Treasury Bubble Follow-Up

A second article published by Bloomberg solidifies some of the opinions and positions on the recent drop of rates to near zero percent levels and what effect it’s having in creating and sustaining a bubble in Treasuries.

Some relevant quotes of the article:

“The flight out of Treasuries is something that will be breathtaking.” -  Mitchell Stapley

Treasuries have “absolutely” entered a bubble, said David Brownlee, who oversees $15 billion as head of fixed income at Sentinel Asset Management in Montpelier, Vermont. “There is very little rationality in my mind to bills trading at zero.”

Once the ‘rationality’ resumes and investors look for more than an investment that holds it’s value in light of deflation, and indeed when inflation begins anew… Treasury bonds will be dropped as fast as gravity will take them. When that happens it will only serve to increase the rate of inflation as investors move out of the dollar.

As a follow up to a question previously asked in another post about “who” is purchasing the Treasuries, it appears to be financial institutions and individual investors.

“Hunger for Treasuries increased as financial companies reported $984 billion of losses and writedowns related to the collapse of subprime mortgages since the start of 2007.”

But that analysis is not by any stretch complete, just what jumped out to me while i read the article. I will post more as i do some more focused research.

For some brief commentary on how a Treasury bond bubble is a sign of coming inflation check out my article here.

Failure of the State

The state of New Hampshire, where i live, has run out of money. So much so that it is suspending certain trials to save on jury stipends. Really?

Granted we pay no sales tax, but we have high property taxes and our liquor commission makes a killing of a monopoly of booze sales. But regardless of the money coming in… how is our state failing to budget for something like COURTS?

Bureaucracy… inefficiency, in something as sacred to the possession of government as the rule of law, it fails. Our government can’t afford to be just. Figures.