treasury markets will be okay with that.ple who trade treasury bonds and bills will be honky doory with it. not so stocks,. >> bad reaction in stocks. potentially gold could go up. you could even see a rally in treasury bonds come monday morning this was so well telegraphed. i know because you are a nerd, you are a huge geek. i'm going to be geeky as well. what's going to happen though. >> neil: why couldn't you say you are a geek and leave it at that? >> two peas in a pod. what's going to happen because you have -- the u.s. has a lower credit rating, that could force many funds to sell, say lower quality investment grade corporate bonds. below investment grade investment bonds. if you see weakness there, that's bad for companies. >> you are with all those commodity traders, and they tend to jump early and fast and rapidly. what are they going to do at the first second an opportunity they have to trade? >> you know, i'm getting ready for deflationary meltdown possibly on monday in commodities. especially if things start to g

treasuries. aaa and treasuries were synonymous. of selling off those treasuries to conform with the rules we will rewrite their perspectives and charter so they are allowed to continue to own in treasuries. treasuries are today as safe as they were on thursday as shakespeare says arose would smell as sweet by any other name. >> stay with us. we have a lot more to get to. coming up tomorrow on the fox business network we will have continuing coverage of the world's market's reactions starting at 5:00 a.m. eastern. you are really going to want to start early with us. tune into the report tomorrow night as we continue our look at the how the downgrade impacts your investment. stay with us. you could save a bundle with geico's multi-policy discount. geico, saving people money on more than just car insurance. ♪ geico, saving people money on more than just car insurance. >> last week the bank of new york had a very interesting announcement. they said for their biggest client they wanted them to pay them for keeping their money. if you we

if you are somewhat rich left more risky to treasury you're still more risky because the treasury can tax everybody to pay its bills and if the treasury doesn't tax it prince at the base of the dollar benefits all bonds not just its own laws but you know it's also crazy about the rating system why is china the world's biggest creditor nation we owe china trillions how can they be rated double a minus and we're all and we're a double a plus and we're kind of trial i don't world is the world's biggest debtor a bigger risk than the world's biggest creditor yeah why do. it's kiters comments he says s. and p. is being irresponsible as an s. and p. being responsible like. saying it's big government this big you're responsible they're the ones that are racking up in bed and you know the a-bomb administration is all over s. and p. because they claim they got the math wrong that they didn't count is two trillion dollars of assume savings over the next ten years why should be counted it's not going to happen and in fact the real math problem is with the administration using eusebio budget congr

treasuries what is your pant doing with all those dollars that they're buying their blind treasuries now because they want to but because they think there's a gun to their head but they're mistaken so instead of paying somebody to hold your dollars sell your dollars and get into this was frank or get into gold and i've got about thirty seconds left i just want to go swing back and revisit the gold standard idea clearly as you point out what with the problem today is inflation and by returning to a gold standard you are coming back to it with something that will hopefully restraint government from spending and from the printing presses from rolling out in full speed so. what clearly you know as it were saying before if you go back to the gold standard got to find a price that way and makes sense given the fact they've had all this money printing going on for so long i know you've got a long term target on gold in the thousands but if you thought about what what price what i don't know because it depends on where we are when we go back to the gold standard obviously if we go to the gol

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let's talk about this for a moment treasury bills you say when you have them in your portfolio and you use them as collateral you can borrow against them one hundred cents on the dollar and this is interesting because if you remember going back to the construction of collateralized mortgage obligations what they did was they created collateralized mortgage obligations as a way to skirt the margin requirements set up by bows will in switzerland that's the genesis of collateralized mortgage obligations it's all about the margin requirements and margin requirements are different for different classes of assets so a junk bond you have to put up more of the junk bond if you want to put it into an account and borrow against it the margin account as it's called treasury bills you can borrow one hundred cents on the dollar t. bills you can borrow one hundred cents on the dollar but what they're saying here is that there are so worried about the underlying fundamental. sole integrity of these global markets that not even a treasury bill is as good you know hundred cents on the dollar they're go

treasuries? >> we had weak economic data and then trechet made an announcement that they were going to be vigilant against inflation, and it's simply the wrong battle to be fighting now. it's more about growth than inflation. >> suzanne: three weeks ago, you were on our program, and you told us that you were staying away from treasuries with your $20 billion fund, you were completely avoiding treasury. was that a mistake? >> no, not at all. we're very focused on the long-term and while treasuries had a tremendous day today -- we saw the long bond up four points, so rates really going to all-time lows and when you think about the long-term, that's not a very attractive rate of return. the market is clearly in a mode of flight to quality, looking for a safe haven but that's very short-sighted in the moment. i think that investors are reacting to what they remember about 2008, and so there is this crawl into the treasury market. a very fast pace to find that liquidity but you're giving up a lot of y

treasury bill ear. suggesting that it is not as credit worthy as some suggest so that my question is with all this talk about the play rating of u.s. debt being downgraded it sounds as though it's already been downgraded in the minds of a lot of people yourself included oh yeah i think the psychological effect of what's already gone on is really strong and i can always go back to short term treasury bills if i have to we're not going to bail out for a while into other short term instruments and wait it out sort of like you know waiting out you know a contagion let's talk about the craziness that's going on in the u.s. concerning the debt ceiling up until a few months ago people didn't focus on this debt ceiling so much because every time it came up for an expansion it was automatically expanded there wasn't a huge issue suddenly there attaching all kinds of riders today as that has to be reexamination of the entire fiscal policies of the united states how did that happen who are the players and what's r

