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That's plain wrong. You don't buy treasury bonds unless you know the interest rate. Even after all the bail outs, all the crisis and despite rising government d

That's plain wrong. You don't buy treasury bonds unless you know the interest rate. Even after all the bail outs, all the crisis and despite rising government debt there is no safer investment. It's just usually not used as the sole investment, but rather the safest position in portfolio...

lesterbuck 14y ago
And "usually" housing prices don't go down in tandem across the country....
adventured 14y ago
That's exactly my point. You can't even remotely earn enough interest on treasuries to offset the destruction in the dollar that is occurring as the Fed generates massive inflation (aka expands the money supply at a record pace). The M2 is expanding at 12%, and the M1 is expanding at 7.5%. You don't have to take my word for it. The destruction has already occurred, and is getting worse. A 5 minute effort on calculating what your dollar will purchase today versus 10 or 15 years ago, proves that. Except now your treasury paper yields almost nada because the Fed is acting to destroy your 'return' by holding rates artificially low while devaluing the dollars you use every day to do so. Treasury paper is as dangerous as holding your money in a Cyprus bank. The next decade is going to be a fiscal disaster for the US. The bill is coming due, and not only can the US not afford to repay its debts ever, but it can't afford any real interest on its debt (4% * $20 trillion = bankrupt US Government). This isn't going to happen in decades, it's happening now, which why the Fed can't raise interest rates, can't ever sell off its holdings, can't stop buying 85%+ of all the US Government debt being issued, and can't stop buying mortgages. Worse yet, they're going to increase their purchases again this year.
- bayesianhorse 14y ago
  The argument about inflation really depends on what you have to do with the money besides putting it into investments, and what other investment options out there. It is still consensus that the bond rate + inflation risk is understood much better than any other asset I can think of. I'm talking about the financial term 'risk' here, not the colloquial one that you are using. In financial terms, you can have a loss without any risk and still be happy about the position afterwards...
  - jrs235 14y ago
    The only true and safe way to stay ahead with the rampant inflation of the money supply is: become a government contractor and get your hands on the money first before it's effects appear in the system. Does that make sense?
- georgecmu 14y ago
  Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. It may be influenced by changes in the money supply, but is not defined by them. What evidence do you have to back up your assertion that "Fed generates massive inflation"?
  - adventured 14y ago
    Inflation is not a general rise in the prices of goods; prices going up is merely one symptom of inflation. Inflation is the expansion of the monetary base. Printing dollars, for example, is inflation. The increase in prices is a result of inflation, and there are numerous effects other than prices going up. It's critical in economics to separate supply & demand of goods causing increases or decreases in prices, from monetary changes. Free market forces are not the same as central bank forces. There's about 200 years of modern economic evidence for how exactly inflation works and how central banks create it. I'll ignore the fact that the Fed has openly admitted it has devalued the dollar by 97% since its founding. I'll also ignore the fact that Bernanke recently said it was the goal of the Fed to generate asset inflation via QE aka debasing the dollar (see real estate skyrocketing 10% again, or 22% in Phoenix (a disaster market recently), see stocks at all time highs again ala 2007). I'll also ignore the fact that Greenspan openly admitted the Fed has the direct ability to increase or decrease inflation, and can cause bubbles or pop them. He of all people should know. It's not an assertion, it's a fact supported by extreme amounts of data. If you increase the monetary base and money supply by hundreds of percent over a relatively short period of time, you're going to see a substantial increase in the price of goods in the currency in question. If you 'print' dollars to buy trillions in mortgages and remove them from the market, you're going to limit supply of housing and cause approximately $3 to $4 trillion worth of inflation in just one year (what's happening right now). Not to mention simultaneously holding down mortgage rates via the government dominated mortgage market, by holding short term and long term interest rates artificially low by buying the paper that influences that. Then when consumers sell their homes, or take home equity loans, and then spend in any manner or buy anything else or loan their money to banks - the inflation gets discharged directly into the economy. This is one simple example, there are countless. If today you have one trillion dollars, and tomorrow the Fed prints another trillion dollars, it's obvious what happens. So not only do I have vast empirical economic proof not only do I have historical evidence for how it all works, not only do I have obvious math theory that is as simple as addition and subtraction, but I have the Fed openly admitting the scale of the inflation it has caused. How many proof articles would you like on the topic?
- zevyoura 14y ago
  > Treasury paper is as dangerous as holding your money in a Cyprus bank. You were making some interesting points, but this kind of hyperbole makes it very difficult to take you seriously.

