Flight to U.S. Treasuries
Mark Anderson
October 10, 2008
Because of the instability in the capital markets, this causes a shift towards more "stable" assets (e.g., Treasury bills and notes). I put stable in quotation marks, because given the reckless fiscal policy of U.S. politicians, there is nothing stable about Treasuries.
What this represents is a shift from malinvestment that was precipitated by loose monetary policies of the Fed into even worse malinvestment. It's like running straight towards the explosion. The government, by its very nature, is insolvent, thus the need to tax. Policy makers and talking heads will morph this extra revenue for the U.S. government into some sort of positive economic indicator. Where is this money going to go? It is going to be spent. When it comes time to redeem these Treasuries, the U.S. government will find itself in even worse shape.
That the U.S. Treasury is going to insert itself into the capital markets I believe is a signal that the whole empire, warfare, welfare state is just about over.
I believe that we are going to face hyperinflation one way or another, unless we have a serious change in the Congress. Congressmembers don't want to curtail spending, thus diminishing their own power. The way central planners are looking at this is that in order to keep spending, they need to keep inflating, otherwise interest rates will rise. So, plan A involves more inflation.
If, however, spending is curtailed and inflation is halted, interest rates will rise. My guess is that we would see interest rates of, at a minimum, 10%. The national debt is almost $10.5 trillion. Do the math. What is Plan B, then?
A shorter way to grasp this is just thinking about the national debt by itself. Having $10.5 trillion in debt, the Congress has positioned itself where it can't stop spending without defaulting overtly, as opposed to covertly (i.e., by hyperinflation).
Understand that the only way we will attract real capital investment is by letting interest rates go where they may, free from central bank manipulation. It is rather revealing that the government would rather run with the ruse of FDIC coverage, by expanding it to $250,000 (the opposite of what we should be doing), rather than letting interest rates rise. A nice ploy, but it isn't going to work.
What this represents is a shift from malinvestment that was precipitated by loose monetary policies of the Fed into even worse malinvestment. It's like running straight towards the explosion. The government, by its very nature, is insolvent, thus the need to tax. Policy makers and talking heads will morph this extra revenue for the U.S. government into some sort of positive economic indicator. Where is this money going to go? It is going to be spent. When it comes time to redeem these Treasuries, the U.S. government will find itself in even worse shape.
That the U.S. Treasury is going to insert itself into the capital markets I believe is a signal that the whole empire, warfare, welfare state is just about over.
I believe that we are going to face hyperinflation one way or another, unless we have a serious change in the Congress. Congressmembers don't want to curtail spending, thus diminishing their own power. The way central planners are looking at this is that in order to keep spending, they need to keep inflating, otherwise interest rates will rise. So, plan A involves more inflation.
If, however, spending is curtailed and inflation is halted, interest rates will rise. My guess is that we would see interest rates of, at a minimum, 10%. The national debt is almost $10.5 trillion. Do the math. What is Plan B, then?
A shorter way to grasp this is just thinking about the national debt by itself. Having $10.5 trillion in debt, the Congress has positioned itself where it can't stop spending without defaulting overtly, as opposed to covertly (i.e., by hyperinflation).
Understand that the only way we will attract real capital investment is by letting interest rates go where they may, free from central bank manipulation. It is rather revealing that the government would rather run with the ruse of FDIC coverage, by expanding it to $250,000 (the opposite of what we should be doing), rather than letting interest rates rise. A nice ploy, but it isn't going to work.
Print
Email
