<The run up of commodity prices must result in higher product costs unless savings can be wrung out somewhere else>
Absolutely correct. The easy money that has overheated Asia and has caused the runaway inflation in input goods, is perversely causing even more job loss in the US. The proper policy now would be to fight inflation, job losses, scant savings, and a weak currency through a series of US rate increases. But as Misheldo has repeatedly pointed out, "Russ, you aren't the Fed", so we will get a massive trainwreck instead.
In the meanwhile the BOJ prints up more yen for the inflation fire, and scarfs up a huge treasury offering, la de dah:
Reuters
US Treasuries in demand from foreign central banks
Tuesday February 10, 1:22 pm ET
NEW YORK, Feb 10 (Reuters) - Treasuries were easier but pulled off their lows on Tuesday as an auction of new U.S. government debt drew strong demand from overseas central banks, boding well for the rest of this week's $56 billion refunding.
Indirect bidders, which include foreign central banks, picked up 46 percent of the issue, easily beating November's 37 percent and the best since this maturity was brought back last May. Traders had been hoping for strong demand given the Bank of Japan is known to have bought massive amounts of dollars in recent week to restrain a rise in the yen.
The $24 billion in new three-year Treasury notes went at a high yield of 2.33 percent and drew bids for 2.27 times the amount on offer, beating November's 2.11 level and well above the 1.80 average of last year's auctions.
The current three-year note (US3YT=RR) recouped some of its initial losses but was still off 4/32 in price, taking yields to 2.19 percent from 2.14 percent late on Monday. In when-issued trading, the new three-year paper had been yielding 2.33 percent just before the sale. |
