The Epic American Credit and Bond Bubble Laboratory Message Board

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

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To: Crimson Ghost who wrote (53485)	2/11/2006 1:41:06 PM
From: ryoung8918	Read Replies (1) of 110194

The problem is those foreign CB buyers do not seem to care much about earning a good return. That's what I find interesting about the latest auction of 30 year bonds. No one who is paying any attention at all could believe that holding dollars for 30 years at 4.5 percent is a good investment. If there is serious inflation in the US, you get hammered. Either by rising US interest rates trying to control inflation or devaluation of the dollar if the Fed lets inflation run. If there is serious deflation in the US, the entire US economy goes belly-up and you risk monetization of the debt when tax revenues plummet or simple default once cascading bank failures start. Those are the extremes. If Big Ben can somehow make simple stagflation happen in the US, that's the "goldilocks" scenario, IMO. IMO, the CBs know all this already. They have decided on a course of action, and they are trying to execute it. That's why they're still sucking up bonds despite their actual value. I have no clue what that course is, but that's the only way I can explain the events in the last auction. Just my 2 cents. And I'm probably wrong. ;-)

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