Well, it’s here. QE3. The third round of stimulus by the federal reserve. They will be purchasing $40 billion of mortgage debt per month for an open-ended number of months.
I think we are seeing the making of a bigger bubble than the dot com bubble or the real estate bubble, a bubble in bonds. It is inevitable in the long run that these stimulus and 0 interest rate policies will cause rapid inflation. When (not if) that happens, the feds only defense will be higher interest rates. The more inflation, the higher interest rates will need to be to curb that inflation and the higher rates go, the lower bond prices will fall.
Don’t make the mistake of thinking that your money is safe in bonds and don’t make the mistake of thinking that we have free markets.
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