It's been a bit stormy in the fly-over zone lately. Yesterday, it blew like hell and we lost a tree, part of a fence and the internet connection. There went the blog. Sorry.
Which was a shame because I was going to direct you to the front page story in the WSJ concerning QE II. Now I can spot a plant as good as the next guy but cudos to Jim Hilsenrath for being wired in enough to give us the heads up that Ben and his boys may not got over the top with this QE II thing as we have been led to believe. Having run into a bit of negative thinking on the part of some of his regional colleagues, Ben seems to be heading off in the direction of moderate purchases of the 2 year note and the 10 year bond which is expected to push rates on the longer end of the curve down to the point where new investment is just too cheap to ignore. Somehow, I don't buy all of the story.
With The Leader's choices now sitting in support and (it appears) Bill Dudley at the New York Fed in lap dogging it with buckets of Kool Aid at his side; with his Princeton colleagues Paulie Krugman and Alan Binder (oh Alan, such a falling off there were) as committed to this plan as is Mr. Bernanke I find it hard to believe that mere mortals could sway him at this stage. So why the pull back?
This is pure speculation on my part but I'm beginning to get the feeling that last week-end's get together in Seoul was a good deal more damaging to the international standing of Miss America's Uncle Sam than previously thought. I have the feeling that what might have happened was that Ben got hauled out to the woodshed and got the crap kicked out of him by all and sundry alike. The juxtoposition of the meeting and this leak in the Journal is simply too coincidental and I have never been one to believe in coincidences. Sumpin' happened and it wasn't good. So Jimmy-boy head back to your source and ask him (or her) what the hell went on over there and let us know, would ya? I bet it's an even better story than the one you printed.
Anyway, while this was going on a remarkable event has occurred in the govvie market. Let me bring you back to last year when I was talking about the coming inflation if the policies of the administration (the Fed was more or less sane at the time) did not change. I think my exact words were, "Can anybody spell TIPS?" Well, the Treasury sold abunch of TIPS last week. For the first time that I can remember, the yield on a Treasury issue was NEGATIVE. Investors are so afraid of inflation that they are prepared to PAY the government to hold its obligations which guarantee them against what is now believed to be a certainty. To say the the bond market is in a tizzy is to make the understatement of the year. The dollar is looking no better either not to mention fixed income markets in the rest of the world. In this latest move, the Fed has made itself to look not only as an outsider to the rest of the world in so far as monetary policy is concerned but weak and unsure of itself as well and to most people there is nothing as dangerous as an unsure central bank. We are rapidly losing our ability to influence our world partners and as such, we are losing the ability to direct our destiny. This is a war out there and we may lose it but for pity sakes let us not through default and stupidity and believe me, the latest girations ARE stupid. At the very least let us die with harness on our back.
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