"So, what do you think? Should the Fed continue to fuel the fire or perhaps start to think about tapering its record-setting levels of economic stimulus? Should the Fed, in other words, continue to manipulate bond prices lower by continuing to sop up more than half of all US treasuries in order to maintain the illusion of a bond market that sees no inflation coming? Clearly anyone thinking bond prices have anything to say about inflation in today’s world is oblivious to how the Fed has completely destroyed price discovery in bonds by owning the market as its biggest whale with a heavy tale on the scale.
"What surprises me are the number of people who know the Fed is soaking up the bond market who continue to think bond yields convey anything. It’s impossible to buy more than half of a market and not be the price-setter. (Which also makes you the yield-setter on bonds.) We all know, the Fed owns the bond market, especially in government bonds. Continually hosing up $80 billion in US treasuries across the maturity spectrum very month, assures yields will stay low in order to keep government debt affordable. Because buying bonds is how the Fed achieves its target interest rates, bond yields will stay where the Fed is setting them until the Fed decides it absolutely must raise interest rates to curb inflation, which recklessly assures one fierce inflation fight because the Fed has already waited too long."~ David Haggith, from his post 'Inflation Growing More Persistent'
[Pics from David Haggith's Great Recession Blog]
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