“If you would know the value of money, try to borrow some.”
~ Benjamin Franklin
Written by Bryan Lutz, Editor at Dollarcollapse.com:
We are debt slaves.
Like we talked about yesterday, that’s the way the system works.
It is set up so bankers and the average investor can measure their return-on-debt.
Return-on-debt for both buyer and seller so long as the seller remains profitable.
Otherwise, neither win.
For example, in a fiat currency world, when the buyer earns too much money from their treasury bond purchase, the seller must print more money, inflating and devaluing their currency.
That is what the market is on the look out for…
Debt Watchdog, Moody’s Ratings are too.
Reuters reports:
Fed’s bumper rate cut revives ‘reflation specter’ in US bond market
“The Federal Reserve’s aggressive start of the easing cycle has rekindled inflation worries in the U.S. bond market, as some investors fear looser financial conditions could re-ignite price pressures.
Yields on longer-dated Treasuries that are most sensitive to the inflation outlook have risen to the highest since early September, with some investors worried that the Fed’s shift in focus from beating back inflation to protecting the job market could allow for a rebound in price pressures.
…Should inflation continue to subside the outlook for bonds would likely remain positive, despite the volatility that comes with a repricing of the pace of interest rate cuts.
But some wonder whether the central bank’s aggressive cut was premature, as inflation remains above target and recent monthly data indicated some stickiness in price pressures.”
So some believe inflation will return…
And they are pointing to return-on-debt(bond yields) for the evidence. If inflation is rising, yields will also rise because the value of the currency becomes worth less.
When you look at the 30-Year Treasury Yields, you can see the 50-day Moving Average, and the 200-day Moving Average flattening out.
And the same for the 10-year Treasury Bond yield.
You can also see the red line, federal fund rate.
Typically, when federal fund interest rates drop, yields also drop, but is this time different?
Will Powell’s bravado be justified?
Or will we see rising yields?
Certainly, other factors will play a role too.
For example, the amount of deficit spending, interest payments on national debts, and commodity prices.
As it is right now, we are bound to the system…
Pushed forward by the bravado of bankers.
1 thought on “Bondage & Bravado: Were Rate Cuts Too Early?”
Why not let the market set interest rates? You know, the old interplay between savers and borrowers. If you leave the process to a bunch of over educated bureaucrats, it’s bound to be wrong.