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

To: bart13 who wrote (69986)	9/19/2006 10:48:13 PM
From: John McCarthy	Read Replies (1) \| Respond to of 110194

Hi bart I respect your time so I don't want to waste it .... (a) Show me a 40 or 50 year graph that just compares (1) actual (announced) inflation levels vs (2) long term interest rates ...... if they don't move in the SAME direction I am wrong ... I introduced the word "announced" because I was trying to get clarity from what Mike wrote ..... if the thinking is that we're gonna have an announced rate of 3% inflation and a real rate of 10% then I don't know how this will square with higher wage increases as discussed in Mike's post ... I'm not certain (and I could be wrong) that we can disconnect wage increases from announced inflation rates if I read you right (and I could be wrong) then you are suggesting that OTHERS have suggested the policy might be to let housing prices come down? if so - then why are we jumping thru all the hoops that Mike's post suggests .... jmo - but the structure of Mike's plan really could take the pressure off the time-bomb .... i.e. this driving of long term rates down-ward to let current holders re-finance - its sharp I'm just trying to ferret out how the fed would engineer this .... lets not forget - the fed cannot (jmo) sit on inflation rates forever .... Why don't you have the final post on this .... regards, John

To: bart13 who wrote (69986)	9/20/2006 10:08:22 AM
From: J_Locke	Read Replies (2) \| Respond to of 110194

The fed talked about manipulating the long end of the yield curve during the great 'deflation' scare of '02. They could easily buy 10 year treasuries through open market operations if they chose to. Thus far they have not chosen to. Bear in mind that foreign central banks now own more than 50% of the outstanding float of treasuries and perhaps an even larger share of the 10 year note. The FCB's and carry traders are ultimately in control of the yield curve. It would be naive to think that the major players (Bank of Japan, People's Bank of China, Saudis) are not co-ordinating their activities with the fed.