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AmSpecBlog
The Obamanomics Electric Kool-Aid Acid Test
You've got to hand it to MSNBC. It takes a lot of moxie to look at an economy shedding jobs, with unemployment and interest rates rising, and come up with the headline: "Evidence mounts that recession may be ending."
In March 2008, I attended a panel discussion where an economist for a private investment firm explained that rising bankruptcy rates pointed toward an impending financial crisis -- which was exactly what happened six months later. At last night's annual gala for the America's Future Foundation, I ran into the same economist, who shook his head and said of the current policy, "They're trying to re-inflate the bubble!"
Ultimately, however, this policy will yield higher interest rates or inflation, or perhaps both. The Wall Street Journal explains what's happening:
Bond markets continued to gyrate Thursday after a sharp run-up in 10-year Treasury yields the day before. The bond market pushed yields of 10-year Treasurys down to 3.674% from 3.70% Wednesday, but they remain well over mid-March's 2.5% level. Yields on mortgage-backed securities continued to climb, pushing 30-year fixed-rate mortgages to 5.44%, the highest since early February.
The Fed has embarked on a massive effort in recent months to buy Treasurys and mortgage-backed securities, a bid to drive up their prices and push down yields. It aims to keep borrowing costs low, hoping cheap mortgages in particular will spur the still-weak economy. . . .
So far, the Fed has purchased $130.5 billion of the $300 billion in long-term Treasury debt it began buying in March. It also has bought $481 billion in mortgage-backed securities and has said it could buy as much as $1.25 trillion worth.
In other words, the monetary dog is chasing its fiscal tail -- a can't-miss formula for stagflation. Pity the investor who is foolish enough to rely on MSNBC to stay informed about economic news.
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palper| 5.29.09 @ 8:53AM
You hit the nail on the head. I discovered this site a few months ago and is hands down the best econ/markets site on the web.
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Pete| 5.29.09 @ 10:30AM
They must be part of the 95% of Americans who don't consume electricity, alcohol, tobacco or buy anything on the internet. You see, this 95% is experiencing no increase in taxes, so they are really starting to ramp up consumption as a result....
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ds80| 5.29.09 @ 2:57PM
$64 trillion in unfunded obligations... TO DATE.
$12 trillion current deficit that must continually be rolled over ... while foreign governments are starting to shy away from US sovereign debt.
Next big wave of mortgage rate resets (Option ARMs) yet to hit (2010-2011).
Geithner/Paulson/Bernanke's BIG FINANCE buddies exposed to multi tens of trillions in derivates.
"Green shoots" ? Hah! Obamanomics **IS** Electric Kool-Aid Acid
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