Mais um interessante artigo retirado do site www.financialsense.com, desta vez elaborado pelo Jim Willie CB.
BATTLE ROYAL OVER BONDS
"A titanic battle is underway with US Treasurys. On the bond bull side is the gradually faltering US Economy, which spurs purchase of TBonds and TNotes to bring about lower interest rates. On the bond bear side is an incredible explosion in federal deficits and trade gaps, which is further aggravated by rising prices system-wide. The chart of the 10-yr Treasury Note yield, tracked by the TNX chart, is highly revealing. It displays the battle royal underway. Is there inflation out there, or deflation? Is the Fed’s Reflation initiative succeeding to lift wages, reduce debts, or failing? Is secular deflation tightening its grip, or is the rise in commodity prices seeing a “cost push” work its way throughout the economy?
Secular deflation is still the beast in the east, as Asian production floods our nation to keep a lid on product prices, and as the growing outsourcing of jobs keeps a lid on wages. Debts are growing while wages are not keeping pace. Prices are surely on the rise, but mainly in the cost side of the equation, not the income side. Monetary growth is monumental, from both the federal budget province and the mortgage arena. We clearly have both inflationary influences at work against deflationary trends. The collection of economists in our land sound as befuddled as the outcomes of their policies are twisted wreckage in a sequence of busts. Central bank intervention to support the USDollar, and to prevent its rapid decline, is played out with US Treasurys as the primary vehicle.
DEMAND FOR BONDS FROM SLOW GROWTH
First is the demand side. Consumer spending has come down for four months. The Coke warning in early September was the latest confirmation after a spate of warnings this summer. Wages are unable to keep pace with rising prices. Wholesale inventory levels are building. Industrial production for August came in at 0.1% growth, flat, but in fairness that figure is largely due to reduced air conditioning in the entire eastern part of the nation during a mild late summer. Bear in mind the queer anomaly that the largest niche within our absent manufacturing base is electricity generation, perversely. The pinch of higher gasoline prices has taken a toll, despite Wall Street claims. It makes up a full 7% of household budgets. Other factors slow the economy at a household level. At a national level, huge trade gaps and growing inventories cut into GDP reported growth. As the US Economy slows, and incomes fail to offset rising costs, the demand for Treasury Bonds grows. These are the justifications for investment in bonds. With bond purchases come lower interest rates....."
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