Wall Street Journal FOREX Article:
WORLD FOREX: Dollar Continues To Rise On High U.S. Bond Yields
As interests are expected to rise on U.S. financial instruments, the dollar becomes more valuable.
This is double bad news.
Why? Because international money managers move world slush funds to whichever country is paying the highest yield. The demand for dollars necessary to buy dollar-denominated bonds and other financials puts more demand on the dollar; people want them so they can get the higher yield.
This is bad news because a higher dollar makes it harder to export American-produced products and keep jobs and home.
Higher bond yields will be necessary to attract foreign dollars to buy our insanely high and growing debt. That’s what brings the expatriate dollars back home. That also means that as bad as our national debt load is now, it will get worse. The rates paid onT-Bills will go up to attract the money, which will make the interests costs on the debt higher, which will mean either less money in the budget or higher taxes to pay just the new and improved interest on the debt.
This is the other bad news.
This Obama/GOP-negotiated tax deal apparently took barely 24 hours to change the dynamics of the world financial markets.
So now, we’ll lose more jobs and sales overseas as the dollar rises and our goods and services become more expensive AND we’ll pay higher interest rates on the debt we already have plus what we will continue to incur.
I know that some of you reading this know exactly what I mean when I compare this to a revolving credit card for someone who’s living beyond their means. Every months you pay the minimum payment, but every month you borrow more to maintain a lifestyle you really can’t afford, whether the reasons are within your control or not.
Eventually, you reach a tipping point, where you can no longer pay your essential bills AND your minimum payment, and no other credit card will allow you to refinance to a lower promotional rate because you’re obviously tapping out.
Next comes defaults on your debt, because someone is going to have to wait on their payments or get stiffed altogether.
United States Congress, meet your China Bank revolving credit card. Revolving China Bank credit card, meet the United States.
Credit analysts, start your calculators.
Las Vegas, start making odds on when U.S. T-Bills begin to pay the same interest rates as Junk Bonds.
Hyper-inflationary German scenario (God help us), here we come…
