Bond investors are no doubt breathing a sigh of relief. Now that investors are waking up to the fact that a recovery is not “around the corner” after all, the yield on 10-year T-Notes is dropping and bond prices are rising again.

As long as investors have an appetite for low-yielding Treasurys (10-year Notes were yielding 3.53% yesterday), the government will have a tough time pushing its “green shoots” fairytale.

We challenge even the best paid of President Obama’s economic spin doctors to find the silver lining in the following two recent data points. This from MoneyMorning.com:

1. Unemployment claims unexpectedly rose yesterday, as the number of US workers filing new claims jumped by 15,000 in the week ended June 20 to a seasonally adjusted 627,000, the Labor Department reported. The four-week moving average of initial claims, a less volatile measure, rose to 617,250 from 616,750, signaling the US job market is stagnant.
2. US gross domestic product (GDP) contracted at a 5.5% annual rate in the first quarter after plunging at a 6.3% pace in the fourth quarter of 2008, the Commerce Department said yesterday (Thursday). That means the US economy just went through its worst eight-month period in more than 60 years, according to MarketWatch. The government last month estimated GDP fell at a 5.7% pace in the quarter ended March 31.

If you in any doubt about the dangers of relying on the mainstream media for your economic and financial information, here’s how the BBC, Britain’s state-sponsored news agency, had this to say about the worst eight-month contraction of the US economy in more than 60 years.

US economy better than expected

The US economy shrank at an annualised rate of 5.5% in the first three months of 2009, better than previously thought, government figures show.

This is pitiful. And it’s clear evidence that governments and mainstream media outlets really do believe that people are too stupid to notice what’s going on in the economy. Don’t be suckered. This kind of nonsense is dangerous: listen to it and you could get wiped out as an investor.

If you want to know why the economy is in the ditch… and ain’t “bouncing back” anytime soon, look no further than this chart. It shows the total level of equity in household real estate from 1952 to 2009. (Hat tip, The Big Picture.)

GM has lost an aggregate $82 billion in the past four years even as it slashed production capacity, nameplate brands – and more than 100,000 U.S. jobs. It needs to cut another 19,000 workers by 2012 to bring its domestic employment down to 72,500 jobs.

GM on Saturday passed a major milestone ahead of a bankruptcy filing planned for today (Monday) as the deadline passed for bondholders to accept an exchange offer brokered by the Obama administration.

As of late Saturday night, GM would not comment on how many investors had tossed in their support for the debt-for-equity swap that would have them surrender $27 billion in corporate bond debt in return for as much as 25% of a restructured GM. However, the company did say this enhanced deal already had the support of investors who held 35% of GM’s bonds. The deadline passed at 5 p.m. Saturday.

Fund managers and analysts told Reuters that that it was possible that this enhanced  bond offer could have attracted a majority of the GM bond investors by the deadline. Under the new offer, bondholders would have a recovery of around 9 cents on the dollar, up from an estimate of zero to 5 cents under the previous offer. GM bondholders last week rejected a proposal that would have given them a 10% stake in a reorganized GM.

“The warrants and the improved capital structure make for an improved recovery for bondholders,” Brian Johnson, an analyst for Barclays Capital PLC (NYSE ADR: BCS), told the news service. “In terms of the bankruptcy process, we expect the likely bondholder assent to smooth the process.”

The United Auto Workers union (UAW) on Friday cleared the way to the bankruptcy filing when it overwhelmingly approved a new labor pact that lets GM slash costs.

GM has struggled in recent years to compete, hurt by its truck and SUV-dominated vehicle line-up and a deep plunge in U.S. vehicle demand.

Market Matters

In the holiday-shortened work week, investors searched for  the tonic needed to escape the “excessive” volatility that still exists in the markets.  How did that cure-all work out?  In three consecutive sessions, the Dow Jones Industrial Average jumped 193, plummeted 173, and finally rebounded 104 points.  Meanwhile, the yield on the 10-year U.S. Treasury, the perceived safe-haven for risk-averse investors, soared by 30 basis points during the week and its declining value prompted many to rethink their “flight-to-quality” strategies.  After the recent talks that Standard & Poor’s Inc. may cut its rating on UK debt, investors began speculating that the mass domestic borrowings (to rescue virtually every industry and near-bankrupt company) will take its toll on US debt ratings as well.  While Moody’s Investors Service Inc. (NYSE: MCO) offered a bit of confidence by proclaiming the Aaa rating remains “stable,” it did leave the door open for a future downgrade. Fortunately, the week’s treasury auctions were generally well-received, though investors remain cautious that demand may subside in the future as the deficit balloons.  Stocks followed bonds for a change as traders unloaded equities on weakness in fixed income, only to buy again after the favorable auctions (among other news).  And the volatility continued.

