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Discussion: (2 comments)

  1. There are many things I could pick apart in this opinion piece, but let me concentrate on the last 2 paragraphs.

    Yes, the Great REcession and financial crisis have inspired many investors to be more cautious with their money. I believe it is mostly by default that investor seek US government debt, as first, they believe the likelihood of being completely wiped out is fairly low. The government will always pay its debts, even if it has to get the FED to print more money to borrow so that they can continue to pay. BUt this scenario is not without consequences, not without risks. This constant injection of money into the system IS inflation, that is an expansion of the money supply. Even IF higher prices do not result, there is still the problem of shifting power and wealth to those who are allowed to counterfeit the money into existence, namely the FED and its member banks.

    But let me also point out that the reason the government borrows is because of the huge predilection of politicians to spend more money than they have. THe feedback mechanism is positive in the sense that the more they borrow the more they spend the more they have to borrow. All this debt-caused inflation may not immediately manifest itself in higher prices, but long term it is certainly highly probable. And given that long term the dollar HAS depreciated, prices HAVE risen, to a great extent the “prosperity” is funded by stealing the wealth of those who save, which DEFINITELY drives down interest rates paid savers, Uncle Milty notwithstanding. ANother episode of the great one not being quite so great.

    Now that we have a preponderance of politicians dedicated to increasing spending, and even more, now that we have had several generations brainwashed into thinking that government handouts and government “stimulus” programs are a good thing, it is all the more problematic that the fedgov will live within its means. Price inflation is already here in capital markets, capital goods and housing, and believe it or not, among many consumer goods. For CPI, like the unemployment rate, the numbers are cooked.

    Please note also that despite or as I believe, BECAUSE of the high level of government spending and government interference in the market place, the market place has been both less stable and less certain that at any time since the Great Depression. Times may be marginally better now, but we have not repealed the law of supply and demand, nor have we repealed other time-proven economic verities.

    The market monetarists are just as wrong as the outright Keynesians. In fact, they are kissing cousins.

  2. Benjamin Cole

    CNBC as economic retards.

    When the Fed does QE, it is increasing the supply of money. That should lead to more demand and then higher inflation and interest rates.

    Aside from that, no one is forced to sell or buy a 10-year Treasury note. Those rates are pretty much set by the market.

    We may see low interest rates for a long, long time. See Japan.

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