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The evidence of the Fed’s colossal policy failure is as clear as it is incontrovertible …
* Earlier today, the yield on the 30-year bond spiked to 4.53 percent. That’s the highest in seven months.
* Five-year Treasury rates just breached 2 percent, DOUBLE what they were only six weeks ago.
* Municipal bonds have gotten crushed, suffering the biggest rout since the credit crisis of 2008, while mortgage rates have surged.
* Then there’s this: The spread, or difference, between 2-year yields and 30-year yields just blew out to 388 basis points. That’s the highest ever!
It’s a crystal clear indicator that bond investors are deadly afraid of the future consequences of the Fed’s reckless easy-money policy — and Washington’s out-of-control borrow and spend bonanza!
Look, Ben Bernanke pledged to LOWER interest rates by throwing $600 billion of newly printed money at the bond market. Instead rates have done nothing but surge for home mortgages … thousands of cities, towns, and states … even Uncle Sam himself!
The Fed’s apologists — former Fed economists, Keynesian acolytes, and the like — are out in full force trying to make excuses for Bernanke. But the cold, hard facts simply can’t be denied.
The Fed’s QE2 policy is proving to be just as big a blunder as the late-1990s easy money policy that helped fuel the dot-com bubble … and the early 2000s easy money policy that helped inflate the biggest housing bubble in world history.
It’s especially dangerous at a time when inflation indicators are heating up worldwide. We just learned that producer prices jumped 0.8 percent in November, the biggest rise in eight months. Crude oil recently tagged $90 a barrel, the highest in two years, while gold is going for around $1,400 an ounce, the highest ever.
Best wishes,
Mike
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But some economists are very optimistic about the outlook for U.S. growth next year and they see stronger expansion in the first half of 2011, with growth picking up speed as the year progresses. Some predictions also say that GDP will rise 3%. So the Fed’s actions may at least bring some positive results in these areas.