With its bankruptcy filing, GM is merely taking a step to following in Chrysler LLC’s footsteps. Chrysler hopes to move beyond its own bankruptcy as a judge considers its restructuring via the Fiat SpA (ADR OTC: FIATY) deal.

A Federal Deposit Insurance Corp. (FDIC) report showed that banks earned $7.6 billion in profits in the first quarter, rebounding from the first quarterly loss for the industry in 18 years.  Before executives could award themselves (excessive) bonuses, the report added that the number of institutions considered “problem” climbed from 252 to 302 and said that delinquencies rose across most loan types.

In other corporate news, Microsoft Corp. (Nasdaq: MSFT) is set to launch “Bing,” its upgraded search engine on June 3 and Yahoo! Inc. (Nasdaq: YHOO) remains open to a partnership (after last year’s failed buyout) if offered a “boatload of money.”  Costco Corp.’s (Nasdaq: COST) earnings fell by more than analysts expected; Dell Inc. (Nasdaq: DELL) continued to struggle from a decrease in IT spending; Time Warner Inc. (NYSE: TWX) plans to spin-off AOL by year-end.  The Organization of the Petroleum Exporting Countries (OPEC) met and held production levels steady, though crude prices surged above $66 a barrel for the first time in six months and prices now stand almost twice as high as its mid-February level.

Economically Speaking

A recent survey by the National Association for Business Economics showed that 93% of the respondents believe the recession will end in 2009, with almost 75% of them seeing a third-quarter recovery. Still, most feel the rebound will be slow to develop as unemployment continues to climb (the survey says it will average 9.1% this year).   The results also predict gross domestic product (GDP) to contract by 1.8% in the second quarter, before turning positive (though ever-so-slightly) over the latter six months of the year.  By comparison, the first quarter GDP revision was reported as down 5.7%, a modest rebound from the 6.1% initially released, though weaker than many prior forecasts and still reflective of some pretty dire domestic economic conditions.

Since the consumer accounts for two-thirds of the activity within the economy, analysts point to some favorable sentiment data as further proof that the recession is nearing an end.  In May, the Conference Board said that consumer confidence experienced its best showing in eight months, while the Reuters/U of Michigan Index also posted stronger results.  Renewed activities should be welcome news to retailers and manufacturers alike, some of whom will be counted on to resume hiring over the next few months as they reap some rewards to their bottom lines.

April housing data also highlighted the week’s economic releases as both new home (+0.3%) and existing home sales (+2.9%) posted gains.

However, the inventory of unsold properties continued to climb and the median sales prices fell from already weak levels.  Delinquencies remain on the rise as 12% of all homeowners have fallen behind on their mortgages and foreclosures rates on even the prime borrowers (with decent credit) have surged in recent times.  Even though housing still has a way to go before the “worst of times” officially will be considered over, some early signs of a rebound in activity may be emerging.

Weekly Economic Calendar

Source: Bankrutpcy Will Let General Motors Move Forward

The volume of commercial mortgages at risk of default has quintupled since the beginning of 2008 as a deteriorating economy has made it increasingly difficult for shops and businesses to keep up with their payments.

Special servicers, companies that collect payments from borrowers in distress on behalf of mortgage bond investors, reported $23.7bn of mortgages under their care at the end of the first quarter, according to Fitch Ratings.

That was five times higher than the $4.6bn of mortgages needing special servicing at the end of 2007. Servicers experienced an almost 50 per cent increase in the volume of distressed commercial mortgages in the first quarter alone.

Mortgages for multi-family residential properties suffering from the housing downturn represented the largest share of the troubled loans at 31 per cent, said Fitch. However, mortgages for shops and businesses were catching up, with retail loans at 28 per cent of the distressed pools.

“Retail properties were the first property type to see the effects of declining economic conditions and consumer spending,” said Stephanie Petosa, analyst at Fitch. “[We have] observed an increase in defaults of retail loans and expect them to eventually surpass multi-family as the highest property type concentration.”

