“Hey, if inflation is going to be such a problem, why aren’t we seeing it reflected in the long-term bond market yet?”
Because we can’t sell any. Read:
Robertson said while he doesn’t think the Chinese will stop buying US bonds, the Japanese may eventually be forced to sell some of their long-term bonds.
“That’s much worse than not buying,” he said. “The other thing is, they’re buying almost exclusively short-term debt. And that’s what we are offering, because we can’t sell the long-term debt. And you know, the history has been that people who borrow short term really get burned.”
I’ve been saying for years that we couldn’t export dollars endlessly, that eventually we’d saturate that market. Well, we did — or close enough, anyway. Now that Treasury is running the printing presses 24/7, and the Fed “can’t” raise interest rates, things will get worse.
As if all that weren’t enough, just wait (not too long now) until we have to start refinancing all our existing short-term debt. Ever paid off a low-interest credit card by putting the balance on a higher-interest credit card? No? Good, you’re smarter than our government.
If we can’t sell long dated bonds, then interest rates will bullet the blue sky. My bloomberg is telling me that 30 yr bonds are trading at 4.1%, so Houston, we don’t have a problem (yet).
Why would the Chinese, scraping about a tenth of US GDP per capita, tank the $800 billion of treasuries they own? Or more importantly, abandon their rigid currency regime (which requires removing all those US Dollars we send them from the system, and is there a better way to do it than US debt), from which their labor cost advantage derives?
The “better way” is for them to start replacing their U.S. bonds with gold, platinum palladium, iridium and other rare, expensive, industrially valuable elements, as well as large quantities of less valuable metals, such as copper.