I've Wondered Why Bonds Defied Inflation Logic... now we know

comintel · Oct 12, 2008

Quote from Pasternak:

Commodities have given us some short term relief now that they have fallen sharply. But the central banks all over the world are now printing money. They have literally decided to avoid a "recession" by all means by printing money. This increase in money supply will sooner or later turn into some serious inflation. Yields in government bonds have to increase and subsequently fall in value.

Looking at long term trends it is obvious that an increase in money supply leads to inflation. The US now have 5% inflation and FED have 1,5%. Really scary to me. The real problem all over the Western world is the low saving rate.

I live in Norway and we have a Y/Y inflation now running at 5,5%, the highest in 20 years.

By lowering the interest now it really gets scary some years ahead. I have saved money over the years and I'm really scared now. I will by some real esate in the next year to protect me from rising prices.
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Good points but I think that the money supply rate of growth has dropped precipitously for now because there is little lending going on.

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I've Wondered Why Bonds Defied Inflation Logic... now we know

comintel