Fitch says it expects commercial mortgage defaults to continue to increase this year. At the end of the first quarter, defaults and payments more than 60 days late were at 1.53 per cent of outstanding mortgages. Fitch said they could reach 4 per cent by the end of 2010.

Good luck to banks holding onto junk commercial real estate loans… They better hope the government has deep pockets to cover the coming wipe out.

The U.S. treasury broke two bond sale records this week: Uncle Sam sold $21 billion in 10-year notes Tuesday and another $14 billion in 30-year bonds yesterday — both all-time daily highs.

Both are just small pieces of the expected $2 trillion in U.S. debt sales this year… at least.

But bond investors are finally starting to see the forest for the trees. The yield on those 10 years climbed above 3% this week, the highest level in more than three months.

“Except for U.S. Treasuries, what can you hold?” lamented Luo Ping, the director of China’s Banking Regulatory Commision.

In a speech in New York yesterday, Luo said China will continue to buy and hold U.S. Treasuries. With a giant tone of reservation: “You don’t hold Japanese government bonds or U.K. bonds. U.S. Treasuries are the safe haven. For everyone, including China, it is the only option.

“We hate you guys,” Mr. Luo said, half kidding after his speech. “Once you start issuing $1-2 trillion… we know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do.”

Maybe they should buy gold. The spot price is up $50 since Tuesday, to $950 an ounce. Considering fleeting investor confidence in U.S. paper and all the stock suffering Tuesday, can’t say we’re surprised.

“We are bearish on U.S. government paper in all its forms,” says Bill Bonner. “And here’s why. The latest estimate from Goldman Sachs puts U.S. government borrowing for this fiscal year at $2.5 trillion. Meanwhile, foreigners are showing less and less interest in U.S. debt. They’re switching to short-term paper — bills and notes, which are less vulnerable to inflation and currency declines. And they’re pulling out of U.S. Treasury market generally. The total percentage of U.S. debt owned by foreigners is falling from 60% down to about 40%… a huge drop.

“Either one of two things will happen. If the government funds its deficits honestly — by borrowing from willing lenders — this huge extra demand for credit will force up yields… thereby lowering bond prices. Or if the government resorts to “monetizing the debt” — that is, funding its debt with printing press money — investors will flee bonds, in fear of higher inflation.

“Either way, it will be bad news for bond prices.”

At the same time, the U.S. budget deficit has risen to a record $569 billion in just four months. With the $83 billion January deficit the Treasury reported yesterday, I.O.U.S.A. has already topped its own annual budget deficit record, despite being just four months into the fiscal year.

At the current rate, the 2009 annual budget deficit will exceed $1.7 trillion, almost four times 2008’s record deficit and $500 billion over the Congressional Budget Office’s latest projection.

Stocks managed small gains yesterday after the Geithner debacle on Tuesday. Falling oil prices mired the energy sector, while a lack of data and even fewer earnings surprises gave traders little reason to bounce back from Tuesday’s big loss.

In the end, most major indexes inched up less than 1%. The Dow ended the day at 7,939. The S&P settled in around 833.

“I’m looking for a break above the intermediate range on the S&P at 878” notes options trader Wayne Burritt. “That should signal a move to the upside of the range. That means a run to 944 — the very top of this large trading channel — could easily be in the cards.

“In spite of a ton of terrible fundamental news, the stock market is holding onto its base. That shows uncommon resilience and, in the near term, is bullish for stocks.

“That said, it’s also not time to kid ourselves. While the market should continue to bottom out in the 800 area for some time, it’s not going to really break out to the upside until some solid fundamental data begin to show improvement.

“Remember, the stock market tends to be a leading indicator of where the economy is headed. So we’re not looking for every data point to turn to the upside. We just need a few here and there, and then investors should begin buying with more conviction.

“Specifically, I’d like to see some good news out of the housing and jobs front.”

Maybe we can find some good news in the mortgage market.

Ummn… no. Despite historically low mortgage rates, mortgages applications have plummeted to an eight-year low.

Applications fell 25% last week alone, the Mortgage Bankers Association reports. According to the group, the recent acceleration in unemployment is partially to blame. But mostly, consumers know the government is going to keep pushing rates lower.

Today, the national average for a 30-year fixed is 5.19%. But the Fed and Treasury have vowed to keep defibrillating until the rate hits 4.5%.

OK, how about on the foreclosure front? The U.S. foreclosure rate improved in January. “Only” 274,399 foreclosure filings hit the books in January, down 10% from the month before.

