Posted on 05/30/2009 11:58:52 PM PDT by Ernest_at_the_Beach
Bond vigilantes—investors who, in protest to the government's monetary or fiscal policies policy, sell bonds to purposely drive up yield on U.S. debt—are back after 15 years of remaining on the low-down, according to Bloomberg. Higher yields mean higher interest costs for the government, making the cost of borrowing more expensive and throwing the proverbial wrench in Fed Chairman Ben Bernanke's efforts to keep borrowing costs low for consumers and businesses while also trying to jolt the economy. The 10-year Treasury yield has risen 1.4 percent this year, pushing interest rates on 30-year fixed mortgages to more than 5 percent. Edward Yardeni, who coined the vigilante term bond vigilante in 1984 and now runs Yardeni Research Inc. in Great Neck, N.Y., says they are "up in arms over the outlook for the federal deficit," which has quadrupled under President Barack Obama to $1.85 trillion. He adds that Washington is "out of control" and lacked "fiscal discipline."
The vigilante's outrage comes from a long-term perspective. For now, consumers prices remain low—in the past year, they've fallen 0.7 percent, their biggest decline since 1955—but bond guru Bill Gross, the co-chief investment officer of Pacific Investment Management Co. and manager of the world's largest bond fund, has said all the cash being pumped into the economy could cause inflation to accelerate to 3 percent to 4 percent in three years, surpassing the Fed's "preferred range" of 1.7 percent to 2 percent.
Reuters, taking the alarmist road, says because of the increasingly high yields, the "global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again."
(Excerpt) Read more at thebigmoney.com ...
Will this slow down the Obama juggernaut...?
"It is a very bad idea for governments to create arbitrary and unfair outcomes, or outcomes resulting from the passions and whims of the government rather than from the law, just because they have the power to do so," said Paul Singer of hedge fund Elliott Management.
Most important to note, what raising interest rates will do to the O’Budget.
It will sink us into a unbearable debt.
“Bond vigilantes”.... Unreal.
The Obama juggernaut will stretch the current crisis out for decades. The fact that you’re hearing rumors about another crisis illustrates that the new elite doesn’t believe their own bullshit.
These people may be our only hope to stop Obama. May God be with them.
This time .gov can't save the remaining banks from massive CDS claims, $91 trillion for JP Morgan alone.
Ironically we won't need the banks when the Federal Reserve system resets to zero.
Seriously, what did they expect? You cannot borrow your way out of debt. The resulting borrowing MUST drive up interest costs. Go back to Econ-101.
For Bernanke and his ilk to attempt another New Deal rescue (the Raw Deal) is to invite runaway inflation, a dramatic run up in interest rates for ALL borrowers, and generations of Americans saddled with foolhardy debt that should have been avoided at all costs.
It’s time to take back the country.
Truly ridiculous to think that a few protesters could drive up the interest rates on bonds. However, markets could do this, simply because almost-no-interest bonds are not worth it.
All we need is the beginning of creeping inflation, and bond-holders may begin to see that their money is losing value tied up in bonds. They are getting negative interest, in effect; and yet the nominal interest they collect is in inflated dollars, and gets taxed. It is no bargain. Many will decide that it is better just to have the money, and spend it on real items as soon as possible. This will feed the inflation.
Combine this effect with the fact that most American employees have “service sector” jobs which don’t really do anything vital, and you have a perfect storm for rising unemployment and inflation, like Carter’s “stagflation,” or a eventually like Zimbabwe.
The Zimbabwe example may be extreme, but there are even leadership similarities. Mugabe worsened the situation by demonizing white farmers and expropriating their land. 0 attacks “selfish speculators” (investors), and leaves them with 10 cents on the dollar or less, turning over huge companies to the unions which ruined them in the first place.
The vigilante’s outrage comes from a long-term perspective. For now, consumers prices remain low—in the past year, they’ve fallen 0.7 percent, their biggest decline since 1955
Big government that knows no restraint on printing fiat money and spending it on non-economic projects undercuts sound government.
People who have a full understanding of the economic consequences of government action, and who act on their more clear thinking, are the vigilant heroes here.
There would be no play here at all if our government was setting the standard of behavior instead of seeing how far it could stretch the debt and spend envelope.
Excellent point.
Mugabe-"You white guys. Gimme the farms so my War Veterans can run them into the ground".
Obama-"You GM and Chrysler stock and bond holders. Gimme the companies so my UAW buddies can run them into the ground".
they are “up in arms over the outlook for the federal deficit,” which has quadrupled under President Barack Obama to $1.85 trillion
—
“up in arms..”
‘inflammatory’ reporting? 8-* (censor tapping finger on table)
I’ll take Truth and Justice over Hope and Change anyday... and a good yield on a bond if I can get it.
Bond vigilantes -- investors who, in protest to the government's monetary or fiscal policies policy, sell bonds to purposely drive up yield on U.S. debt -- are back after 15 years of remaining on the low-down, according to Bloomberg. Higher yields mean higher interest costs for the government, making the cost of borrowing more expensive and throwing the proverbial wrench in Fed Chairman Ben Bernanke's efforts to keep borrowing costs low for consumers and businesses while also trying to jolt the economy.It's a little thing the Obamabots have never heard of -- the law of supply and demand. If they want lower rates, they need to not overspend to the tune of $8,219,178,082 a DAY.
Might be enough to get rid of some of the Dem’s....course they will say the Business Guys are the Bad Guys!
Obama's little "gift" to the UAW will end up costing the economy billions.
The 1.4-percentage-point rise in 10-year Treasury yields this year pushed interest rates on 30-year fixed mortgages to above 5 percent for the first time since before Bernanke announced on March 18 that the central bank would start printing money to buy financial assets. Treasuries have lost 5.1 percent in their worst annual start since Merrill Lynch & Co. began its Treasury Master Index in 1977. ... They’re back. For the first time since another Democrat occupied the White House, investors from Beijing to Zurich are challenging a president’s attempts to revive the economy with record deficit spending. Fifteen years after forcing Bill Clinton to abandon his own stimulus plans, the so-called bond vigilantes are punishing Barack Obama for quadrupling the budget shortfall to $1.85 trillion. By driving up yields on U.S. debt, they are also threatening to derail Federal Reserve Chairman Ben S. Bernanke’s efforts to cut borrowing costs for businesses and consumers.
Obama Losing Bond Vigilantes’ Votes, Yardeni Says - May 29, 2009
... "At some point, there has to be a recognition of the fact that while President Obama clearly won a resounding victory in winning the White House, he has to win bond vigilantes’ votes every day,” said Edward Yardeni, head of Yardeni Research Inc. in Great Neck, N.Y. “And he’s losing them now. That’s the heart of it." ...
Zoellick Warns Stimulus 'Sugar High' Won’t Stem Unemployment - May 30, 2009
“While the stimulus has given an impulse, it’s like a sugar high unless you eventually get the credit system working,” Zoellick said in an interview yesterday ... ... The World Bank is monitoring private companies’ abilities to roll over "a lot" of debt in the developing world, Zoellick said. At the same time, he played down risks to the global recovery posed by rising U.S. Treasury yields, saying that “in terms of absolute levels, rates are still pretty low for most players." Zoellick also said that the dollar will remain the world’s main currency "for a long time," and noted that investors flocked to the dollar as a haven during the worst parts of the financial crisis. ... World Bank President Robert Zoellick warned policy makers that fiscal-stimulus plans are insufficient to turn around the “real economy” and rising joblessness threatens to set off political unrest across the globe.
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