Markets are getting closer to the idea that:

Interest rates don’t/won’t help
QE doesn’t/won’t help

With the larger point being coming to terms with the possibility the Fed can’t inflate, or do much of anything that actually matters for the real economy, except maybe fund zombie entities to keep them from failing.

So bonds are throwing in the inflation towel and yields are coming down.
The dollar is going up with miles to go before ppp is reached.
Gold is well off the highs and being held up probably by europeans running from the euro to dollars and a bit of gold.

(***Bernanke just again testified that a contango in futures prices is a reasonable forecast of higher prices down the road. So much for the credibility of their inflation forecast)

Meanwhile the eurozone is continuing it’s methodical implosion with no credible response in sight.
And the realization that all eurozone bank deposits are only insured by the national govts has yet to hit the headlines.

The Obama administration believes the US Treasury is ‘out of money’ and we have to borrow from China to spend and leave that for our children to pay back.
So any kind of meaningful US fiscal response seems off the table.

The American economy works best when people working for a living make enough to be able to one way or another buy their own output, and business competes for their dollars. It’s not happening.

We are grossly overtaxed for current circumstances with no meaningful relief in sight.

Lots of reasons to stay on the sidelines.

5 Responses

  1. But why? Why are folks like Pete Peterson spreading the hysteria? What is their agenda? Is it they want the stock market to crash and buy up cheap assets? Or is it bigger than greed and profits? Are they looking to get rid of social securtiy so they can ‘skim of the top’ peoples mandatory retirement funds? Seems they are disaster capitalist wanting to privatize all things government.

    And who is winning this battle? So far these folks seem to have people scared senseless about deficits. Whats the objective?

  2. Warren (and others), I assume ppp means purchasing power parity but it might be helpful for newcomers to your site if you spelled terms like this and QE out.

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