Federal Reserve Chairman Ben S. Bernanke and his colleagues may try once again to cure the aftermath of a bubble in one kind of asset by overheating the market for another.In other words, whatever treasuries the US government buys will become the only game in town for investors. They will flock to them, as they already have been. But the Magic ATM of the US Government will flood the bond markets with cash. Bond prices will skyrocket. Yields will push towards zero.Fed policy makers meeting tomorrow and the day after are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move: a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero.
The risk is that central bankers will end up distorting the Treasury market, triggering wild swings in prices -- and long-term interest rates -- as investors react to what they say and do. “It sets forth a speculative dynamic that is very unstable,” says William Poole, former president of the Federal Reserve Bank of St. Louis and now a senior fellow at the Cato Institute in Washington.
The Treasury market has “some bubble characteristics,” Bill Gross, the manager of Newport Beach, California-based Pacific Investment Management Co.’s $132 billion Total Return Fund, said in December on Bloomberg Television. He echoed that sentiment last week.
“I will say, and I have said for the past three months, the governments are very overvalued,” Gross said in a Jan. 20 interview. Treasuries last year returned 14 percent, according to Merrill Lynch & Co.’s Treasury Master Index, their best performance since 1995.
The the problem starts. As investors flood the same market and push the price up even higher, the government loses control over the price. Wild swings in the bond market could lead to devastating consequences for investors, particularly long term investors. Remember folks, treasuries are what foreign investors are buying from us: the promise the Treasury department will pay them back later. If the prices go all over the place and the bond market goes nuts, we run the risk of a 1929 style crash in the bond market...and that could devastate the US economy even more.
In other words, Bernanke is playing with a flamethrower in a fireworks factory. So many mutual funds and 401(k) plans and of course foreign investors are in Tresuries right now that it's already causing a bubble. If Bernanke lets loose with the full power of the Magic ATM, we'll see another massive bubble much sooner...and the corresponding crash will be much, much worse.
But Obama can't can Bernanke now. It's far too late. Bernanke's fate is Obama's fate...and our fate as well.
The People Wants The Credit Free, Free Market Economy
ReplyDeleteDear, I should say Expensive Chairman Ben S. Bernanke,
All of Our Economic Problems Find They Root in the Existence of Credit.
Out of the $5,000,000,000,000 bail out money for the banks, that is $1,000 for every inhabitant of this planet, what is it exactly that WE, The People, got?
If my bank doesn't pay back its credits, how come I still must pay mines?
If my bank gets 0% Loans, how come I don't?
At the same time, everyday, some of us are losing our home or even our jobs.
Credit discriminates against people of lower economic classes, as such it is unconstitutional, isn't it? It is an supra national stealth weapon of class struggle.
Credit is a predatory practice. When the predator finishes up the preys he starves to death. What did you expect?
Where are you exactly in that food chain?
Credit gets in the way of All the Principles of Equal Opportunity and Free Market.
Credit is a Stealth Weapon of Mass Destruction.
Credit is Mathematically Inept, Morally Unacceptable.
You Bail Them Out, We Opt Out
President Bush Proposed the TARP, Senator Obama Voted It. Who Roots for US?
We Want Some TARP.
My Solution: The Credit Free, Free Market Economy.
Is Both Dynamic on the Short Run & Stable on the Long Run, The Only Available Short Run Solution.
I Am, Hence, Leading The Exit Out of Credit:
Opting Out Is Both Free and Strictly Anonymous.
Let me Outline for You my Proposed Strategy:
✔ My Prescription to Preserve Our Belongings.
✔ Our Property Title: Our Free, Strictly Anonymous Right to Opt Out of Credit.
✔ Our Credit Free Money: The Dinar-Shekel AKA The DaSh, Symbol: - .
✔ Asset Transfer - Our Right Grant Operation - Our Wealth Multiplier - Our Liquidity TARP.
✔ A Specific Application of Employment, Interest and Money.
[A Tract Intended For my Fellows Economists].
If Risk Free Interest Rates Are at 0.00% Doesn't That Mean That Credit is Worthless Already?
Since credit based currencies are managed by setting short-term interest rates, on which you have lost all control, can we still say that are managing?
We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.
In This Age of Turbulence The People Wants an Exit Out of Credit: An Adventure in a New World Economic Order.
The only other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.
It will be either awfully deadly or dramatically long.
A price none of us can afford to pay.
“The current crisis can be overcome only by developing a sense of common purpose. The alternative to a new international order is chaos.”
- Henry A. Kissinger
What Else?
Until We Succeed the Economy Will Necessarily Keep Sinking Into a Deeper and Deeper Depression
- Will people use the Credit Free money?
- That I don't know yet. What I already know though is that their wives will spend it.
You Bail Them Out, Let's Opt Out!
Check Out How Many of Us Are Already on Their Way to Opt Out of Credit.
If You Don't Opt Out Now, Then When Will You?
Let me provide you with a link to my press release of my open letter to you:
Chairman Ben S. Bernanke, Quantitative [Ooops! I Meant Credit] Easing Can't Work!
I am, Mr Chairman, Yours Sincerely [As if I really had the choice.],
Shalom P. Hamou AKA 'MC-Shalom'
Chief Economist - Master Conductor
1 7 7 6 - Annuit Cœptis
Tel: +972 54 441-7640
Fax: +972 3 741-0824
http://edsk.org/