treasurys at 1.3%, 10-year treasury the s 2.7, the combination of low yields and deteriorating quality suggest that treasuries are not a good holding relative to other assets. >> susie: the u.s. government and u.s. treasuries has always been a positive bias by investors all around the world. do you think other countries are still interested in investing in the u.s.? >> i think they have to be. countries like china and other surplus nations such as brazil basically have to use that money to buy treasuries. they do it in order to maintain and to fix their own currencies relative to the dollar, to make sure that those currencies don't depreciate and therefore to gain a trade advantage, so china basically has to buy treasurys, but at the margin, that's the critical element to investigate, at the margin, china, brazil and other countries are looking for not only other countries in terms of their currencies and their debt but commodities. real assets as well. >> susie: we got a weak manufacturing report today. we got a weak g. d.p. report showing weakness in the u.s. economy friday. this fri

treasuries? >> we had weak economic data and then trechet made an announcement that they were going to be vigilant against inflation, and it's simply the wrong battle to be fighting now. it's more about growth than inflation. >> suzanne: three weeks ago, you were on our program, and you told us that you were staying away from treasuries with your $20 billion fund, you were completely avoiding treasury. was that a mistake? >> no, not at all. we're very focused on the long-term and while treasuries had a tremendous day today -- we saw the long bond up four points, so rates really going to all-time lows and when you think about the long-term, that's not a very attractive rate of return. the market is clearly in a mode of flight to quality, looking for a safe haven but that's very short-sighted in the moment. i think that investors are reacting to what they remember about 2008, and so there is this crawl into the treasury market. a very fast pace to find that liquidity but you're giving up a lot of y

does treasury still think it will run out of cash by midnight tonight? i've been given only limited information. treasury continues to say we will run out of cash today and will not be able to pay our bills the same date they estimated way back in may. treasury won't show me, the ranking member of the senate finance committee, how they are arrest raoeufrg at that estimate -- arriving at that estimate. i have not been informed, congress has not been informed and americans counting on timely social security payments have not been informed. almost every member of the fsoc including treasury and federal reserve refused to provide me with information. even if the debt limit is raised there is no assurance we won't face a downgrade. we need to know the government's plans. it should rise above politics. mr. president, as i've said repeatedly, this is unacceptable. i want to be clear about two things. first, congress will have to look into this matter very carefully and investigate whether treasury and most of our major financial regulators have been deliberatel

the evidence a stunningly high correlation of gold to twenty year treasuries from july twenty first through august sixteenth is point eight nine over that period gold is up twelve point three percent and treasuries are up eleven point eight percent result the conundrum that people are talking about right now on this show people say that bonds and gold cannot both be hitting new all time i simultaneously because that would mean that inflation and deflation are happening simultaneously let me break it down for you a vastly the bond market is being bought up by computers. the gold market is being bought up by people who are fearful that the bond market is being bought up by computers to understand i'm saying one is real people and the governments are buying gold the other one is fake a bunch of computers are buying treasuries to make it look like the u.s. economy is not as catastrophic as it really is and that can only last so long well the reason why people are going to gold instead of the treasury according to this article and really holds dot com gold does not carry a downgrade risk

a treasury type of. concoction but i don't honestly think that the treasury department will go along with this the tim geithner will go along with this because the banks will go along with this and whether it's the republicans who won't anyway if there was a viable solution that said look refinancing has to happen banks have gone a good deal on their money they have not opened their doors they are not working with borrowers we see that in every corner in every county in every city throughout the country and if there was a legal requirement for what the banks are receiving there continues to be zero interest money now as well there has to be a certain percentage otherwise they're taxed more otherwise something happens to you know their very income their profitability whatever that actually in current acts a an economic kind of pain to them if they don't refinance only one way of doing it outside of a sort of congressional vote or congressional action if it came in came from that but that kind of an idea w

ten-year treasury, the yield was down to 2.34%. that's still really cheap. so in the short term, investors are putting their money in u.s. treasuries. >> what about that to chrystia's point, letting the bush tax era expire? >> i don't think it's up to any agency to tell a sovereign nation how to put its finances in order. what they need to be concerned about is where are we headed with regard to deficits and where are we headed with regard to debt to gdp and it's part of elected officials to decide how to bring those numbers under control. and has r as already has been said, there's no question we're going to need revenues 18% of gdp, which is historical average over time, in addition to entitlement reform and cutbacks and restraints. but we're dealing with a very economic recovery right now. we have very high unemployment and it's not just a matter of what you do. it's how you do it and when you do it that matters. >> ali, what do you think this means for ordinary -- go ahead, ali. >> i was just going to say to david's point, ther

treasury is going to back stop them. so, it doesn't really matter that much where their debt trades, in terms of where mortgage rates might go. in addition to the fannie and freddie downgrades, s&p also cut the ratings of senior debt at 10 of the 12 federal home loan banks. those banks also provide funding for home loans. >> in the same way that we suspect that the increase in funding cost for fannie mae and freddie mac, we think that also applies to the federal home loan banks. so, it's a somewhat different program, same bottom-line result. tom, today of all days freddie mac ask the the government for another 1.5 billion dollars in aid. >> tom: trouble in the house market clearly continues it was the shot heard around the world with that debt downgrade heard late on friday. let's get everybody upgraded now with specifics on tonight's market focus. there was massive selling pressure today in stocks, making today's session a historic one. here's what the s&p 500 stock index looked like today. a mid-afternoon effort to sta