"When people find that they are losing money [as bond prices fall as rates rise], they say, I don't want these bonds: Sell them. Then the question is, To whom? The Fed is the only answer. So they cannot taper. But where does that lead us to? Worldwide destruction of currencies, often called currency wars. So that is the backside of the bursting of the bubble.
And I will go one step further. We are in the bursting now because interest rates – instead of falling during the last year’s biggest rate of QE – a trillion dollars a year, $85 billion a month (Treasurys and MBS) – that rate rose. It did not fall this year, 2013. As the Federal Reserve increased its purchases and increased its balance sheet, rates tended to go exactly the opposite direction because they are driving them down. They are driving the price of bonds up as they buy them.
This year it went the other way. Now, is that just a fluke or is this it?
My claim is: This is it. We have already passed the bottom of rates."
Buying our own bonds because nobody else wants them is simply 'a snake eating its tail'.
ReplyDeleteAnd Obama wants to spend more -- because he and his can only survive by buying votes.
I'm afraid from here it will simply be a more and more desperate effort to hold down rates. The question will be what the federal government will do once the money stops when the fed cannot simply print without consequence. More taxes? Asset confiscation? Who knows what a desperate government might try?
DeleteWhen you're above the law and want to "fundamentally transform America", I suppose that you can do what you please once you've separated the "fly over people" from God and guns.
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