The Name is Bond - Part I
An interested Naybob reader comments: So holding cash is probably better than equities, but stagflation can eat away at both.
What's the generic recommendation for how to weather the next three years? If demands for bonds and dollars drop as well then it doesn't sound like there are a lot of options. Is the best bet simply the lesser of these evils?
My thoughts (which I have reflected in these pages many times) and a multi-part rant follow:
This time is different in the fact that central banks are applying industrial capitalism economics to the new finance "money shuffler" capitalism and it isn't working.
My sense is that the "powers that be" know that US interest rates must remain reasonably low for the consumer housing ATM to remain open. Why?
The ubiquitous "they" know that any significant rise in rates will cause a drop off in the US housing market and precipitate a major drop off in US consumption.
This scenario would cause a global slowdown and result in a banking & economic disaster in China which could dominoe throughout Asia and then globally.
Therefore, the FED, OPEC, global petrodollar countries, Asian private investors, the PBOC (Peoples Bank of China), BOE (Bank of England, ECB (European Central Bank) and the BOJ (Bank of Japan) all have a vested interest in protecting the fiat currrency dollar and by default the US bond market.
They will protect the bond market at all costs, as to do otherwise would be financial hari-kari on their part. More on the evolving liquidity drain and its effects in Part II.
What's the generic recommendation for how to weather the next three years? If demands for bonds and dollars drop as well then it doesn't sound like there are a lot of options. Is the best bet simply the lesser of these evils?
My thoughts (which I have reflected in these pages many times) and a multi-part rant follow:
This time is different in the fact that central banks are applying industrial capitalism economics to the new finance "money shuffler" capitalism and it isn't working.
My sense is that the "powers that be" know that US interest rates must remain reasonably low for the consumer housing ATM to remain open. Why?
The ubiquitous "they" know that any significant rise in rates will cause a drop off in the US housing market and precipitate a major drop off in US consumption.
This scenario would cause a global slowdown and result in a banking & economic disaster in China which could dominoe throughout Asia and then globally.
Therefore, the FED, OPEC, global petrodollar countries, Asian private investors, the PBOC (Peoples Bank of China), BOE (Bank of England, ECB (European Central Bank) and the BOJ (Bank of Japan) all have a vested interest in protecting the fiat currrency dollar and by default the US bond market.
They will protect the bond market at all costs, as to do otherwise would be financial hari-kari on their part. More on the evolving liquidity drain and its effects in Part II.
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