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

To: GraceZ who wrote (51386)	1/25/2006 3:15:28 PM
From: bond_bubble	Read Replies (3) \| Respond to of 110194

I was lending for less because if I dont, then govt was going to print money and give it at a lower rate!!! I cant compete with govt!!! So not because it is low inflation - but I cant fight the Fed!! And the bond market also has been fooled to thinking the CPI prices that excludes housing cost, investment cost (i.e future retirement cost) is what is important. Fed has outright forced them to think inflation as: 1) Chinese wages 2)Computer speed 3)Quality that you seem to be espousing etc.... So what if the Fed has fooled the bond market? So what if the Fed has forced me to lend lower? So what if the govt runs a $1 hospital? So what if govt sells $1 cars? As long as there are private enterprises also existing, there is free will right? You are a great admirer of this $1 cars, $1 hospital and -ve real interest rate!! Although you, as a consumer will not choose $1 cars as they might be risky but buy 20K car with nice quality etc!!! This is all nice and dandy when the honey is flowing. What happens when there are no more private hospitals, private car companies as they die competing govt? And what happens to my money in the bank if there is either (a) hyper inflation OR (b) deflation and bank defaults. Oooh ya, I know, I've the "freedom" to choose whichever bank I want to deposit in!!! And there are plenty of banks that transact in gold money around. Do you see them? Oooh, BTW, those Chinese making the $1 cars and the Indian doctors providing $1 hospital and law services - now might decide to charge more!! And US lawyers, auto workers have no jobs!!! Is the honey still flowing?

To: GraceZ who wrote (51386)	1/25/2006 5:11:04 PM
From: Mike Johnston	Read Replies (4) \| Respond to 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.