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Politics : Ask Michael Burke
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To: BGR who wrote (71375)12/3/1999 11:00:00 AM
From: Earlie  Read Replies (2) of 132070
 
BGR:

The only place I hear "the THREAT of inflation" discussed as a reason for rising bond yields is on bubblevision. I talk to some quality "bond boys" almost every day. Much more important thoughts are put forward.
- an historic trade deficit and the obvious implications for the buck (and all things denominated therein).
- Ditto the current account deficit.
- Looking for a REAL "new era"? How about net selling of treasuries by the offshore central banks, now into its second year and rising. Japan has been almost in "dump" mode in this regard, and one can hardly blame them or anybody else for quietly ridding themselves of what is becoming a tidal wave of increasingly less valuable paper.
- Checked out corporate debt levels lately? This is where corporate America has really experienced "exponential growth".
- Do rising interest rates ever do anything other than shrivel profitability? Can interest rates possibly fall when the U.S. must maintain a substantial interest rate differential to keep the ocean of treasury paper from washing back home (and Europe nudged rates up 1/2% a few weeks ago). They think Alan's choices relate more to how much and how fast rather than whether to raise interest rates.
- Money printing and money velocity running at historic levels. The government can't see any inflation, but unfortunately the "Bond Vigilantes" as well as any person who buys anything knows that inflation is alive and well right across the nation. They also know that Big Al is fighting a desperate battle against a spreading global deflationary wave with the only weapon he has, which is the creation of powerful inflation. "A rose by any other name,..." etc.

They have a much longer list, but the above tends to include some of their imperatives.

Bonds are really IOUs,....a "promise to repay". Both the shrinking probability that such repayment will occur, as well as the possibility that said repayment may well be made in a crumbling currency seems to have their attention.

There are the quick (sellers) and there are the dead. (g)

Best, Earlie
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