Financial Times/Tommy Stubbington and Colby Smith
“A rebound in inflation, which has been elusive since the 2008 financial crisis, could disrupt these widely held expectations by making the debt market look less attractive. Bonds typically provide investors with a fixed stream of interest payments, which become less valuable as the overall cost of goods and services accelerates.”
USAGOLD note: JP Morgan Chase’s Jamie Dimon recently said that he wouldn’t touch Treasuries with a ten-foot pole – perhaps an indication that he too sees inflation coming down the road. The problem from a monetary policy perspective is that reluctance to buy evolves to encouragement to sell and we have another “liquidity problem” like we experienced earlier this year. Ultimately, it comes down to financing the huge federal government deficits and how that would be accomplished if buyers of Treasuries were to become sellers – something that might already be underway as it is.
Repost from 12-18-2020
