Mark McHugh

Is This the Last Great Bubble?

I agree 100% with the author. The timing is anybody's guess.

To try to answer Alex's question (and I don't mean to speak for Nick): We've been trying to solve the problem of easy money (abundant low interest loans) with more easy money. The treasury is issuing low interest debt at an unbelievable place, almost half to foreigners. We do not have the means to pay this debt in real terms, so we will print more and more money to pretend we are covering the debt. When it dawns on everyone that this is what we are doing, they will dump our debt, and the Fed will have no control over interest rates.

It's important to understand that when rates rise, existing bond prices fall. A while back, I ran some examples and I figured if rates go to 10%, treasury long bond holders will lose about 50% (flight to safety?). So, it's just a question of when the world loses it's appetite for our debt. And your guess is as good as mine.

I hope Nick would agree with that explanation.