Business Insider's doom and gloom scenarios never convince, because the fatal flaw in the argument is always clearly visible - as pointed out by Robert Happek - who after his completely insightful observation, went off course into an improbable govt conspiracy theory, which is as unlikely as the hyper-inflation argument.
The hyperinflation scenario requires the fed to protect T bonds.Why should they? They can just allow people to sell bonds - rates will rise to the level where people feel comfortable investing in bonds again. End of matter.
The fed can continue to keep short term rates at zero - why should they change that? They will keep it there until the economy and jobs recover. Nothing to do with bond yields.
Long term rates have never been under fed control - they are market determined. Frankly, I never understood why people are buying so much into T bonds and pushing rates down - people are crazy to feel happy with 2.8% return or whatever the rates are now.
The people who will get crushed when the bond rates climb will be the dumb 401K investors who chose bond funds rather than bonds - the smart money will dump bonds quickly before they crash - whereas the average Americans will be wrong footed. Having lost a lot of money in the 2008 stock crash, they fled to "safety" in bonds - but put money in bond funds instead - now they will lose a lot more money - those who got crushed will get crushed again.
Ironic.
If I were a conspiracy theorist like many who have commented here - I would think it was a Wall Street conspiracy to make money from the stupidity of average americans - moving money from the 401Ks into their pockets.
All over again !!!
Anyway, conspiracy and unlikely scenarios aside, at some point, USA will grow again - because unlike Japanese, Americans are not going to save and not spend - Americans work hard and play hard - they wont work hard and give the money to other people - unlike the Japanese.
At that point of growth, expect 10% inflation. Not hyper-inflation.
You can think of the current bond buying as basically being financed by the extremely low US short term rates. Getting money at 0% and investing it at 3%, getting more funds and investing at 2.8%, then 2.4%, then 2% - basically pushing up the price of bonds - and then suddenly dump it. Its like any pump and dump scheme. Its a liquidity fuelled bond bubble which has to burst and will burst soon.
But without hyper-inflation.
In other words, we are witnessing investment bankers get rich from free govt money once again.
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