Tuesday, November 16, 2010

They're Baaaaaccccckkkkkk...

I have talked about the role of the "job market vigilantes" but I have said that we need them as well as the "bond market vigilantes" to really put a brake on destructive government policy. Well, according to Scott Grannis, about as astute an observer that I am aware of, the bond market vigilantes are now officially back in action. I was wrong to focus on profligate spending, or creditworthiness, as the factor that would awaken the BMVs. It is inflation that gets them stirring or maybe the combination of the two. In any event, the BMVs are now calling the shots.


Blogger Richard said...

Hmmm! Apparently that last TIPS auction wasn't such an anomoly after all.

Some of Scott Grannis' commenters seem to have forgotten that markets offer a collective assessment of what is expected to happen... not what is currently happening.

Regardless, what the market is telling us now is that the cost of rolling over all that debt is gonna be a lot higher than anyone at OMB or CBO has forcast.

5:43 PM  
Blogger Richard said...

Incidentally, speaking of CBO, I wonder whether the incoming Speaker of the House will leave "The Most Honest Man in America" at his post as director of CBO.

5:48 PM  
Blogger Donny Baseball said...

Yes, and the Treasury has been selling far too much sub 5 year paper so the impending rollover needs are going to be immense in 2012 and 2013. My prediction for US fiscal health come that time is the same as Clubber Lange's for his match with Rocky Balboa: "Pain".

5:52 PM  

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