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Are We Headed For A Dollar Doom Loop?
A few weeks ago the 10-year US bond reached 4.67%. The 20-year period was even worse at 5.19%, the highest since 2007.
People always blame it on inflation. I’m not so convinced. Inflation obviously hits short-term bonds, but long-term? It actually makes me angry whenever these pundits are like ‘Oh it’s just X’ or ‘It’s just Y’. What happened was due to a multitude of factors.
First we have the more hawkish Kevin Warsh being appointed to the Fed. Apparently he was supposed to be appointed on the 15th but that was delayed a week.
Interestingly, in his swearing-in speech he mentioned Alan Greenspan a lot. Alan Greenspan is similar to Warsh in many ways. Both have argued that technology facilitates lower inflation. And they are both not a huge fan of traditional economic tools and models.
Although Greenspan also hiked interest rates immediately causing the Black Monday crash. Could Warsh be planning to do the same? Maybe. CPI is at 3.8% and PPI is at 6%, well above the 2% target.
