Tuesday, May 12, 2009

Obama's Inflation Storm Clouds

The storm clouds of inflation are starting to gather.
Treasuries fell for the first time in three days after Federal Reserve Chairman Ben S. Bernanke said stress tests conducted on the 19 largest U.S. banks yielded “encouraging” results, damping demand for the safety of debt.

The yield on the 10-year note increased two basis points to 3.19 percent as of 9:40 a.m. in Tokyo, according to BGCantor Market Data. The price of the 3.125 percent security maturing in May 2019 fell 1/8, or $1.25 per $1,000 face amount, to 99 14/32.
It was just a few short weeks ago that 10-year treasuries were yielding about 2.70%. They are going to have to flood the market with debt to pay for Obama's dinner tab, and that forces interest rates up. Very soon you will start hearing about the concept of "crowding out" private investment demand by so much government spending. Expect to see a relatively high unemployment for quite some time to come (at least 3.5 years by my estimate).

As inflation starts to heat up, listen close to how the MSM blames Bush for everything even though Obama is borrowing about 50 cents of every dollar the government will spend this year.

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