June 9, 2009 10:11 AM
Naked Capitalism has a great summary today of the conundrum we are in. On the one hand, the need to encourage shifts toward risky assets requires relatively low rates of return on Treasuries. On the other hand, the need to finance huge deficits requires relatively high rates of return on Treasuries. Either the deficits have to go down or, relative to the price of Treasuries, risky asset prices (stocks) have to go down. Which will it be?
More on this topic
(What's this?)
Demand for Treasury securities is still high
(Credit Writedowns, 7/6/09)
Treasuries Rallying: How Long Can it Last?
(Expected Returns, 7/11/09)
T2 Partners: You Don’t Stand a Chance in Today Market
(Contrarian Profits, 7/10/09)
Treasuries are getting crushed
(Credit Writedowns, 4/30/09)
The odds of this administration reducing deficits in any substantial fashion are slim to none. Stocks are going to fall.
The treasury is already trying to get TARP money that is going to paid back put back into the TARP fund…rather than using it for what the original legislation stated that it should be use for: Paying down the national deficit.