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

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To: Skeeter Bug who wrote (103748)	6/24/2009 7:35:58 PM
From: Think4Yourself	Read Replies (2) of 110194

I see TWO forces at play in the Treasury markets. One is the inflation everyone knows about, and understands fairly well. I do not see inflation as an imminent threat but when it does come it is going to be VERY nasty. The other force is simple supply/demand issues, which are totally independent of the inflation issue. For one thing, China and Russia are no longer the eager buyers they have been, and China is now a seller. The Treasury is going to sell extra trillions worth of Treasuries for each of the next few years. Where is this money going to come from? The excess cash willing to settle for 2% interest will soon be gone. After that the remaining investors will want higher yields to buy them. Unless the Fed wants to try buying ALL of those Treasuries, yields are going to rise and prices are going to fall. The Fed may continue trying to hold rates down, but will not succeed for much longer without losing all credibility. The sheer amount of Treasuries needing to be sold/renewed guarantees this is going to blow up in their face. If the Democrat's National Health Plan passes, it's all over.

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