VIRTUAL NATION: Bond Yields Reveal Impotence of Central bankers

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“Bill Clinton’s campaign manager, James Carville famously mused that he would like to be reincarnated as the bond market – so that he could intimidate everyone. Seventeen years on, the market has lost none of its power to reduce all and sundry to a quivering wreck. The beginning of the week saw the biggest sell-off in US Treasuries for two years.”

EDITOR’S NOTE: Bond yields arise from supply and demand, which as the NY Times lead article by Louise Story points, out is actually controlled by an inner sanctum of a handful of people with no nation, no loyalty but to their own virtual nation. As bond yields rise, the expectations of investors are revealed, which as we all know, brings about self-fulfilling prophecies. The only rational conclusion is that without a shock-induced changed in the paradigm of thinking and government policy, we can only expect a long period of increasing inflation, increasing interest rates, and stagnant economic activity, with joblessness remaining high and maybe even getting worse. THERE IS NO WAY OUT BUT TO BREAK THE TRUSTS — THE OLIGOPOLIES THAT CONTROL REGULATION OF THEIR OWN INDUSTRIES. Citizenship is a sophisticated job. Americans need to wake up, smell the roses, get the information and force fundamental changes in our society before the US Constitution becomes a “dead letter.”

Reading between the bond yields

Published: December 10 2010 23:12 | Last updated: December 10 2010 23:12

Bill Clinton’s campaign manager, James Carville famously mused that he would like to be reincarnated as the bond market – so that he could intimidate everyone. Seventeen years on, the market has lost none of its power to reduce all and sundry to a quivering wreck. The beginning of the week saw the biggest sell-off in US Treasuries for two years.

Although dramatic, this week’s events are not a reason to panic: after three disinflationary decades, yields are still low by historical standards. While there are gloomy explanations for the market moves, there are also benign ones. Vaulting yields could mean investors fear rising inflation or share concerns about the sustainability of Washington’s fiscal position. They might equally reflect expectations of higher economic growth.

The inflationary explanation is the least plausible. Private demand remains weak, and US house prices are still falling. Deflation seems as reasonable a concern as inflation. Moreover, it was not just conventional bonds that were sold off this week. Yields on index-linked bonds also rose sharply. If inflation were investors’ only worry, they would have had no reason to sell these securities.

This leaves growth or the US deficit. Yields were rising before President Obama’s deal to extend the Bush era tax cuts. But the sharpest spike coincided with the plan’s announcement. The deal certainly gives bondholders with an eye on the US deficit something to think about. Its combination of tax cuts, a payroll holiday and an extension of benefits for the jobless will add about $900bn to the federal government’s debts over the next two years.

However, the plan is also a shot in the arm for the US economy. It is bigger that the 2009 stimulus package. In conjunction with other recent developments, it may give cause for cautious optimism. Leading indicators, such as construction spending, have improved of late and stocks are trading at close to two-year highs. True, unemployment remains stubbornly high. But growth tends to precede employment, rather than the other way around.

It is not clear which aspect of the plan is uppermost in the market’s mind. But in any case, for the federal government, the implication is the same. It needs a credible medium-term plan to cut its deficit. If growth sets in, then the government will be able to rein in stimulus measures without unduly slowing the economy. If, on the other hand, self-reinforcing fears about the US’s long-term solvency are beginning to take hold, the case for fiscal tightening is stronger still.

US leaders should do all they can to make sure it is the former rather than the latter. Voting on the Bowles-Simpson deficit reduction plan would be a good start.

6 Responses

  1. […] more here: VIRTUAL NATION: Bond Yields Reveal Impotence of Central bankers   Tags: foreclosure, government, gtc | honor Posted in: […]

  2. I think the U.S. Constitution is already a “dead letter” if having the Supreme Court deny writs of certiorari to (1) a case raising Obama’s citizenship requirement to hold the office of president; and (2) a case raising the unconstitutionality of the bank bailouts. Also, it recently stated that the government does not have to answer to citizens’ petitions for redress of grievances, and that people do NOT have the right to withhold their money if and when it does not answer. In conjunction with this decision, new penalties ($5,000 instead of the usual $500) have been added to the IRS “authority” (I believe one was sneakily added to the “health care reform bill” — as if this has anything to do with health) for any failure to pay taxes based upon the government’s failure to respond to a First Amendment grievance.

    We have been so long with an unconstitutional money/taxation system anyway, that it may have been a dead letter long ago.

    It is possible to restore the Constitution, but it won’t be easy. We need numbers to fight back. There were a few good people elected this past November, but they are far outnumbered by the corrupt and the weak. Some think it’s only a matter of time before the United States itself is a “dead letter” and becomes a “region” in the global scheme of things by the one-worlders. It is prophesied, after all.

    But as long as we’re here, we’re supposed to take a stand for what is right. Personally, I believe when they shut down the Internet, that will be the moment they are going for the throat.

  3. Sorry got iff track. But I guess qe2 is backfiring

  4. I had wondered about what is called the alunminati. Over the past two or so years a new reality has Bern discovered for me I am
    in shock word like aluminati I’m not necessarily buying into it just looking for absolute truth as inntjr real world even if it’s ugly If we live inba virtual nation then what’s the point tlkimg the talk like all the crap we are fed via news media and mr Obama and his virtual following

  5. If you want to lower the deficit, you will have to get the military spending reduced by about 50%. Our military spending is unbelievable. In addition, stop giving money to countries that hate us. What is up with that? Our military budget is bigger than all the other military budgets on the entire planet. If we all have to tighten our belts, so does the military including that idiot McCain. Once again, another multi-millionaire running things against the people of the US. Too many wealthy people who are lawyers running the government. Too many wealthy people whose greed is beyond comprehension running the government and not only the federal government, but state governments as well. The fraud and the greed extend from the bottom all the way up to the top. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  6. I believe there is a specific group of people who have been known throughout history to
    “have built up a state within the state; and when opposed have tried to strangle that country to death financially, as in the case of Spain and Portugal.”

    Benjamin Franklin, at the Philadelphia Constitutional Convention of 1787

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