Fed to bond market: "We get it"

[Joanne98]

WASHINGTON (Reuters) - Policy-makers at the U.S. Federal Reserve stepped up their anti-inflation rhetoric this week after a bond market sell-off delivered a sharp reminder that they ignore investors at their peril.

Extreme bond market volatility reflects uncertainty over the inflationary impact of aggressive Fed action to defeat the severe U.S. recession, and could cool the central bank toward further efforts to lift growth by buying up U.S. Treasuries.

Fed Chairman Ben Bernanke tried to placate concerns that the central bank will tolerate higher prices to ensure recovery, while a couple of regional Fed bank chiefs called for an exit strategy from so-called quantitative easing.

"This is a day of reckoning that the Fed would have hoped (would come) a year or two from now," said Gregory Hess, an economics professor at Claremont McKenna College in Claremont, California. "They have done big things and now they face the consequences."

http://www.reuters.com/article/ousiv/idUSN0527980620090605

We're being held hostage by the bond market! You know, all those debts are only pieces of paper. We could tell the bond market to FUCK OFF AND DIE by declaring JUBILEE!

[newinnm]

1. There is a term for doing that...

Its called bankrupcy. Lets do that and see what kinda jubilee it will be.


-nnnm

[Statistical]

6. You are aware that pension plans, retirement accounts, and individuals own federal debt right?

Not only that years ago Congress took all the money out of the SS trust fund and replaced it with federal debt in the form of an IOU.

So single handedly you would cripple SS at the same time you could tell tens of millions of Americans that their retirement saving are gone.

Not to mention the credit rating of federal govt going into default would cause the credit rating for states to skyrocket (as Fed govt is seen as a defacto lender of last resort if states get into trouble).

Carrying cost for state debt as it comes due would likely be in 12%-15% range bankrupting state after state.

To compensate both federal & state govt would need to cut services by 30%-40% at a time when you have tens of millions of retirees with no savings and no income.

Oh Jubilee!

[Mike 03]

2. Yeah, the Fed has been worried about this, and it is happening much faster than they

planned for.

[notesdev]

3. We're hostage

to our own gross financial mismanagement. There was no lack of warning over the decades but it was easier to spend ourselves into bankruptcy than to be responsible.

If we do tell the bond market to blow off, then there will be no more government borrowing - who would lend to a default? - and our federal government shrinks by almost half, overnight. We could do that but the consequences could get pretty ugly. On the bright side, the budget would then be balanced (for the lack of the option to do otherwise).

[Abq_Sarah]

4. We aren't being held hostage

You just can't print a bunch of paper and call it money without something behind it unless you want to roll a wheelbarrow full of $20's down to the grocery store to buy bread and milk. If the treasury wants people to purchase US debt, they have to offer it on terms that are acceptable to the buyers.

[Yupster]

5. Think of it this way

If you could print $ 2 trillion and spend it without anything bad happening, then every president would have done it.

I wonder what President Clinton is thinking looking at a $ 1.8 trillion deficit after working so hard to balance the budget.