December 4, 2010
During the Reagan administration’s experiment with supply-side economics, the United States budget deficit swelled and bond buyers were appalled. They punished the government by pushing down the price of Treasuries.
Ed Yardeni, then an economist with Prudential-Bache Securities, dubbed the informal posse of outraged investors “the bond vigilantes,” writing in 1983: “If the fiscal and monetary authorities won’t regulate the economy, the bond investor will.”
Now an independent economist and market strategist, Mr. Yardeni says that over the last few years, the American vigilantes have been asleep at the switch — lulled by the Federal Reserve’s seductive monetary policies. While the budget deficit has mushroomed to previously unimaginable, $1 trillion-plus dimensions, bond traders have been buying Treasuries with gusto, keeping prices rich and yields extremely low.
But in Europe, where a series of credit crises have sent the euro plummeting, the situation is quite different. There, he says, “the bond vigilantes are very, very active.”
More
No comments:
Post a Comment