of interest for three months and then return your principal. Because it is very unlikely that the U.S. Treasury will not be around to repay you three months later, the investment is close to riskless and therefore pays a low rate of interest. Its return serves as a benchmark for riskier securities, which must promise to pay more.

The Purānas, which are encyclopedic repositories of traditional wisdom, including everything from cosmology to philosophy to stories about kings and holy men. They contain many yogic legends and teachings. The following are especially important: the Bhāgavata-Purāna (also known as Shrīmad-Bhāgavata), Shiva-Purāna, and Devī-Bhāgavata-Purāna (a Tantric work). The so-called Yoga-Upanishads (some twenty texts), most of which were composed after 1000 C.E. and include three extensive works: the Darshana-Upanishad, Yoga-Shikhā-Upanishad and Tejo-Bindu-Upanishad. The texts of Hatha-Yoga, such as the Goraksha-Samhitā, Hatha-Yoga-Pradīpikā, Hatha-Ratna-Avalī, Gheranda-Samhitā, Shiva-Samhitā, Yoga-Yājnavalkya, Yoga-Bīja, Yoga-Shāstra of Dattātreya, Sat-Karma-Samgraha, and the Shiva-Svarodaya, which are all available in English. Vedāntic scriptures like the voluminous Yoga-Vāsishtha, which teaches Jnāna-Yoga, and its traditional abridgment, the Laghu-Yoga-Vāsishtha, both available in English renderings. The literature of the bhakti-mārga or devotional path, which is especially prominent among the Vaishnavas (worshipers of Vishnu) and Shaivas (worshipers of Shiva). There is a considerable literature on bhakti in both Sanskrit and Tamil, as well as various vernacular languages. In particular, I can recommend Nārada’s Bhakti-Sūtra, Shāndilya’s Bhakti-Sūtra, and the extensive Bhāgavata-Purāna, which is a detailed (mythological) account of the birth, life, and death of the God-man Krishna, with many wonderful and inspiring stories of yogins and ascetics. This beautiful work contains the Uddhāva-Gītā, Krishna’s final esoteric instruction to sage Uddhāva. Goddess worship from a Tantric viewpoint is the core of the Devī-Bhāgavata-Purāna, which should also be studied. In addition, sincere Yoga students should also read and ponder the great yogic texts associated with the different schools of Buddhism and Jainism. To encounter the world of Yoga through its literature will challenge the practitioner in many ways: The texts, even in translation and with notes, are often difficult to comprehend and demand serious concentration and perseverance. Yet we do not have to become scholars, but our study (svādhyāya) will show us what it takes to be a real yogin and what magnificent tools Yoga puts at our disposal. It will also further our self-understanding and strengthen our commitment to practice. In his Treasury of Good Advice (1.6), Sakya Pāndita, who was one of the great scholar-adepts of Vajrayāna Buddhism, wrote: Even if one were to die first thing tomorrow, today one must study. Although one may not become a sage in this life, knowledge is firmly accumulated for future lives, just as secured assets can be used later.

In buying Treasury securities, our ultimate goal was to precipitate a broad reduction in the cost of credit.†

vice president, and secretary of the treasury beam down from the walls. Visitors pass a sequence of photographs and paintings detailing the history of paper money in the United States and culminating with a life-size re-creation of President Lincoln signing the legislation authorizing the federal government to print money. At the end of the long corridor, visitors watch a short video on the history of paper money, after which guides divide them into small groups before they enter the work area. These small groups wend their way through the carefully marked visitors’ corridors past glass-enclosed galleries from which they can watch the sheets of dollars being printed, examined, cut, and stacked as the guides dispense a constant flow of facts about America’s money: The dollar is printed on textile paper made by the Crane Company using a mixture of 75 percent cotton and 25 percent linen with a polyester security thread. The printing machines are made by Germans and Italians. Nearly half of the bills printed in a day are one-dollar notes, and 95 percent of the bills are used to replace worn-out bills. The average life span of a bill varies from eighteen months for the one-dollar note to an ancient nine years for a one-hundred-dollar note. A bill can be folded four thousand times before it tears.

High-yield bonds—which Graham calls “second-grade” or “lower-grade” and today are called “junk bonds”—get a brisk thumbs-down from Graham. In his day, it was too costly and cumbersome for an individual investor to diversify away the risks of default.;1 (To learn how bad a default can be, and how carelessly even “sophisticated” professional bond investors can buy into one, see the sidebar on p. 146.) Today, however, more than 130 mutual funds specialize in junk bonds. These funds buy junk by the cartload; they hold dozens of different bonds. That mitigates Graham’s complaints about the difficulty of diversifying. (However, his bias against high-yield preferred stock remains valid, since there remains no cheap and widely available way to spread their risks.) Since 1978, an annual average of 4.4% of the junk-bond market has gone into default—but, even after those defaults, junk bonds have still produced an annualized return of 10.5%, versus 8.6% for 10-year U.S. Treasury bonds.2 Unfortunately, most junk-bond funds charge high fees and do a poor job of preserving the original principal amount of your investment. A junk fund could be appropriate if you are retired, are looking for extra monthly income to supplement your pension, and can tolerate temporary tumbles in value. If you work at a bank or other financial company, a sharp rise in interest rates could limit your raise or even threaten your job security—so a junk fund, which tends to outper-forms most other bond funds when interest rates rise, might make sense as a counterweight in your 401(k). A junk-bond fund, though, is only a minor option—not an obligation—for the intelligent investor.

