Friday, June 05, 2009

More Cause and Effect

What I don't get is that obviously President Obama isn't stupid. He also has some bright lights advising him on the economics front. So the question is doesn't he think that the trillions of spending will have longer term consequences? Or does he believe his priorities in changing how government work supercede what those might might be? Or perhaps most arrogantly he believes he knows better than the markets and that what he is doing will in fact strengthen them?

I don't know - what I do know is this: the further this drags on, the more obvious it becomes the stimulus wasn't about stimulus at all. Further, evidence mounts that the stimulus will end up weighing down the economy in the long run with permanently higher interest rates as the US dollar loses its relevance as a reserve currency. From Glenn Reynolds:

TREASURIES: Exit The Safe Haven. “The 10-year Treasury bond paid a 3.83% yield Friday afternoon, up from 3.6% in the last week of May and a 52-week low of 2.07%. One worry is that higher yields on benchmark government bonds will translate into steeper borrowing costs for home buyers and businesses, besides making the U.S. government’s deficit spending more expensive.”

Related: Interest rates soar on jobs data, putting housing at risk. “The Treasury bond market is in cardiac arrest today over the May employment report: Yields are soaring, dealing another blow to investors who’ve been hiding out in government bonds — and threatening another big jump in mortgage rates.”

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