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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (39664)	8/25/2005 1:05:41 AM
From: rayok	Respond to of 110194

"I do not think that treasuries are easily manipulated, not for any long duration anyway. Long term trends in currencies and interest rates are very tough to shake. Ask Japan who tried to induce inflation for 18 years and could not do it even at ZIRP." Did the Japanese money supply not grow? Of course they created inflation, just not the type of inflation you seem to perceive as inflation. For example, the Japanese liquidity helped to inflate the Nasdaq, and created the very same low interest rates, that you assume indicates low inflation(deflation?). Governments create the liquidity, but the liquidity recipients decide which asset classes and/or prices to inflate, and that can include inflating the price of bonds.

To: mishedlo who wrote (39664)	8/25/2005 8:59:39 AM
From: Real Man	Read Replies (3) \| Respond to of 110194

There is little doubt that real (not BLS) inflation is above 6%. The average oil price increase has been 66% YOY since 2003. That's hardly deflationary. This makes all real treasury yields negative. Why, you ask, don't they respond to it? Derivatives. Derivative interest rates market is about 300 Trillion dollars NV, $6 Trillion real value. It dwarfs the underlying bond market, it moves it. If delivery is requested, there is not enough bonds to be delivered. ANY Fed printing has a huge multiples effect. No need to sell bonds because the rates are low, just short the short end, get long the long end, and lever to the extreme, cause you know Greenspan Fed will never, ever be tough. Money for nothing, chicks for free. Pig men always win. They don't call him easy Al for nothing. He propelled moral hazard in the US to the extreme. Raising rates to create an image of inflation fighting Fed for the Asian bag holders, while passing billions of dollars to the Pig men under the table, these amounts growing with time. That's what is keeping the LT yields low. Things are very different now. Derivatives market dominate the trade, old wisdom no longer applies. Meanwhile, real economy suffers because of high inflation and low income and job growth. There is only one punishment for unwise currency management. It's called "hyperinflation". We are well on our way. No need to listen to BLS. Just look at CRB.

To: mishedlo who wrote (39664)	8/25/2005 9:27:04 AM
From: GST	Respond to of 110194

<Ask Japan who tried to induce inflation for 18 years> Perhaps it was because of their huge current account deficit, or perhaps it was because of the fact that Japanese people had no savings -- not, not. Every time you use Japan to try to make a point it seems to undermine your argument rather than bolster it. The situation in the Japan bubbles was as close to the opposite of our situation as you can get and still be talking bubbles. They ended up with ten years of stagdeflation -- our fate seems to point in the opposite direction -- staginflation. The US and Japan point to the extreme opposite ends of the spectrum when it comes to the situation in which bubbles are to be resolved.