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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (134659)	7/12/2013 2:30:13 PM
From: RetiredNow	Read Replies (1) \| Respond to of 149317

Oh ok. I see your point. However, let me point something out that not many have connected. In a free market, free from central planners who manipulate prices, the floating interest rate on the 30 year bond or 10 year bond is a good market pricing signal for inflation, when it spikes, and good signal for deflation when it is low. However, we don't have that here. Bernanke has been buying up close to 80-90% of Treasury issuance and an enormous percentage of MBS issuance. That has driven bond prices up very high and compressed yields. This is the mother of all price manipulations and is fully intentional. So you cannot with a straight face call the interest rate on Treasuries or in MBS a free market pricing signal of inflation. It is manipulated and compressed artificially. So if you want to know whether inflation is happening and where, then look at commodity indexes or the BLS numbers at the line item level. If you want to know if we are in a bond bubble, look at bond prices over the last 30 years and you tell me. What I see is the highest bond prices and the lowest yields in 30 years. This is the mother of all bubbles in bonds. This is the catch-22 the Fed is in. If they ever do decide to taper, then it will hammer bonds, as we just got a taste of. In addition, it will hammer stocks, because all this liquidity that is sloshing around has propped up the stock market like crazy. So if the Fed tapers, BOTH stocks and bonds will go down. Cash will be one of the few safe places. Now, if the Fed DOESN'T taper, then everything will continue to rise to even more bubblicious territory until it explodes of its own accord. My guess is that if we go down that path, the bubble explosion will result in 70s style inflation and stagnation. Don't know about hyperinflation, but that might also be a possibility, given the massive size and length of this experiment. Then there's the other risk...that almost every government in the world is devaluing their currency. Wow. What are the consequences of that? We're in uncharted territory. This has never happened before. Simultaneous global fiat devaluation. Reminds me of the ancient Chinese curse: may you live in interesting times.