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.
