Generally, the reason that 30-year rates are higher than two-year rates is because of a cushion for inflation. (Duh. You know that.) The inverted yield curve means that the market is telling the fed that its recent market manipulation to drive interest rates higher is wrong.
The Fed cannot set the market 30-year rates, for example. It can only manipulate the money supply by (i) raising or lowering the interest rate at the discount window or (ii) buying or selling treasuries in the market. The market, however, is dominant on the price of credit. Fed magicians try to hit a target rate through the amounts that the raise or lower the discount window rate. If the yield curve is inverted, this means that the market thinks that the cushion for inflation is negative because it didn’t add anything to the long rate, but reduced it. This gives greater credibility to the theory that we are not in an inflation right now, despite the gold indicator.p>While I’m no economist, I have always considered gold to be an excellent (and long overlooked) indicator of inflation. Despite what the last paragraph says, I find it difficult to believe that after millennia it’s no longer right. But I cannot explain the discrepancy between the inverted yield curve and the current price of gold. br> — David I. Held br> Vice President, Bank of America, Compliance Risk Management /p>
Tom Bethell asks who is he to argue with Steve Forbes on what the price of gold should be. Before conceding too much financial insight to Mr. Forbes, it should be pointed out that last year (May 9, 2005), Steve lead off in his “Fact And Comment” column in Forbes magazine by saying, “The Oil Bubble is about to burst. Don’t be surprised to see oil at $30 to $35 a barrel within 12 months.”
Well, he missed that one. Today, one year later, the price of oil is about $70 a barrel.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?