Saturday, 5 January 2013

Sutton's Law...............from Rico

Considering the obvious has become known as "Sutton's Law." It is fairly well known, unlike Galbraith's comment that "The conventional view serves to protect us from the painful job of thinking."

Let's travel from Sutton, to Spain, and then back to today's US, which bears some serious (if painful) thinking about.

Willie SUTTON.
New York bank robber Willie Sutton (1901-1980) did very well in his career, robbing millions of dollars. Famous for his success (although later over-shadowed by Bernie Madoff and the US Congress), he is more famous for apocryphally replying to a reporters question "Why do you rob banks?" with the quip "Because that's where the money is."

Which takes us to SPAIN.
The Spanish government has had its hand in the piggy bank. Have you wondered WHO in their right mind would be buying Spanish 10Y's? Spain has. Tapping the national piggy bank to become the buyer of last resort for it's own bonds. At least 90% of their Social Security fund has been spent to buy their own risky national debt because the government is broke and "because that's where the money was."
- Never mind that there will not be any retirement for a lot of Spaniards, their government needed the money more than they will.

This brings us back to the US.
There can be no end to QE, but there can be an end to private savings. The FED is currently the buyer of last resort for over 60% of US 10Y's. They cannot stop...UNLESS the "USG goes where the money is" and forces private 401K's and IRA's to hold Treasury bonds (debt), Social Security already having been plundered of its cash in exchange for US "IOU" Treasurys. Would the American government 'rob' the private savings of its own citizens because it was 'broke' and "that's where the money was?" In a New York minute!


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