Wait.....What?

[tarbe]

Something hit me this morning.

I was pondering the yield inversion we just experienced (short term Treasury rates higher than long term) and I got to thinking about the current (real) inflation rate vs 30 year mortgage rates.

How does this sound...borrow money today, for 30 years, at roughly one-fourth the rate of inflation?

Now we know that inflation changes over time...but the yield rate of a debt instrument is supposed to take that all into consideration.

Things are really out of whack.  Almost like TPTB know this is not going to matter in the long run, because the long run doesn't exist???

Just thinking out loud.  I am not a financial guru or investment expert (I would not still be working if I was!).

Curious if any of you can talk me off of thinking this is insanity?

[Ozarks Tom]

Really, when you think about how the Fed and Treasury are doing things, why is anyone paying taxes? After all, they're imagining money into being with just a few keystrokes. If imagined money spends just like tax money......

As to tarbe, question, he's right. It does in fact appear TPTB have no faith they can keep the balls in the air much longer, and they're just looking for a short-term fix until they've got theirs, their hideaways, their "preps", and it'll be "so long suckers!"

[tarbe]

Ozarks Tom for President. No More Taxes!

[blackfeather]

Inversions usually predict recessions. Though this time I think it will be a depression, and probably a Weimar Republic like depression. People don't want to be invested for 30 years due to uncertainty, only a couple of years at best so demand for 2 years goes up and 30 years go down. Supply and Demand. It isn't just the 2 and 30 but the 5 and 30 and the 2 and 10 are both close to inverting as well.

If you think about it, the rising two-year yield makes sense. At its most recent meeting, the Fed began raising its benchmark overnight lending rate and indicated it expects six more rate hikes this year and perhaps another four in 2023, providing the market a pretty good indication of where the federal funds rate is headed over the next two years: Much higher. But the failure of the 10-year yield to adjust higher suggests the market is not currently so bullish on long-term U.S. economic growth. That's why investors typically don't see it as a good sign when the yield curve flattens.

www.msn.com/en-us/money/markets/3-charts-that-are-stoking-recession-fears-in-the-market/ar-AAVHYXa

So yes they don't see much of a future right now for the US economy.

[joebill]

"IMAGINE!"

"IMagine it's real money
It's easy if you try"

Sorry, obviously I am no John Lennon, even with the round glasses and no shower this week, buy maybe somebody can help with the lyrics ....Joe





Pitch in, here!

[DEKE]

Apr 2, 2022 20:17:14 GMT blackfeather said:

Inversions usually predict recessions. Though this time I think it will be a depression, and probably a Weimar Republic like depression.

Ha, make the same prediction every single time and eventually you'll be right.  Doom porn

[Ozarks Tom]

Apr 4, 2022 15:39:01 GMT DEKE said:

Apr 2, 2022 20:17:14 GMT blackfeather said:

Inversions usually predict recessions. Though this time I think it will be a depression, and probably a Weimar Republic like depression.

Ha, make the same prediction every single time and eventually you'll be right.  Doom porn

Let's discuss this again in six months, I'm betting that six months will put us a month before the elections and our economy will be in the dumper.  Biden will be sending out "stimulus checks" with the money gleaned through increased short-term rates now.

I know, doom porn, but there is such a thing as learning from history.  The history in this case points towards a severe downturn due to bond buyers not having confidence in long term purchases.  A very bad sign.

[DEKE]

Apr 4, 2022 23:44:56 GMT Ozarks Tom said:

Apr 4, 2022 15:39:01 GMT DEKE said:

Ha, make the same prediction every single time and eventually you'll be right.  Doom porn

Let's discuss this again in six months, I'm betting that six months will put us a month before the elections and our economy will be in the dumper.  Biden will be sending out "stimulus checks" with the money gleaned through increased short-term rates now.

I know, doom porn, but there is such a thing as learning from history.  The history in this case points towards a severe downturn due to bond buyers not having confidence in long term purchases.  A very bad sign.

History also says that the party in power will usually do something to slap a bandaid on the butt cheeks of the economy to buy a little time until after the elections.

You know I agree with you that sooner or later printing mo money doesn't work to fix every conceivable economic problem.  But our unique position in the world has so far proven all the naysayers wrong again and again since the 70s.  Odds are the next blip is not Weymar Republic bad even if the gov't response to print more money makes Weymar Republic a more sure thing ...eventually...one day.    

[tarbe]

The slide into what we call hyper-inflation is not a constant. It becomes hyperbolic right at the end.

This is why 95% of any given population is singing the same tune when it hits the fan.

No one here should be caught being a part of the 95% (FYI I am pulling that percentage out of thin air, to illustrate the point...it could be 99%).

[tarbe]

Well folks, it has been almost a year since the original post in this thread.

Seems like it has been a slow train wreck since then.

More fun to come!!