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March 27th, 2010 | Author:

Chinks in the armor? I hope your mattress is well-stuffed.

For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.

Chart: TreasuriesFalling inflation, rising unemployment, the housing market slump, the Federal Reserve’s policies of a near zero overnight borrowing rate and its purchase of up to $1,700bn in bonds have all helped keep Treasury yields near historic lows.

But this week the mood shifted as yields for $118bn of new US debt were much higher than forecast, sparking overall selling of Treasuries.

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Worries about the debt loads of developed economies have come into focus this year amid the crisis threatening Greece and other members of the eurozone periphery.

The fact that German Bunds have outperformed both Treasuries and gilts in recent months highlights this increasing worry over public debt. Germany’s budget deficit is much lower than the US and UK and inflation there is also expected to remain low.

“The spotlight on Greece only helped to reveal that the US’s kitchen – with Federal and state budget balances – was itself full of cockroaches,” says William O’Donnell, strategist at RBS Securities.

It hasn’t helped that the US announced a big overhaul of its healthcare system this month, adding to worries about the scale of US spending.

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Category: economics, Federal Reserve  | Comments off
September 01st, 2009 | Author:

If Barney Frank has his way, Bernanke & company will continue to do as they please. Here’s Frank’s plan.

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Category: Bernanke, economics, Federal Reserve, Ron Paul  | Comments off
August 03rd, 2009 | Author:

As of July 30th, Ron Paul’s “Audit the Fed” HR 1207 has 279 cosponsors in the house, the senate version S 604 has 20 cosponsors, and 75% of Americans surveyed by Rasmussen support it.

Ben Bernanke, of course, isn’t so fond of the idea.

So I thought I’d present the opposing viewpoints, one after the other. If this were American Idol, who would you vote for?

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April 05th, 2009 | Author:

If you’d like to understand what’s happening with our economy – in just one page – go read this article by Pat Buchanan. Here’s an excerpt. [And, yes, the Fed should die.]

The “forgotten depression” of 1920–21 was caused by a huge increase in the money supply for President Wilson’s war. When the Fed started to tighten at war’s end, production fell 20 percent from mid-1920 to mid-1921, far more than today.

Why did we not read about that depression?

Because the much-maligned Warren Harding refused to intervene. He let businesses and banks fail and prices fall. Hence, the fever quickly broke, and we were off into “the Roaring Twenties.”

But, the Fed reverted, expanding the money supply by 55 percent, an average of 7.3 percent a year, not through an expansion of the currency, but through loans to businesses.

Thus, when the Fed tightened in the overheated economy, the Crash came, as the stock market bubble the Fed had created burst.

Herbert Hoover, contrary to the myth that he was a small-government conservative, renounced laissez-faire, raised taxes, launched public works projects, extended emergency loans to failing businesses and lent money to the states for relief programs.

Hoover did what Obama is doing.

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Category: bailout, economics, Federal Reserve  | Comments off
March 29th, 2009 | Author:

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