Sunday, May 23, 2010

Bloomberg Announces that Inflation is Dead After Ten Year Treasury Yields Have Fallen 80 Basis Points in Almost No Time

Uh oh. has caught on to the drop in Treasury yields in the catchily titled article Strippers Declare Inflation Dead in Zero-Coupon Bond Revival.

Investment banks increased the securities -- created by separating the interest and principal payments of a bond and selling them at a discount -- by 4.4 percent to $179.4 billion from December through April, according to Treasury Department data. It’s the first time that the market expanded for five straight months since 2006.

The best time to buy straw hats is when summer is already leaving. This train has left the station. Price increases may be low. The idea that "inflation" is "dead" is idiotic. More than that, it is impossible. Deadness is a permanent condition precluding life. Not only are price increases still present, they only left briefly, at the bottom of a horrible economic downturn.

The powers that be globally are fighting an anti-deflation fight. Just as 30+ years ago it was reasonable to bet that Volcker would win his anti-inflation fight, it is reasonable that the Fed will get its wish.

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