Australians are now the biggest borrowers in the world

which all works of course in the absence of inflation. In the event of inflation.

sgs-cpi.gif

Coutesy of Shadowstats.com, John Williams is an ex US government economist. This chart tracks US inflation as it was calculated in the 1980s. There have been many changes since then. For example as of the 90s, if meat goes up a long way they substitute the price of hamburger meat.

If the current inflation rate in the US is 11% does that mean they have been in recession for some time?!

I dont see any problem for interest rates right now, but do you really think the bond vigilanties will sit on the sidelines for ever, especially now that China is a net seller of US bonds?

In future, if interest rates go up 1% that's a 50% increase the governments repayments. The Fed will print even more, will that lead to hyperinflation? Germany hit hyperinflation at 60% debt to expenses ratio, the US is currently at 43%, so I hope they can pull some tricks out the bag soon.
 
sgs-cpi.gif

Coutesy of Shadowstats.com, John Williams is an ex US government economist. This chart tracks US inflation as it was calculated in the 1980s. There have been many changes since then. For example as of the 90s, if meat goes up a long way they substitute the price of hamburger meat.

If the current inflation rate in the US is 11% does that mean they have been in recession for some time?!

I dont see any problem for interest rates right now, but do you really think the bond vigilanties will sit on the sidelines for ever, especially now that China is a net seller of US bonds?

In future, if interest rates go up 1% that's a 50% increase the governments repayments. The Fed will print even more, will that lead to hyperinflation? Germany hit hyperinflation at 60% debt to expenses ratio, the US is currently at 43%, so I hope they can pull some tricks out the bag soon.

If there was any real truth to these types of inflation analyses then the current buyers of US Treasuries would be taking a huge bath right now, with a 2% nominal return in a 11% inflation environment. So I don't agree with the basic premise that US inflation is well above published values - a lot of study goes into getting inflation numbers right and I don't see either myself or this other guy being better than it. It's a bit like Climate Change - you can believe a couple people over there who are throwing rocks at things they don't understand or you could side with the thousands of studies and exabytes of published data supporting the conclusions of all the major science institutions of the world. I know which side I'll sit on - but thanks for the offer!

Having said all that I wouldn't be surprised at all to see US bond yields rise. The USA is still sick with high unemployment and few good options available to them anymore. I don't pretend for one minute that they're not in a serious situation but it's not quite armageddon - yet. But it's also a bit like forex - the best indicator of future exchange rates are the current ones because that's the sum total of the market view of the matter and I don't pretend to know more than all that money!
 
If there was any real truth to these types of inflation analyses then the current buyers of US Treasuries would be taking a huge bath right now, with a 2% nominal return in a 11% inflation environment.

Since Williams was the guy who used to calculate these figures for the US government in the 80s & he simply inserts the current government figures into the formula the government itself used in the 80s, then I'd say the figures accurately reflect the way the figures used to be calculated by the government.

It's clear that a great deal of inflation has been created out of the Fed's 'money printing', it's just that most of it has been in bonds, some in equities, a lot in gold (which is a very small market) etc. It's been four years since the GFC started so it makes sense that some of that monetary inflation has hit consumers buy now. The annual Thanksgiving dinner has gone up 13% for example.

As to whether treasuries would be taking a bath, why would they? There is so much dodgy money going around, where would institutional investors put it if not for treasuries? Besides most investors still want to believe that inflation is under control, but with the money supply having quadrupled since '08 how could that be possible?
 
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