/biz/ - Business & Finance

This is why. They have to keep that number below 1.5%. If the interest rate on government debt is higher than it's because big players are worried about inflation turning bonds into a negative return. Just like JPM shorts silver to keep the price down the Fed buys treasury bonds to keep the rate down. Government debt is so high that any significant interest rate would make the US insolvent. That will never happen, so the Fed prints money to buy government debt and inflation happens. This is first creates an asset bubble, stocks go up, real estate goes up, everything goes up, then the bubble pops, and we get a stock market and real estate crash. That causes mass unemployment and now the government has to borrow even more to pay for social programs or risk armed uprisings. The fed has to print even more money to buy that debt with because by now everyone is aware that real inflation is coming and treasury bonds at 1.5% are even less attractive than wheelbarrow cash. Politicians have no choice but to promise everything and we become Weimar 2.0. Gold and Silver will likely be unobtanium the moment the markets crash. Buying anything on margin or adjustable rate credit is suicide today.

The only alternative I see to the above scenario is one where the Fed steps on the inflation pedal hard right now and devalues the currency to the point where it forms a floor under current asset prices.

Get ready for $20/loaf bread. You have a mill right?