The shape of things to come: high inflation and interest rates, tanking dollar
We are only at the very beginning of the nutty $10 trillion borrowing binge that the Obama administration and Congress intend to inflict on America and already the effects are becoming apparent. WSJ:
Yields on 10-year Treasury notes have risen 1.5 percentage points this year as bond traders pull back amid worries about rising federal debt. Higher yields will leave the government with higher interest costs and still higher deficits. They could also push up other forms of interest rates, making borrowing more expensive for many people. On Thursday, the Treasury Department is expected to announce an auction of roughly $65 billion in three-year, 10-year and 30-year notes and bonds…
The nonpartisan Congressional Budget Office estimated that Mr. Obama’s budget would leave the deficit above $1 trillion in 2019. Goldman Sachs projected borrowing of $3.25 trillion this fiscal year and a national-debt load of 83% of gross domestic product by the end of the decade — double the current debt-to-GDP ratio…
Obama administration officials acknowledge the interest-rate increases this week have raised pressure to get a deal fast on health-care legislation that emphasizes cost containment. Mr. Orszag posted a message on his blog Friday explaining how a surge in health-care spending now will help lower deficits in the long run. Many are skeptical.
In our view the recent increases in commodity prices are a related phenomenon. IBT: “OPEC Secretary-General Abdalla El-Badri attributed oil’s recent rally to sentiment rather than change in fundamentals. He said that speculation has come back to oil as well as other commodities. However, persistence in demand/supply imbalance was not supportive for prices.” The spending plans of the Obama administration have once again created a friendly environment for those who want to short the dollar by going long commodities, and that is a significant part of the recent run-up in oil and metals prices.
Thank goodness this is beginning — maybe the markets will rescue the country from the absurd (and dangerous) spending and borrowing plans of the administration.