Higher long-term rates will create more devastating depression – a big lesson waits for Federal Reserve and the Treasury
Alan Hershey
Oct. 19, 2008

The bond market is showing signs of tiredness. The long term rates are actually going up to support the budget deficit as economic depression in the main street and the Wall Street deepens.

Normally economic recession or depression is accompanied with lower long term rates as inflation changes to deflation. But this time it is different. Federal Reserve is thinking they can print money and turn things around. It will not work this time because of the ballooning budget deficit.

Just like Greenspan, Bernanke is about to learn his first lesson Pragmatic Economics 101. The long-term rates are a function of implied inflation, which is an inverse function of budget deficit. Simply put, as budget deficit increases, the long-term rates rise in spite of real deflation in the economy. That means real devastation of the economy. The long-term rates can move to 8 to 10% while the short-term rates can hover around zero percent.

The effect is spiraling downward cycle that can continue for more than three to five decades. The depression that long will finally create a new bull market – but will be for our grandchildren.

Higher long-term rates will create more devastating depression – a big lesson waits for Federal Reserve and the Treasury
Alan Hershey
The bond market is showing signs of tiredness.
READ MORE>>

Stay away from stocks, major stocks can have the same fate as AIG – nationalization is the only hope for big companies as depression goes deeper
Bernie Snyder
The Dow Jones Industrial Average is headed below 6,000.
READ MORE>>

The next wave of financial collapse is ready to strike - first commercial real estate and then credit card defaults – buy gold sell everything else
Sam Adelton
The economy is in deep depression. The financial meltdown is accelerating.
READ MORE>>

It is time for Gold to shine but you may have to wait till Governments finally realize that they cannot stop the inevitable
Joe Weinman
Gold is poised to rise as the Governments all over the world has started printing...
READ MORE>>

Like in 1929, Wall Street and Commodity related suicides have started as the markets swing wildly with a downward trend
Marla Guthrie
The commodity investors, Wall Street managers and Investment bankers are running...
READ MORE>>

After a sharp bounce Dow Jones Industrial Average is headed south below 6,000
Sam Adelton
The news of depression all over the world has finally touched the mainstream media.
READ MORE>>

MORE ARTICLES >>