lesterbuck 14y ago

And "usually" housing prices don't go down in tandem across the country....

adventured 14y ago

That's exactly my point. You can't even remotely earn enough interest on treasuries to offset the destruction in the dollar that is occurring as the Fed generates massive inflation (aka expands the money supply at a record pace). The M2 is expanding at 12%, and the M1 is expanding at 7.5%. You don't have to take my word for it. The destruction has already occurred, and is getting worse. A 5 minute effort on calculating what your dollar will purchase today versus 10 or 15 years ago, proves that. Except now your treasury paper yields almost nada because the Fed is acting to destroy your 'return' by holding rates artificially low while devaluing the dollars you use every day to do so. Treasury paper is as dangerous as holding your money in a Cyprus bank. The next decade is going to be a fiscal disaster for the US. The bill is coming due, and not only can the US not afford to repay its debts ever, but it can't afford any real interest on its debt (4% * $20 trillion = bankrupt US Government). This isn't going to happen in decades, it's happening now, which why the Fed can't raise interest rates, can't ever sell off its holdings, can't stop buying 85%+ of all the US Government debt being issued, and can't stop buying mortgages. Worse yet, they're going to increase their purchases again this year.

bayesianhorse 14y ago
The argument about inflation really depends on what you have to do with the money besides putting it into investments, and what other investment options out there. It is still consensus that the bond rate + inflation risk is understood much better than any other asset I can think of. I'm talking about the financial term 'risk' here, not the colloquial one that you are using. In financial terms, you can have a loss without any risk and still be happy about the position afterwards...
- jrs235 14y ago
  The only true and safe way to stay ahead with the rampant inflation of the money supply is: become a government contractor and get your hands on the money first before it's effects appear in the system. Does that make sense?
georgecmu 14y ago
Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. It may be influenced by changes in the money supply, but is not defined by them. What evidence do you have to back up your assertion that "Fed generates massive inflation"?
- adventured 14y ago
  Inflation is not a general rise in the prices of goods; prices going up is merely one symptom of inflation. Inflation is the expansion of the monetary base. Printing dollars, for example, is inflation. The increase in prices is a result of inflation, and there are numerous effects other than prices going up. It's critical in economics to separate supply & demand of goods causing increases or decreases in prices, from monetary changes. Free market forces are not the same as central bank forces. There's about 200 years of modern economic evidence for how exactly inflation works and how central banks create it. I'll ignore the fact that the Fed has openly admitted it has devalued the dollar by 97% since its founding. I'll also ignore the fact that Bernanke recently said it was the goal of the Fed to generate asset inflation via QE aka debasing the dollar (see real estate skyrocketing 10% again, or 22% in Phoenix (a disaster market recently), see stocks at all time highs again ala 2007). I'll also ignore the fact that Greenspan openly admitted the Fed has the direct ability to increase or decrease inflation, and can cause bubbles or pop them. He of all people should know. It's not an assertion, it's a fact supported by extreme amounts of data. If you increase the monetary base and money supply by hundreds of percent over a relatively short period of time, you're going to see a substantial increase in the price of goods in the currency in question. If you 'print' dollars to buy trillions in mortgages and remove them from the market, you're going to limit supply of housing and cause approximately $3 to $4 trillion worth of inflation in just one year (what's happening right now). Not to mention simultaneously holding down mortgage rates via the government dominated mortgage market, by holding short term and long term interest rates artificially low by buying the paper that influences that. Then when consumers sell their homes, or take home equity loans, and then spend in any manner or buy anything else or loan their money to banks - the inflation gets discharged directly into the economy. This is one simple example, there are countless. If today you have one trillion dollars, and tomorrow the Fed prints another trillion dollars, it's obvious what happens. So not only do I have vast empirical economic proof not only do I have historical evidence for how it all works, not only do I have obvious math theory that is as simple as addition and subtraction, but I have the Fed openly admitting the scale of the inflation it has caused. How many proof articles would you like on the topic?
zevyoura 14y ago
> Treasury paper is as dangerous as holding your money in a Cyprus bank. You were making some interesting points, but this kind of hyperbole makes it very difficult to take you seriously.