Hyperinflation!

Post #335,968 by Another Scott 11/19/10 1:19:43 PM Reply	Hyperinflation! Maybe not. http://www.bloomberg...ernment-bonds/us/ http://www.marketwat...speech-2010-11-19 The FedÂs Treasury buyback lent some support as the only scheduled event for the session. The central bank has bought bonds every day this week and is scheduled to continue operations on almost every business day until early December. See more on the New York FedÂs buyback schedule. The Federal Reserve Bank of New York bought $2.169 billion in long-term bonds, in line with the amount of debt the central bank said it would buy. The amount includes the FedÂs second round of quantitative easing and reinvesting proceeds from maturing mortgage-related holdings. See buyback results. For the week, 30-year yields are down slightly from 4.30%. They hit 4.42% this week, the highest since May. Ten-year yields up from 2.75% last week, the second weekly increase. During the week, yields hit the highest since early August Â before the Fed began dropping bigger hints that it would resume buying Treasury bonds. At the moment, the yields are: 2 year: 0.50% 5 year: 1.50% 10 year: 2.88% 30 year: 4.26% Hyperinflation is coming!!!11 Cheers, Scott.
Post #335,970 by beepster 11/19/10 3:17:15 PM Reply	Do you read all your posts and tie them all together? Your current rally cry around hyperinflation...and the link to the research paper speaking of "impending" inflation to spurn demand..then go back to the stuff posted on Ireland and their current crisis... Now merge thoughts on the 2 situations... The question I want this to open up in your mind is simple... Currently, you are correct...debt is cheap. What happens when that mark changes to 4%. Not hyperinflation, as you are out here screaming about..just a paltry 4 points. What does that do to the cost of maintaining the debt load. A cost of capital of 8% is quite possibly going to topple what was one of the strongest economies in Europe 10 years ago...because they operated on debt and now they can no longer fund it. The point is, it is not going to take hyperinflation to get us there. Its not even going to take Jimmy Carter level inflation to get us there. Sure, understanding today's complex world of the future is a little like having bees live in your head. But...there they are.
Post #335,971 by Another Scott 11/19/10 3:45:21 PM Reply	It's not that hard, really. My argument is consistent. You don't accept the premises that I do - which is fine. But riddle me this: Why would real interest rates and inflation increase substantially in the US in the near future? Unless you can construct a convincing case for why that would happen, there really isn't much point in discussing hypotheticals of interest rates going up (suddenly) by 4 points. Ireland's strength was an illusion built on a bubble. Their situation is hardly comparable to the US (e.g., when was the last time Ireland was 20+% of world GDP?). Hint: Things are different, as Krugman keeps screaming with his hair on fire, when we're at the zero lower bound. Thanks. Cheers, Scott.
Post #335,975 by folkert 11/19/10 5:32:49 PM Reply	Lenders pay us to borrow under the "zero" bound? I'ma thinking that would bring on the end of the universe.
Post #335,976 by beepster 11/19/10 5:40:07 PM Reply	Nothing is permanent Currently we are at the lower bound. I've shown several areas where cost drivers are showing strong inflationary pressure. China is tracking currently at close to 5% inflation, with food inflation over 10%. Many other areas of the world are also seeing strong price inflation, especially related to food. So, while the cost of capital is currently near zero, this is not permanently feasible....and we roll over debt..so there will be a time, in near future where we are forced to refinance the massive debt you are asking to be put in play at 5% instead of 1%....and if it gets worse, we have times in our recent past (last 30 yrs) where that cost of capital has been 12-15%. You are correct in saying that we are not Ireland. However, we are getting very close to carrying a similar debt load...and a 4 or 5 point financing penalty on that level of debt is no longer an annoyance...it quickly becomes a disaster. The key term in your "why" question is "substantial". A couple of points on the debt load we're carrying is substantial...it doesn't have to be a "Weimar-esque" hyperinflation to be a real problem. Sure, understanding today's complex world of the future is a little like having bees live in your head. But...there they are.
Post #335,981 by Another Scott 11/19/10 7:21:30 PM Reply	Look at Japan. Rates are going to stay low for a long time. Inflation is going to stay low for a long time. Why? Because, among other things, growth is going to be anemic and unemployment is going to stay high for a long time as a result of artificial wealth being wiped out when the bubble burst. Even with aggressive action by the Fed and the Congress (which is probably hoping for too much), we're still looking at years of pain before we have to worry about high interest rates. Under these constraints, worries about hypothetical debt payments is looking for invisible bond vigilantes. Japan has gone through this for 18+ years. Their government debt is far higher than ours under any thus-far conceivable situation (189% of GDP - http://en.wikipedia....es_by_public_debt ). Japan's 30 year bond rate is 2.09% - http://www.bloomberg...ment-bonds/japan/ Japan's unemployment rate is 5.0% (high for them, roughly like 10% for us (it used to average 2.6%)), and it's latest CPI is -0.6% - http://www.stat.go.jp/english/ That's the kind of things we've got to look forward to unless Bernanke, Geithner, and the Congress get their acts together. (Of course, it's not a perfect comparison...) China has many bubbles it is trying to combat. It's anyone's guess whether they'll succeed. We aren't going to have 10% growth for years on end... Again: Things are different at the zero lower bound. It's very hard to get out of a deflationary trap under the best of circumstances. Evidence and logic tells us that it's much more sensible to get the economy moving at a pace large enough to substantially decrease unemployment than to worry about invisible bond vigilantes... Cheers, Scott.
Post #335,986 by boxley 11/19/10 8:54:03 PM Reply	ya mean the dam kids will never leave? guhroan Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free American and do not reflect the opinions of any person or company that I have had professional relations with in the past 55 years. meep
Post #335,987 by Another Scott 11/19/10 9:02:47 PM Reply	Yeah, something like that. :-/ Parasaito shinguru. http://en.wikipedia....i/Parasite_single Cheers, Scott.

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