Richter Scale

It’s absolutely beautiful outside. I’m driving to work about an hour early because of a monthly management meeting with the owner. I am looking forward to a nice day of weather and heavy customer traffic. We specialize in selling toys, and this weather is made for it. I hear my phone signal that I’ve received a text message. Usually, this is one of my guys telling me he’ll be a little late or something. No big deal.

 At a stop light, I open my phone to discover that it’s from Jen. Hmmm. Interesting, indeed, to be getting a text so early from her. It briefly flashes in my brain that something may be amiss, but I am calmed when I realize she’s just telling me about an interesting article in the Washington Post this morning. It warms my heart to see my ramblings making an impression.  

Earlier this week I sent an email to Jen and Scott about the volcanic rumblings in the Treasury markets and how it’s affecting national mortgage rates. They jumped over a point in one day this week, and I was just mentioning it to them because we (and everyone else in Sebastian county, according to the woman at the abstract company) have recently re-financed at a savings of thousands. 

The Fed’s recent machinations in the Treasury auctions, nicely renamed “Quantitative Easing”, has caused some small problems, and this is just one of them visible to joe public if he cares to pay attention. The story in the Washington Post is one of the first I’ve seen from a mainstream media source that is openly discussing the rumblings going on with our right-minded individuals voted into office by the people.  These officials have recently been enlightened about how inherently wrong it is for one of our country’s institutions (one that does not have to answer to anyone) to be playing with taxpayers’ money. I left out “openly” playing because that’s the huge black eye of a problem. Bernanke and his boys are not publicly disclosing any of their machinations because they aren’t required to by law. This allows them to spend billions, any time they please, to artificially change Wall Street and the markets, trying to steer it in the direction they want so that public perception and consumer confidence (which is regularly measured and reported on Wall Street) doesn't go in the toilet.

   The Treasury auctions held last week ($100 Billion worth of T-Bills) is a perfect example. There was a huge rise in long Treasury yields, 10 and 20 year, that would indicate a shortage of buyers because they are skeptical of the viability of the United States’ long-term ability to pay back debt. Bernanke and the Obama administration is printing money by the truckload, and this will naturally lead to inflation. The math doesn’t lie. 

The US did sell these bonds, and the yields went a little lower on Thursday and Friday, but because of Quantitative Easing, there is a distinct, and very likely, possibility that the Fed is buying the bulk of these Treasuries. Unfortunately, there is no way for traders, or anyone at all outside of Bernanke and the Fed, to know whether these auctions are being supported artificially with our tax dollars. If joe public were to know that all of the T-Bills being purchased in these auctions were not bought by China, Brazil, and Russia, as hoped, it would be a giant red flag for a serious lack of confidence on the part of foreign countries in counting on the United States as the rock solid center of the economic world. 

This would be serious trouble for the dollar (which has also received a significant beat-down this week) and serious inflation for everyone trying to put fuel in their cars and dinner on their tables. Big Trouble on the home front, my friends. I really hope some measures get passed in Congress that make The Fed accountable for what they are doing. Otherwise, we’re going to see the volcanic rumblings like this week turn into Mount St. Helens.

 Here’s the story: Washington Post