Mrcauser’s Weblog

Just another weblog

he more it changes the more it stays the same….

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I remember the 70’s. Compared to today they were pretty good.

You could actually support a family on “blue collar” wages. However, about this time changes were in the making: the wholesale moving our industry offshore.

The 70’s started out with us carpet bombing little brown people from the stone age into the 20th century.

 Boy that worked out good.

Then we pissed off a bunch of people with towels on their head because we like to make war on religious nuts who disagree with our religious nuts by moving religious nuts into their neighborhood.So they decided to quit selling us oil.

Boy that worked out good.

After that we turned our money into play dough to pay for all these different wars and dictators we owned by borrowing and spending ourselves into a series of  inflationary depressions that have finally now caught up with us.

Boy that worked out good.

Until today we have to hire a black guy as president who’s main asset is having no real discernible qualifications for the job to kiss and make up with everyone on the planet we have abused for all our empire building by his  clueless predecessors.

Boy is that working.

Now we have to pay the piper. Every dime we borrow or print will come home to bite us in the ass.

Until the empire dies and we start over.

Inflation Tsunami

A few days ago, in a bold move, the Federal Reserve announced that it would buy US$1 trillion worth of U.S. Treasuries and mortgage-backed agency debt. Apparently, the idea behind this measure is to subdue long-term interest rates in the United States, thereby assisting homeowners. However, any serious investor should realize that this line of thinking is totally flawed. Allow me to explain:

By announcing to the entire world that the Federal Reserve is ready and willing to buy U.S. Treasuries and other agency debt, the Federal Reserve is hoping to support the U.S. bond market and suppress long-term interest-rates. Unfortunately, in order to buy these assets, the Federal Reserve will end up creating even more dollars and the result will be the exact opposite of what the officials set out to do! As the Federal Reserve steps up its buying of U.S. government debt, it would have to create money out of thin air. When this occurs, inflationary expectations will rise and nervous bond investors will automatically demand higher interest-rates in order to protect themselves from inflation. So, as an inflation-premium sets in the market, bond investors will reset interest-rates at a much higher level. It is worth noting that the U.S. establishment engaged in the same misguided policy roughly 60 years ago and the result was much higher interest-rates…and that saga morphed into the inflationary holocaust of the late 1970s.


Written by mrcauser

April 25, 2009 at 7:38 pm

Posted in Uncategorized

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