Friday, Nov 14, 2008
US Gov Bonds auction - "There’s just no interest in it."
FT Alphaville: The parabolic Fed: divorcing monetary policy from money
Following up on my post on Monday on what to watch this week - Treasury sales as the US tries to fund itself and the bailouts. Not a train wreck yet, but getting closer. Yield on 30 year bonds - "the lowest since regular sales of the security began in 1977". Shorter term - "The U.S. sold $34 billion in four-week bills yesterday at the lowest rate on record."
The article goes into some more technical central bank theory related to a Bernanke speech in 2004 which I don't fully understand. He was talking about a Zero Interest Rate Policy ZIRP. I think he is saying that a ZIRP, and increasing the money supply, discourages people from hoarding cash in their portfolios and encourages investment into higher yielding corporate bonds and stocks, which is needed to get the economy going again.
4 Comments
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1. planning4acrash said...
Yup, so what will they do? They will monetize the debt, send it to the Federal Reserve, who will print up the treasury notes into money that they send back to the government. This is the beginning of hyperinflation, gold to the moon and beginning of the end of the dollar. For all those USA bashers, wait till you have China as enemy number 1.
2. jack c said...
planning4acrash - could it be that there is little or no interest because there is a growing perception of defaults arising? - your thoughts please.
3. stillthinking said...
"It’s clear that much of the world’s capital has been herded into cash and treasuries,"
4. mountain goat said...
A crisis seems to bring the opposites together. Inflation or deflation seem to sit on a knife-edge. Capital herded into treasuries while a buyers strike starts to develop. It is clear Bernanke thinks ZIRP is require, latest headline Bernanke leaves door open to another rate cut.