Investors in U.S. Debt
Posted: Wed Aug 29, 2012 12:04 pm
If you have money in U.S. bonds or T-bills you need to read this note from Stephen Leeb. I agree 100%. So many investors think bonds are safe. They are not when interest rates go up or inflation returns. - Dan
--------------------------------------
I’m shocked at seeing our leaders in government ignore basic common sense.
Here’s what we have:
A structurally weak economy
A fiscally irresponsible government
Both of which are propped up by a co-dependent central bank, accommodating their bad behavior
This has disaster written all over it for bond holders. You’ll soon experience a bond crash of epic proportions.
Here’s why: The Fed has backed itself into a corner. After mercilessly pounding down bond yields to less than the inflation rate... and pumping up the money supply like a hot-air balloon...
It has one of two choices, neither of them good. Both will crash bonds:
1. Stop artificially depressing interest rates, and let them soar to their market level — OR —
2. Unleash inflation
And if you’re left holding those low-interest bonds when either of the above happen... you lose.
--------------------------------------
I’m shocked at seeing our leaders in government ignore basic common sense.
Here’s what we have:
A structurally weak economy
A fiscally irresponsible government
Both of which are propped up by a co-dependent central bank, accommodating their bad behavior
This has disaster written all over it for bond holders. You’ll soon experience a bond crash of epic proportions.
Here’s why: The Fed has backed itself into a corner. After mercilessly pounding down bond yields to less than the inflation rate... and pumping up the money supply like a hot-air balloon...
It has one of two choices, neither of them good. Both will crash bonds:
1. Stop artificially depressing interest rates, and let them soar to their market level — OR —
2. Unleash inflation
And if you’re left holding those low-interest bonds when either of the above happen... you lose.