Bianco & Biderman On Bonds And deBasement

Tyler Durden's picture

James Bianco plays straight-man to Charles Biderman in this extended (and admittedly audio-challenged) discussion of the reality behind money printing, inflation, and the US Treasury market. Following our discussion of the deficit earlier, it seemed appropriate to listen to this back-and-forth as Bianco addresses who is really buying US Treasuries, how 'money' is created by the Fed for the banks, and where inflation is leaking into the system. "The day the Fed admits there is an inflation problem is the day they are too late" is how they summarize the temporary/transitory verbiage that the Fed needs to keep using to placate the masses. Gold (and TIPS) remain their preferred strategy as Bianco argues that putting the 'inflation' threat in context is critical - this is not about 14/15% comparisons, this is about investor expectation that we get 3% inflation with the Fed at ZIRP and intending to keep printing money - which is just as toxic. The two end with an interesting conversation on the simultaneous debt deflation and price inflation and the importance of not comparing either to their extremes by way of shrugging off concerns.


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Dr. Engali's picture

Thank goodness the S&P is back above 1400. I was getting scared there for a moment.

Jason T's picture

I thought the 3 big buyers of the Tresurys were BOJ, Bank of England and Fed .. and that China was a net seller?  They don't want the Ben confetti from Washington.

The trend is your friend's picture

Debt is Money so what difference does it make

Vince Clortho's picture

So, the more Debt the Better!  I think you are really onto something.

Have you ever considered running for office?

kito's picture

tyler is on fire today, pumping them out faster than we can read them...........................

Dr. Engali's picture

I was thinking the same thing.

citta vritti's picture

lucky this is an audio one :-) 

Sudden Debt's picture

Nice... Your increase the money supply with what?... 25% a year? And expect 3% inflation?

cjbosk's picture

Still in the Rosie camp, no velocity of money, no return to housing and no wage inflation in sight.  Tought to get inflation (beyond headline) with the aforementioned stats.

Libertarian777's picture

Man are you smoking the bernake crack pipe or what.
1. Price inflation is the LAST thing you see. It's like how someone lives with HIV for years with no symptoms, then shows lots of sores and that once full blown AIDS has developed. By then it's too late.
2. Inflation, headline, pce, CPI etc are all manipulated. Using CPI-U as was calculated in the late 1970's Inflation is north of 9% already, monetary velocity be damned.
3. What Austrians hate about inflating the money supply is, even ignoring the price impacts that occur later, it is who gets first use of the money that benefits most. They get to acquire assets on the (relative) cheap, before the price explosion. It's akin to a counterfeiter who gets to debase a gold bar and sell it at full value and sell the gold he cutout of it. Eventually his counterfeiting will be discovered, but until such time he is doubling his gold at the expense of the market.
4. The damn gun is so fucking loaded now with powder, if monetary velocity increased just slightly the 'virtuous circle' will result in hyperinflation. And bernake is powerless. Think he has the balls to raise interest rates to 6% and destroy the federal budget (since the entire budget would practically be consumed with interest payments, soc sec and Medicare alone)? If it rose to 19% like in the late 70's the entire federal income wouldn't even cover the interest cost. And for the record, the amount that has to get rolled over every year means interest rate increases will be felt almost immediately in the federal budget.

Just my 2,000,000,000,000c