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Senior Advisor

bond bubble

I'm reminded of the work of Antal Fekete, a somewhat obscure Hungarian economist with goldbug tendencies. But he has some unique views on money and credit.

He says that depressions are a function of too much wealth with nowhere to go. When the potential return on all major avenues of investment become wildly over valued, money seeks the relative safety of bonds and the trend becomes self reinforcing.

Some economists sort of played around with the "excess savings" thesis for a while but I haven't heard of it lately.

In some ways it does explain Japan better than a lot of orthodoxies do. Bernanke was brought in as the ultimate expert to keep the US from going Japanese. Maybe he did* maybe he just forestalled it? I'm not really predicting anything.

If such a circumstance was to befall us, we've never been worse prepared to deal with it. Half would blame Crooked Hillary, the other half Trump but the odds of a political quorum to force a policy response would be nil.

Maybe get a second chance for the liquidationists to clear the rot?

*that got cut short by a crisis of a different nature anyway.

4 Replies
Senior Advisor

Re: bond bubble

A parlay-

if the Fed cuts 50 bps, how long until the 10 yr inverts again?

My guess is under 6 months.

Rate cuts don't help much in an economy that is somewhere near full employment. Something that nobody really understands and needless to say that would include Shmoe and the 3 stooges.

Honored Advisor

Re: bond bubble

It made NO sense what so ever that the Fed raised rates in the first place!   LOOK PEOPLE, WE HAVE A NAT DEBT OF $22TRILLION, 105% of GDP, YOU CANT PAY INTEREST ON THAT!!!!!

Obama had 0% rates AND QE spending, the Fed has a $4.5 Trillion balance sheet because of Obama.  but the Fed raised rates for Trump.....for what purpose???  All I ever heard was "to have higher rates so they could cut them if there was an economic slow down".   Well I`m just a farmer/truckdriver but even I know RAISING INTEREST RATES WILL BRING ON A ECONOMIC SLOWDOWN!!!!!!

Senior Advisor

Re: bond bubble

lol. ca. 2009- debasement, hyperinflation I tell you!!!!!!!

You gotta love Trump squirming after he appointed a pretty uninspired normal guy because Yellen was a woman and too short to look like a Fed chief on TV. He followed the orthodox view.

But liberal economists do tend to agree with you.

Anyway, my point is that I fear we're looking at a whole 'nuther sort of a thing.


Senior Advisor

Re: bond bubble

But anyway, the market is screaming for the treasury* to roll the debt out to longer term.

And if they did, a future administration could heat things up and basically make the debt go away in 10 years.

But then there wouldn't be anything for the AEI to holler about.

And it would be in America's interest, not the people whose interest is currently favored.

America can go forward if it wants. Not back.

*currently headed by a WS scammer and wannabe movie producer.