Because the economic uptick may just be an uptick before….
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Yup. The other thing that people aren’t tracking yet is this: Boeing cut their profit forecasts going forward due to pension costs. Now, they knew roughly who would retire when. What is hurting them is their pension investments because of the Fed’s zero interest rate policy. So the longer that persists the worse the pension gap will become for companies which in turn will increase the drag on profits for those companies. What the Fed is signaling is not good news going forward.
good point Sikander!
If the Fed doesn’t buy bonds rates will go up because who is dumb enough to take less than 2% interest on a 10 year bond when “official inflation” higher and in fact real inflation much higher? Who except the US taxpayer is dumb enough to take that deal. Conversly, if he doesn’t purchase bonds, and there is a real auction and the rate goes up, what will happen to banks who can’t make money when they are given it for free? What will happen to the “economic recovery”?
Yep…. not to mention if the fed lets rates rise, at some point we will have to roll our debt over at higher interest rates like Italy and Spain are scheduled to do and that means skyrocketing debt
Or like Japan…who pays less than 1% on 10 year bonds and has a way bigger debt problem.
Don’t go comparing currency issuers with currency users.
If the Fed steps away and things go to shit, thus sending equities and commodities lower and people pour into Treasuries for safety…those people who bought at 2% and sold at 1% are going to look very smart.
At which point we will be in the midst of a deflationary vortex, where the Fed can turn up the printing presses again and the US borrowing costs will be even lower.
Massive Federal borrowing/spending has to be at low interest rates. And, more importantly, the economy has to be jacked up during the summer and fall to facilitate 0bama re-election.
Just blow that bubble a little bigger and hope it doesn’t pop before November. Then blame capitalism for the failures and put in a Marxist dictatorship for everyone’s own good. Scary.