alwaysalady

Own Gold? Time to Fold

It's my belief that bond yields are so low not only because Treasuries are being used to park money but because the government is buying them (quantitative easing) after the Federal Reserve has run out of other ways to keep interest rates low. What the government is saying essentially is "spend or keep losing money."

Corporate rates are the real tell. Sure part of those yields reflect default fears, yet 7+% is easy to find on a host of investment grade bonds. I think inflation risk is just as big a factor in the spreads.


On Dec 08 11:50 AM Alan Brochstein wrote:

> Smarty_Pants, again thanks for that link, but I would note that it
> was written before we went over the cliff in October. Before Iceland
> evaporated and Ecuador defaulted.
>
> I am well aware of that chart and actually looked at it yesterday
> before writing the article. What you and others are neglecting is
> that the multiplier effect is not much greater than 1. That chart
> should wake you up! If anyone felt that was inflationary, do you
> think long bonds would be at 3%?

Own Gold? Time to Fold

The taxpayers are NOT paying down the debt so the "created" $ stays in circulation.

On Dec 08 09:19 AM Alan Brochstein wrote:

> To all of you who think that the Fed is "printing money", I ask you
> to "show me the money". The money supply numbers don't show it,
> so where can I find it? The government is running up debt and transferring
> wealth from the taxpayer to creditors (debtholders).

3 Things America Needs to Do to Get the Economy Back on Track

Americans are living a precarious existence of excessive indebtedness, inadequate or non-existant savings, increasing inflation, and the threat of being wiped out by one-time major health care cost. There will be no support for any reform which threatens our delicate financial balance. In this sense, we are able to be blackmailed by our government into accepting proposals which - while unwise - act as stopgaps and defer reform to the distant future.

That is why if we are ever going to change the decadent, acquisition fixated, spiritually shallow, and irresponsible culture we have created, we need to let the current financial crisis play out. Here are my reasons:

. Those who have been most responsible will lose the most $. There is a fairness in this which resonates with many people, even those who would also be hurt by the fallout.
. The weakest banks and businesses will fail.
. While jobs will be lost, the purchasing power of unemployment insurance will go up because prices will go down. Lower prices will especially help people most hurt by inflation --those below the poverty level who are getting food stamps and live in subsidized housing, and retired people on Social Security
. Interest rates will go up, discouraging discretionary borrowing and encouraging savings which increases liquidity.
. There is plenty of capital in our country seeking returns greater than government bonds that will tend to seek out sound investments in favor of risky, arcane financial instruments.

It's Time for the Govt. to Spell Out the Risks of Not Rescuing Financial Markets

Exactly what I've been thinking! Paulson & Co. may as well be saying the "big bad wolf" as vague as the need for this proposal has been currently expressed. They act like a recession is the end of the world.
Their world maybe, but I have lived though a recession, lost my job, found another one and survived. I've paid 12% on an adjustable rate mortgage which went down every adjustment period.

It's insulting that the risk/ reward isn't being quantified. I've written to both my senators and told them that I expect them to understand all aspects of this proposal and that includes understanding how the total amount was arrived at, who will be hurt and how if it is not passed and who will be hurt and how if it is.

If everyone did the same, Congress would realize that this is where the rubber meets the road in the accountability game. To stay on the sidelines is not acceptable and is not something we will forget come election time.