So much for ratings agencies
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As the ratings agencies keep bleating about the possibility that they will take away the AAA credit rating of the United States Government, those who use their money rather than their mouth to predict the future have been sending interest rates on US Government debt down. Whatever the consequences might be of the Congress and the President not agreeing on increasing the limit on total government borrowing, forcing interest rates up is not one of them. Here is what has happened this month to rates on Treasury inflation protected securities.
Feel like putting your money away for five years? You will earn 0.72 percentage points less than the current inflation rate!
There’s certainly no sign there of a financial market predicting an onslaught of inflation.
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Mr Farmer has a remarkable insight: “those who use their money rather than their mouth to predict the future have been sending interest rates on US Government debt down”.
Except “those” is the 80% the Fed itself and the money paid is “monetized” money.
Printed. Not exactly….well…er…’gold standard’ kinda money.
Since December 2008, the U.S. Federal Reserve has held the benchmark Federal Funds rate at historic lows between zero and 0.25% and it’s pumped more than $2.3 trillion into the American financial system, mostly by purchasing securities on the open market.
Notice the Fed funding rate is in essence negative ie less than inflation.
The 80% of Treasury Bonds purchased were from itself during the $600 billion QE2 now just finished.
And QE3 is already being flagged by Bernanke along with continued low interest rates.
Deriding the “bleating” is like pointing to the printed statement from your personal retirement Ponzi Company investment and noting the fabulous rate of return after your bank manager has warned you that the investment looks suss.