Fine, I understand the rationale. But let me give you another way to look at the issue.
1. Deficits are transfer of wealth from workers to the bondholders.
2. Workers get squeezed.
3. Income collapses once Obama and Bernanke stop giving money away.
4. The economy grows slowly.
5. Inflation cannot rise because the strapped workers will buy less as prices rise, thus sending the economy is a major recession again.
6. Yields cannot rise because they follow the trend of inflation.
7. The case could be made that yields have to decline to the point people can afford to borrow again, which is a level much lower than it is now.
8. Only then will the economy stabilize.
In other words, the deficits are strangling us. In these conditions inflation and long-term rates cannot rise.
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest
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