“Au contraire, M. Denninger.”
If we’re facing hyperinflation in the next 10 years, why are people willing to buy treasury bonds yielding 2.33%? They would be crazy to do that if even significant inflation is in our future. The bond market could always be wrong, but it is entitled to considerable deference IMO- bond purchasers tend to be saavy folks.
Why were people still buying real estate, even after the market started to turn south?
In the case of the bond market — it could be a case of “the greater fool” theory in action. IOW, it's just the latest Ponzi scheme. The test will come soon enough. Obama wants to borrow & spend $1 trillion for “economic stimulus” & he's been talking about trillion dollar deficits for years to come. If China (for one) ever stops buying U.S. Treasuries — what do you suppose will happen to the value of the U.S. dollar?
“bond purchasers tend to be saavy folks”
Yes they are, and I hope you are right. On the other hand, I am wondering if a lot of them actually do think there is a substantial risk of future inflation yet are buying bonds now anyway because they appear to be the least harmful alternative.
Buying US Treasuries is like becoming Saddams best friend for life. Not so great, but where else do you plop ten million, a hundred million, ten billion dollars and not only have it safe, but a little profit?
There are some bond buyers that are afraid their CDs, money market and investments accounts might go south, so their thinking is better US bonds at little or no interest, than no money at all. Madoff has scared many investors.