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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: GraceZ who wrote (51386)	1/25/2006 5:11:04 PM
From: Mike Johnston	Read Replies (4) of 110194

Long term interest rates are not kept low by the government printing more money. Yes they are. And it's one of the reasons that a huge and disruptive adjustment will occur sooner or later. The question is not if, but how. Fact #1: Whether it's the Fed or Bank of Japan or Bank of China, most of the support for bonds in recent years has come from central bank buying. Fact#2 BOJ printed 35 Trillion yen not that long ago. That money was used to purchase dollar assets in the open market to support the dollar from collapsing. Fact #3 No sane or well informed person would invest in Treasurys below the rate of inflation, as is the case now. Check out Russ's report from last night. Who is buying all the bonds ? FCB's that are either run by stupid people or don't care if they lose the money. Fact #4 Inflation expectations are kept low, because of the government misinformation campaign. Inflation is simply not measured in this country. While inflation perceptions differ among consumers sometimes by a wide margin, it is not a matter of debate if CPI is understated, the debate can only be about how much.

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