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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: KyrosL who wrote (88000)10/27/2007 3:49:44 PM
From: GST  Read Replies (1) of 110194
 
<the more dollars the Fed is creating, the lower the long bond interest rates will go, since all these dollars increase the demand for long bonds> That is precisely what has happened -- and it is only subject to the willingness to hold dollars. The glut is so huge that renting a dollar is still cheap. On the other hand, the willingness to hold dollars is declining - and so you are seeing the dollar drop even as the long bond holds relatively steady. The long bond is not telling the inflation story -- the foreign exchange market is blaring it at 130 decibles. You can stay deaf to it as you prefer, but you will be completely ignorant of the tremendous inflationary trend that comes along with a sharply lower dollar.
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