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This article was first published by me on Talkmarkets: https://talkmarkets.com/content/bonds/bond-vigilantes-liberty-street-fed-collateral-study-and-art-cashin?post=167584&uid=4798

Art Cashin clarified the limits of volatility, as his statement about the 3 percent barrier to 10 year bond yields caused yields to decline. I don't know if the barrier is permanent and an accurate measure, or if breaking it a little bit would not cause chaos. But clearly, owners of stocks and bonds took Cashin seriously, and the 49th tantrum which goes for higher yield, was stopped in its tracks.

Well, I exaggerate. It may just be a few efforts at tantrum attacks on bond yields since 2013. But it is so continually attempted that it seems like 49 tries at it! Here is my take with a little help from Liberty Fed analysts, who say that there is something at work regarding long bonds that does not reflect traditional market moves.

Bond Tantrums and Goldman Sachs

So then, what is going on with all these …

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/bonds/corporate-debt-as-economic-indicator-jesse-colombo?post=167199&uid=4798

Corporate debt as an economic indicator is highlighted by charts provided by Real Investment research, and author Jesse Colombo. The charts are important, because there is a recurring pattern. I have isolated three of the charts that point out late cycle danger lurking for stocks and corporate bonds. This is not an analysis of treasury bonds, which will likely behave differently in a downturn.

We can see that danger lurks as corporate America's debt load soars. However, Year Over Year percentage change has shown that this debt does not always bring on a recession, as we see in the early 1980's in chart 1. Also, debt is high now, but it has been higher with regard to percentage change, seen in chart 1 as well.

The vulnerability has more to do with interest rates impacting this debt. Chart one shows danger, but …

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/bonds/ron-feldmans-fed-secret-and-treasury-bond-behavior?post=165982&uid=4798


Fed Reveals Secret Bank Bond Protection

Before getting into sovereign Treasury Bond behavior, we learned that Minneapolis Fed Vice President Ron Feldman revealed another terrible Fed secret.

Of course, we know that his boss, Fed President Neel Kashkari has said the Fed prunes wages. Now we find out that the Fed refuses to let bank bond holders take losses. In an interview with David Beckworth at the Mercatus Center, Feldman uttered this must read quote:

The only active creditor in the US where we have a record that we do impose losses on them is equity holders. We do treat equity holders differently from fixed income holders, depositors, or bond holders...The thing that’s not credible is that in a crisis, a government is going to want to impose more losses on debt holders. It is one thing for the Fed to act this way. Bu…

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/bonds/kaleckis-end-of-the-business-cycle-bond-wars?post=165494&uid=4798


Michal Kalecki was a distinguished Polish economist who discovered insights into functioning of capitalism and the business cycle. He understood that full employment was anathema to the capitalist system, and that allowing a certain level of unemployment was key to preservation of the capitalist class. This is, of course, why I have warned that the greatest job of the Fed is to prune wages, and slow the economy as full employment approaches.

From Kalecki's point of view, capitalists want to limit government spending except for armaments, which benefit the class. Recent tax cuts have shown that the Republicans, especially, have bloated armament spending while destabilizing the stock and bond markets with volatility, and with tax breaks that cannot easily be paid back. This instability could hasten the demise of the curre…

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/global-markets/attacking-the-everything-bubble-without-killing-the-economy?post=190774&uid=4798

Mish Shedlock is a regular founding contributor to Talkmarkets. His insights are very interesting and his column here is always worth the read. I agree with him on most issues.

But he advocates similar ideas to the Fed line of raising interest rates. I think that advocacy is wrong. I believe that there are other ways of cooling the financial system, according to economist Thomas Palley, without across the board raising of interest rates.

Before discussing that, here is a look at issues that concern Mish. There are at least two reasons Mish thinks the way he does on the need to raising interest rates:

1. Mish does not believe that the Fed should commit to future booms to offset large financial busts because we already have too much asset inflation, and inflating assets more will be more deflationary in…