The 1 yr T-Bills:
Remember, this can also mean the boys are playing the bond game also.
The 2 Yr T-Bill
Note the slight turn up already on the 2 year bills – not usual in the bond game – too long a term.
The 20 yr Note:
Note – way over on the right, the rates are now exceeding the pre-panic rates.
It appears the rates for these bonds seem to indicate by the summer of 2010 we should be raising interest rates.
Next – check the banks – do the banks have any cash?
Wow, there’s the pig – see how it’s also reflected in the short term interest rates. Typically the money flow works likes this:
The FED buys the bond/Tbills by turning on the printing press and makes some new paper they call money. They purchase the bonds. As you see above it’s a credit to the Bank but a debit to the US taxpayers – they just added to your debt – nice guys!
The bond market receives the cash first, hence the bond prices leap up and the rates plunge. If the bankers do not speculate in the bond game to make some free money off the FED & you the taxpayer, the bonds are sold and the next to get cash (besides the attorneys – The Firm you know) is the stock market. Other investment vehicles come after that. OK checking the market for the pig we see:
Yes, there you are, just showing up. Now you can see why this current stock market has jumped and should get about 50% gains this year – amazing huh!! Note the transportations and the utils and energy stock (and of course gold and silver) are making their moves. They started to move out about April 2009. They should good to go until the spring of 2010.
OK down we go through the snake – the next operators that get a taste are the “normal” commercial bankers. Sometimes the larger commercial banks sell their bonds directly to the Fed (like in this last Panic) – they get to feed directly from the trough. Their reserves get a bounce – as noted Citibank, BOA, etc are much better off today – thanks America. The money received from these transactions are supposed to go in those big savings accounts those guys have and should be loaned out as commercial paper, but as mentioned above, they also like to save you and park these funds in the Reserve and make some free money – for the Firm of course.
Keep in mind these are just the American numbers – all of Europe and Asia got into this game This vast spread of unified activity has never happened before in history, we have no way to determine the exact effects of this.
OK next – your tax dollars sitting in those Big FED Banks earning money for the banks that did those sub-prime loans.
Any money going out for loans – seems to be some, note the low yields – plenty of cash??
Well anyway, money is supposed to move through the commercial area and be loaned to corps and such. Haven’t heard of too many big loans happening. Don’t think the pig has gotten here yet.
Any capital goods happening yet due to these big loans?
Maybe some orders that it – real slow.
Well, then if building is happening, capital goods, steel and cement activity is going up then people should be working and income should be happening. This is finally how this “stimulus” is suppose to get money in people’s pocket. Typically it takes up to two years for this to happen – say November 2010.
Checking that –
Gad – nobody has gone back to work yet. How scarce are those jobs anyway – surely we are building those highways and bridges and wind mills like crazy now, right?
OK so it looks like this doubling of the money supply which we know from the past causes monetary inflation like that of the boom of the late 70’s is on its way. In those days the interest rates peaked out at 16.5% – wonder what it will be like in 2016 for us? I can’t imagine. We appear to be early in this inflation cycle; the money is only in the first phases. The stock market has some cash now and will have it until Nov 2009 until the spring of 2010. By then people will be waking up to what has happened and the commodity market will be rocketing up and out.
Remember those days – gold was leaping $50/day, silver jumping $5/day, and oil going from $13.50 to gasp $35/Bbl. Housing was going up and up – we felt richer but were we really? After the dance was over in 1982, there was a long slow price to pay. More S&L action in ’87?
So how do we prepare for this event that is coming again? Yet this time it would appear to be coming as a tidal wave of inflation to match the wall of cash just launched – a doubling of the monetary supply – what were they thinking?
To Be Continued