Long bond rates will plummet with lower inflation, lower growth and more transparency in Government after election
Alan Hershey
Nov. 5, 2006

The long bonds rates will start its collapse again after the election. The election will bring more transparency; audit trail and above all politicians will be held responsible for their mistakes and corruption. The economic growth will slow rapidly as hopes for further tax cuts are taken out and credit becomes tighter because of the increasing inverted yield curve.

The biggest questions asked to Federal, State and local Government will be how were the public contracts awarded? How are you selecting the vendors that profit billions from public contracts funded by the tax money.

The push will for smaller and more efficient Government. Politicians will be required to perform like in private industry. Inefficiencies will be dealt with punishments. Failures will have consequences of getting fired on the spot.

Simply put, Government will become more responsible and operate like an efficient infrastructure. Right now politicians can do what they like and even avoid agreeing that they made a mistake at the cost innocent public.

The net result will be lower budget deficit. That in addition to lower inflation and growth in coming months will sharply lower the long bond yields. That in turn will invert the yield curve even further. That will slow the growth even further. In turn the long rates will go even lower till Fed is forced to lower the short-term rates.

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