This morning’s employment report looked good enough on the surface to rekindle talk of an end to the Fed’s debt monetization program. So in addition to buying stocks at the open, traders began their day by dumping bonds. The 10-year Treasury yield is up by another 21 basis points in early trading, to almost 2.7%.
Now the question is, which of these two opposing forces — rising employment or rising interest rates — predominates. Specifically, are rising interest rates a sign of systemic health or an arrow aimed at the heart of an overleveraged society? A few things to look for: recalculations of the deficit in light of spiking interest costs, comparisons of US and Japanese yields and speculation about what this means for Japanese rates — followed by dire analyses of Japan’s future borrowing costs — and last but not least, a growing concern for the hundreds of trillions of dollars of interest rate derivatives that now have one counterparty deeply in the red.
In fact, as of 10:20 EST some of the above might already be filtering into stock prices:
Rising interest rates are VERY deflationary. Because then bond prices fall/deflate. and it deflates the entire credit based economy.
The fact that both interest rates are higher & the USD higher as well, simply means DEFLATION. If this would signal inflation then the USD should have gone lower. Like in the 1970s. But this is 2013.
Although I wouldn’t be surprised to see rates fall down to say 1%, before spiking MUCH higher to say 5, 10, 15 or 20%. And that very deflationary.
Mr. Rubino, deflation !!! NOT inflation !!!
Isn’t it both? A brief period of hyper-inflation followed by a long term deflation?
No. IN the current situation (high levels of debt) Hyper-Inflation is simply “Out of the question”. For (Hyper-)Inflation to occur we need to have (Hyper-)Deflation first.
On top of that, Hyper-Inflation is NOT inevitable. Deflation – most definitely – IS.
Of the people that inhabit these blogs, there is near unanimity of the view that we are approaching an economic/financial calamity. On the subject of inflation v. deflation, there is far less agreement. Will we see one before the other? For how long and severe? Prudence dictates that we should expect the worst from both barrels.
Falling prices do not constitute deflation and rising prices do not constitute inflation.
Correct. But falling prices makes it more difficult to service debt(s). So, on its own it doesn’t constitute deflation. But it’s certainbly a clear symptom of deflation.
Rising interest rates were the straw that broke the camels back (housing) back in 08. This time, unemployment and debt is much higher than 08. Hold your breath.
Exactly right Steve. The other 10-30% of bond holders are retirement funds, insurance companies, hedge funds, and foreign governments (mostly China, Japan, Saudi). Their $h1t is hitting the fan right now as the Treasury market tanks. Why is this a surprise with the Fed Fund rate at 0% for 5 years and a bond bull market for 30 years.
Get money out of the banks?
that suks is my credit card going to go up now?
Maybe you should throw that card away…
Multiple Government Agencies Are Keeping Records Of Your Credit Card Transactions
http://www.silverdoctors.com/multiple-government-agencies-are-keeping-records-of-your-credit-card-transactions/
You ask, are rising interest rates a sign of systemic health or an arrow aimed at the heart of an overleveraged society?
I reply, the latter
Jesus Christ, operating at the helm of the Economy of God, Ephesians 1:10, terminated Liberalism, and its Banker regime, by enabling the bond vigilantes to call the Interest Rate on the US Ten Year Note, ^TNX, higher to 2.01%, on May 24, 2013. This killed the Creature from Jekyll Island, that is the US Fed. God’s Son did what Ron Paul could not do; he ended the US Fed.
And now, continuing on, Jesus Christ has buried Liberalism, putting its Milton Freidman Free To Choose Floating Currency System, in the grave, by enabling the currency traders to call the US Dollar, $USD, higher to 84.71, on July 5, 2013, and to sell invididual currencies; those sinking included the Indian Rupe, ICN, -1.2%, Emerging Market currencies, CEW, -1.4%, the Swedish Krona, -FXS, 1.5%, the Euro, FXE, -1.5%, and the British Pound Sterling, FXB -2.4%.
Jesus Christ, as steward, acting in the administration plan of God, for the fullness and completion of every age, dispensed debt deflation to destroy first credit, AGG, and then Major World Currencies, DBV, as well as Emerging Market Currencies, CEW, terminating peoples trust in the elected officials, and world central bank monetary policies of investment choice and their credit schemes, such as, free trade agreements, financial deregulation, leveraged buyouts, nation investment, currency carry trade investing, securitization of debt, financialization of stocks and ETFs, dollarization, and Forward Guidance.
Soon out of the PIGS, that is Portugal, Italy, Greece, and Spain, banking and nation state insolvency, Jesus Christ is going to cause a stroke to one of mankind’s seven institutions, specifically, the head of Finance, Commerce, and Trade, through Financial Apocalypse, that is through a global credit bust and financial system breakdown, as foretold by John the Revelator in Revelation 13:3-4. Yet surprisingly, economic capability will recover, this will come through Regionalism, replacing Crony Capitalism, European Socialism, and Greek Socialism, as well as Russian Communism and Chinese Communism, Revelation 13:1-4.
With Liberalism, both terminated and buried, people will come to trust in Authoritariaism’s regional governance, and economic policies of diktat and their debt servitude schemes, such as, regional framework agreements, bank deposits bailins, new taxes, privatizations, capital controls, and austerity measures.
Dear friends, right now some basic foods are a little bit more expensive, like chicken which is around 1.25 per pound, compared to some weeks or months ago which was priced at around 1 dollar per lb. That is a proof that the US economy is in the middle of an inlationary situation, and capitalist ruling classes won’t be able to stop them. Because the US central bank Federal Reserve has been printing fake dollars with abandon, in order to create a fake prosperity among the masses. But sooner or later it will all grind to a halt and Federal Reserve won’t be able to keep printing fake dollars anymore and that’s when CHECK MATE will take place for the US economy like right now in Egypt, Greece, Turkey etc.