by Bill Bonner, Daily Reckoning.com.au:
Ben Bernanke is losing control. He desperately wants inflation. He’s getting deflation instead. He wants low interest rates; yet rates are rising.
Bernanke is now getting the worst kind of deflation — sluggish price increases against a backdrop of rising interest rates. Consumer prices are rising at their slowest pace in 53 years. And as PIMCO’s Bill Gross says, it looks as though the long bull market in bonds, which began 30 years ago, is finally over. Yields are rising. The Federal Reserve’s borrowing costs are going up.
This is the exact opposite of what the Federal Reserve wants…and needs. Its strategy is to hold interest rates down while it pushes up consumer and asset prices. This would make possible a gradual growth in GDP while the real value of debt was whittled away by inflation. Then it could ‘taper’ its QE.
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