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To: txrefugee
Bread is now $3.50 a loaf and gas is $3.50 per gallon. Ben Bernanke and Ms. Yellen must not be aware of the inflation that is making life very difficult for the middle class.

They don't care about inflation, and they don't care about investors. All they care about is the rate that the Treasury has to pay to borrow (create) money.

The Treasury is broke and our credit is in such a sorry state that we cannot sell enough bonds to cover our spending, not at sub-inflation rates anyway. That is why the Fed is creating all of this imaginary money. They are purchasing bonds in order to keep the interest rates low.

Of course private lenders won't put their money at risk for such pitifully low rates, so the capital market is frozen.

The day that the Fed allows interest rates to rise is the day that the U.S. Treasury implodes. The Treasury has been doing the equivalent of rolling principal from one high rate credit card to another, paying just the low transfer cost and then doing it again before the grace period ends.

We can't pay the 2% interest now, wait unit it is 5%, 6%, 8% or 15%. We have created the perfect formula for double digit inflation, and that will drive double digit bond interest. At 15% the interest on our debt will take every dime of our revenue.

6 posted on 02/12/2013 9:14:02 AM PST by SampleMan (Feral Humans are the refuse of socialism.)
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To: SampleMan

Two things are going on at the FED:

1. regulatory capture - the FED is run by bankers for bankers. Right now their ZIRP is only helping bankers. Despite the fact that the FEDs balance sheet has nearly tripled it only accounts for 15% or so of the broadest measure of money. Bank money is 85% and they’re not lending. Why should they when they can meet Basel III requirements and profit on “risk-free” US Bonds.

2. RE - they’re hoping to jigger RE long enough to work out all the foreclosures. But, since the above policy is choking off the market and everyone knows when interest rates rise RE prices will fall who wants to buy?

Hedge funds do. They’ve got access to cheap money. Otherwise the RE market is dead. Had we just allowed these bums to fail, lose their billions and be the lender of last resort the market would have cleared already and we’d be into the 4th year of real growth.

How many times does government have to fail before people get it?


9 posted on 02/12/2013 10:30:02 AM PST by 1010RD (First, Do No Harm)
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