Were the United States an emerging market, its exchange rate would have plummeted and its interest rates soared. Access to capital markets would be lost in a classic Dornbusch/Calvo–type sudden stop. During the first year following the crisis (2007), exactly the opposite happened: the dollar appreciated and interest rates fell as world investors viewed other countries as even riskier than the United States and bought Treasury securities copiously.33 But buyer beware! Over the longer run, the U.S. exchange rate and interest rates could well revert to form, especially if policies are not made to re-establish a firm base for long-term fiscal sustainability.

way. I monitor the action by following the TLT, the iShares 20+ Year Treasury Bond ETF. This security goes down when interest rates go up, and vice versa. When the TLT goes down, you can expect the stock index futures to go down soon after,

Russia had infiltrated the Treasury in 2015; and Tricia Newbold, a White House employee suspended for exposing that security clearances had been knowingly given to staffers who violated national security protocol.27 Among those staffers were Jared and Ivanka.

REITs. Real Estate Investment Trusts, or REITs (pronounced “reets”), are companies that own and collect rent from commercial and residential properties.10 Bundled into real-estate mutual funds, REITs do a decent job of combating inflation. The best choice is Vanguard REIT Index Fund; other relatively low-cost choices include Cohen & Steers Realty Shares, Columbia Real Estate Equity Fund, and Fidelity Real Estate Investment Fund.11 While a REIT fund is unlikely to be a foolproof inflation-fighter, in the long run it should give you some defense against the erosion of purchasing power without hampering your overall returns. TIPS. Treasury Inflation-Protected Securities, or TIPS, are U.S. government bonds, first issued in 1997, that automatically go up in value when inflation rises. Because the full faith and credit of the United States

Net wages: “It’s not what you make, but what you net” after paying the FIRE sector, basic utilities and taxes. The usual measure of disposable personal income (DPI) refers to how much employees take home after income-tax withholding (designed in part by Milton Friedman during World War II) and over 15% for FICA (Federal Insurance Contributions Act) to produce a budget surplus for Social Security and health care (half of which are paid by the employer). This forced saving is lent to the U.S. Treasury, enabling it to cut taxes on the higher income brackets. Also deducted from paychecks may be employee withholding for private health insurance and pensions. What is left is by no means freely available for discretionary spending. Wage earners have to pay a monthly financial and real estate “nut” off the top, headed by mortgage debt or rent to the landlord, plus credit card debt, student loans and other bank loans. Electricity, gas and phone bills must be paid, often by automatic bank transfer – and usually cable TV and Internet service as well. If these utility bills are not paid, banks increase the interest rate owed on credit card debt (typically to 29%). Not much is left to spend on goods and services after paying the FIRE sector and basic monopolies, so it is no wonder that markets are shrinking. (See Hudson Bubble Model later in this book.) A similar set of subtrahends occurs with net corporate cash flow (see ebitda). After paying interest and dividends – and using about half their revenue for stock buybacks – not much is left for capital investment in new plant and equipment, research or development to expand production.

if you are one of those who believe in trading their votes to politicians in return for the passing of laws which permit the raiding of the public treasury, you may rest securely on your belief, with certain knowledge that no one will disturb you, because THIS IS A FREE COUNTRY WHERE EVERY MAN MAY THINK AS HE PLEASES, where nearly everybody can live with but little effort, where many may live well without doing any work whatsoever. However, you should know the full truth concerning this FREEDOM of which so many people boast, and so few understand. As great as it is, as far as it reaches, as many privileges as it provides, IT DOES NOT, AND CANNOT BRING RICHES WITHOUT EFFORT. There is but one dependable method of accumulating, and legally holding riches, and that is by rendering useful service. No system has ever been created by which men can legally acquire riches through mere force of numbers, or without giving in return an equivalent value of one form or another. There is a principle known as the law of ECONOMICS! This is more than a theory. It is a law no man can beat. Mark well the name of the principle, and remember it, because it is far more powerful than all the politicians and political machines. It is above and beyond the control of all the labor unions. It cannot be swayed, nor influenced nor bribed by racketeers or self-appointed leaders in any calling. Moreover, IT HAS AN ALL-SEEING EYE, AND A PERFECT SYSTEM OF BOOKKEEPING, in which it keeps an accurate account of the transactions of every human being engaged in the business of trying to get without giving. Sooner or later its auditors come around, look over the records of individuals both great and small, and demand an accounting.

In fact, some investment advisors say the only completely safe bond is one backed by the full faith and credit of the United States. And you can actually buy US bonds called Treasury inflation-protected securities, or TIPS, that rise in value to keep up with inflation through the consumer price index.

Child, knowledge is a treasury and your heart is its strongbox. As you study all of knowledge, you store up for yourselves good treasures, immortal treasures, incorruptible treasures, which never decay nor lose the beauty of their brightness. In the treasure house of wisdom are various sorts of wealth,and many filing-places in the storehouse of your heart. In one place is put gold, in another silver, in another precious jewels. Their orderly arrangement is clarity of knowledge. Dispose and separate each single thing into its own place, this into its and that into its, so that you may know what has been placed here and what there. Confusion is the mother of ignorance and forgetfulness, but orderly arrangement illuminates the intelligence and secures memory. (translation by Mary Carruthers)

The Accumulation of Holy Relics started with Helena, The mother of Constantine the Great. She was granted the high title of Augusta Imperatrix and allowed unfettered access to the imperial treasury so she could secure the precious objects of the new Christian tradition. To fulfill her mission, in A.D. 326, at the age of eighty, she traveled to Palestine as the first Christian archaeologist. In Jerusalem she ordered a temple that had been built over the site of Christ’s tomb near Calvary torn down and a new church erected. According to legend, during the construction, remnants of three different crosses were discovered. Was one the cross upon which Christ died? Nobody knew. To find out, the empress commanded that a woman who was near death be brought to the site. When the woman touched the first and second crosses her condition did not change. But when she touched the third she immediately recovered. Helena declared that to be the True Cross and ordered the building of the Church of the Holy Sepulcher at that spot.