$5 Trillion Is A Lot Of Salami: Will Bond 007 Spoil The Equity Orgy?
Will The Bond Market Rout Spoil The Equity Orgy...Beware The Soylent Green.
Suffice it to say that fixed income markets were not invited to the orgy-fest seen in equities the past 3 months. And lately, the market for Treasuries has been showing its disdain. Yields spiking, prices falling--almost exclusively on the longer end. Yesterday there was a shift in the selling to the shorter duration paper as investors began to consider the chaos that $5 trillion in new supply will bring to the market.
The spike in mortgage rates has been substantially violent and has slowed re-financings to a trickle. Not what the Fed-Treas cabal is looking for. Quantitative easing has failed. Will B-52 double-down and committ a few more trillion to a losing construct? Let's hope he's not that stupid. He's playing a game he can't win. Not when the bond market knows there could be upwards of $5 trillion in expected borrowing from team Obama in the next 20 months. That's alotta salami to be selling.
(Quick timeout: let's not forget it took us 213 years to accumulate a national debt of $1 trillion--from 1776 through 1989. So $5 trillion really, really is alotta salami.)
The green shoots are Soylent Green.
Don't buy the hype, lest you may later choke. Pretty decent discussion after the jump.
Problems in the Land of Soylent Green Shoots
Will 007 Spoil The Equity Orgy...?
Jun 9, 2009 at 8:53 AM
Reader Comments (20)
Good points, but we all do have to eat. If the bread costs 10 bucks a loaf, then we will be forced to pay for it, steal it, or starve.
I do agree with you on asset deflation, but how possible input cost inflation and international demand play out for foods, I have no idea. We are in uncharted territory. Unless you run your own kibbutz/commune and have ready access to fresh water, livestock, and produce, you are largely dependent on the grocery chains, local farmers markets, and public utility/municipal water works. You will pay whatever they charge or it's the soup kitchen and bread lines for you. This could get very ugly in terms or soft/nondurable goods consumed out of necessity.
However, I think Gob has it wrong. The Fed's talk of wanting the power to issue its own debt has nothing to do with stemming inflation whatsoever. That's a smokescreen. The Fed has historically induced and actually desires inflation. As both the Fed and the US Federal Govt. are currently in deep and would very much like to reduce the burden of their debts through the magic of the printing press. I guarantee you, if the Fed had the power to issue its own debt, it would foment inflation as quickly as possible.
Technically the Fed already issues its own debt in the form of Federal Reserve Notes, IOUs backed by nothing. They only exchange them in a bit of sorcery with Treasury's own IOUs. IOUs backing IOUs. The Fed's IOUs are only valid in that Treasury's IOUs are supposed to be repaid with future tax receipts and Congress, in their great wisdom, have made them solely "legal tender for all debts public and private". You could refuse payment by Federal Reserve Notes, but a court would just nullify the debt contract. You won't exactly have recourse for payment in wheat and flour, now will you?
The Fed wants to issue their IOUs without petty constraints like backing by US public debt. INFLATION UNENCUMBERED!
I highly recommend reading "The Creature from Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin. Murray Rothbard's stuff is excellent. Avoid William Greider's keep the mystery alive propaganda BS.
"The Mystery of Banking" by Murray Rothbard is available as a free PDF here: http://mises.org/Books/mysteryofbanking.pdf
Take the red pill.
http://www.bloomberg.com/apps/news?pid=20601109&sid=a8R8g_qvgis8
http://www.businessinsider.com/house-panel-subpoenas-the-fed-over-bofa-merrill-2009-6
Also, check this out -- FireDogLake has apparently joined the black helicopter crowd and supports HR 1207. Must be the end times.
http://action.firedoglake.com/page/s/Fed1207
I've been following that story about the Fed issuing its own debt. It's a power tht most central banks have and occasionally utilize to absorb excess liquidity when they fear inflation. It's not something I have ever studied and so I can't comment on its effectiveness when used in other countries.
Someone like Simon Johnson or James Kwak would likely know the history.
2) The Fed in my estimation wanted the power to issue it's own debt because the Citizens are onto their game of deflate the cheese so everyone gets a piece is a bad idea. The folks working 9-5 see the Fed is unregulated and is starting to pay attention to the nat'l debt. The Fed decided against printing it's own because they may just be a little scared of Joe 6 Pack going Walstreetpro2 on their buttocks.
I 'm pretty sure I grew up not far from walstreetpro2, but you've got to be his long-lost cousin or something. He's got some video where he talks about going out and catching a fish and fixing himself "a fish sammadge." He's got to be some kind of genius, anyway. I don't know what kind exactly, but he's got a gift.
And for the record, I think we will have continuing deflation of assets and inflation of commodities. I don't really fear hyper-inflation as some do. There is just too much deflationary pressure for it to take hold. Now, ask me in 2012 and I might start to fear some inflation then after the crisis has finally waned.
http://dailybail.com/home/there-are-no-words-to-describe-the-following.html
Hey Kevin, (Walstreetpro2's real name) if you're reading, send me another one of your recent videos from youtube. I will be happy to post it I just never find the time to search for your stuff over there.
http://dailybail.com/home/2009/1/25/bailout-comedy-by-popular-demand-more-from-the-maestro.html
http://dailybail.com/home/2009/2/18/bailout-news-video-hes-an-original-hes-back-and-hes-still-no.html
The guy is an original.
I remove nothing from comments unless it is racist or sexist. I'm not sure what you are referring to, but what happens is if you add a link to your comment, your comment doesn't go straight in. A 2nd page with a bot test. pops up. People miss the 2nd page all the time and so their comment never gets posted.
It happens all the time. Always wait for the verification page.
"And for the record, I think we will have continuing deflation of assets and inflation of commodities (from Daily Bail). Hmmm, what are commodities if not the most basic of assets, I don't get this statement. This site may have already jumped the shark with such points of view. Please, I need more."
By assets I am referring to homes, cars, land, equities, bonds, buildings, CDOs, CLOs and the rest of the securitized mess, etc. Financial assets. Commodities are of course assets, anything that one owns can be called an asset. But I was making the point of separating them from financial assets.
It's a pretty widespread belief among deflationists that while commodity prices might rise, fiancial assets because of the massive deleveraging still to come, will continue to fall in value.
Hope this helps.
Well done, AB.
From Gobias.
I"f anyone is rewarding the criminal elements within the capitalist system it is the government, the Fed, and the media. Socialism works only on the back of a countries capitalist wealth relative to its small population (Denmark and Norway) and low cost immigrant labor that when asked to leave leaves. As the financial crisis takes hold in Denmark, they are battening down the hatches and taking care of their own and working to remove the failed government policy in their capitalist financial system. Obama, and yes Bush, have squandered any hope of a small recession by rewarding the wrong people and by confusing the role of government. For Obama to believe that anything the government does can be described as efficient is ludicrous."
Well said. Governments are the antithesis of efficiency. Thanks for the post.