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Inflation

Laodicean60

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The issue of inflation affects everyone in our country and interest rates are going up again maybe we will have the 70s-style inflation. Now I get to feel what my parents went through. I'm afraid this might be a future black swan event because banks are failing even though the Fed has created some tools to help banks.

 

Laodicean60

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Richard T

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This rise in the 10-year bond yield will make it more expensive to buy a home. Could be a possibility the bond market is pricing in Trump's tariffs.

A good article. I will share my experience. I bought a few bonds when long term interest rates were just over 3%. Depending on the length, I have some bonds where a 1,000 investment is now off 400 dollars. I has never seen such a loss in bonds, I was pretty new in this area. So will I ever buy a long bond at a low interest rate again? Absolutely not. I also will not loan short-term money out at 2% or less either. I think others are thinking similar things. The quantitative easing the Federal Reserve performed before and during covid was an event that should never occur again. The result of those abnormally low rates for so long and the supply of money expanding will not be tolerated by investors. The article said that many feel the GOP will not get the deficits under control. That is likely right and the result is going to be investors wanting a real return on their money. With inflation at 3% a 20 year government bond at 5% or even higher seems quite reasonable. Even a ten year bond now at around 4.3 % is not worth to many because inflation could easily go over that and the investor loses money. So the US Fed has hit a wall. Their unwillingness to raise fast and far enough, their dovish talk for the election (I presume) has left them no room but to accept what investors will do. Their days of engineering inflation are over for some time unless there is substantial need and inflation goes to double digits then. Game over for them.
 
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