Wait… what’s this? According to RealtyTrac, most of decline was due to a moratorium on foreclosures at Fannie Mae and Freddie Mac. Ah, we see the logic. If you don’t allow foreclosures to take place, the problem will just go away. Impeccable.

Bummer. Foreclosures were still up 18% annually. The trend remains.

Jobs? Any good news there?

The number of continuing claims for unemployment insurance hit another record high today, says the Labor Department. A record 4.8 million people were sucking the government teat in the last week of January. New claims did come off their recent 26-year high, down 8,000 to 623,000 claims.

U.S. retail sales perked up 1%, the first increase in retail activity in six months. That’s good news, right? Darn. Still no… the majority of the retail bump was due to higher gas prices throughout January.

Geez. Can’t a brother catch a break?

Well, at least the IPO dry spell may be over. Thanks to:

Baby formula…?

Bristol-Myers Squibb spun off its infant formula maker Mead Johnson Nutrition in a surprisingly successful IPO yesterday. The company raised $720 million and sold 5 million more shares than it anticipated in the first successful float since November… the most lucrative since April 2008.

Three other companies are set to go public this week. Mead’s float is hardly an all-clear signal to the IPO world… so we’ll see how it goes.

Even good news is bad news today. A better-than-expected supply report from the U.S. Energy Dept. sent crude oil straight to the woodshed yesterday. At $35 this morning, the light sweet stuff is down to a three-week low.

Elsewhere in the resource world, China’s state-owned aluminum producer has closed its $19 billion deal with Rio Tinto (RTP). The company, Chinalco, could control as much as 18% of Rio as a result.

Here’s an interesting detail of imploding economy: Over 3,000 cars currently sitting abandoned in the Dubai Airport.

Apparently, thousands more rest ownerless in garages across the city.

Foreign workers make up 90% of Dubai’s population. But the government, says The New York Times, is canceling 1,500 work visas every day. Over 50,000 were nixed in January alone — up 86% from January 2008.

It’s a crime in Dubai to not pay your bills… so fearing imprisonment, leagues of unemployed are buying one-way tickets out of Dubai and leaving everything they can’t fit in a suitcase — cars included.

(Side note: The Dubai government is trying to save face by passing a law forbidding the media to report anything damaging to its reputation, punishable with fines up to $272,000.)

“You guys are really getting out of touch,” insists a reader. “Why not ask Rush to comment? Either that or state clearly that you are RNC minions! That would be about as stupid as some of Tuesday’s comments. Did any of you guys ever work a real labor job in your lives?

“Let’s try an experiment. Have any of you ever talked to your grandfathers or great-grandfathers about why so many of them voted Democrat from 1932-1952? Geez, guys, give them a break. If the New Deal was such a great failure, as you allege, why did the vast majority of Americans vote Democrat for so many years? And why did America go into such mourning when FDR died? And why did the standard of living for the average American make its greatest increases ever during the Democratic administrations since 1929.

“Another fact you keep overlooking: Since 1945, annual gains during Democratic administrations: 10.6%; average gains during Republican administrations: about 6% (Fidelity Investments quarterly, January 2009). Being the economic and investment geniuses that you are supposed to be, why do you keep spouting such RNC drivel?”

The 5: Huh? The quote we ran Tuesday about the New Deal amounting to futile spending, massive debt accumulation and no impact on unemployment was testimony of one of its chief architects before the House Ways and Means Committee in 1939.

But more power to you, eh? If you’re investing according to which party is occupying the Oval Office and citing Fidelity as your source… good luck. You don’t need The 5 Min. Forecast.

“All the reckless spending your government is doing,” writes a Canadian reader, “and the inflation it’s going to create is going to have dire consequences on the rest of the world too. Just like the dire consequences the rest of the world is suffering now due to the U.S. housing and mortgage debacle.

“Seems the underlying cause of these problems is the political games that go on to win popular support. Your politicians and, in fact, all politicians in democratic countries will do anything, say anything and destroy anything to get into office and stay there.

“Almost makes you wonder if we would all be better off being ruled by a benevolent dictator who could just do the right thing and not worry about what the average voter thinks about it.”

The 5: Hmmn… benevolent dictator. Honest politician. Military intelligence. We’re fans of oxymorons too. (Emphasis on “moron.”)

Cheers, eh?

Source: Bond Bubble, Deficit Record, Trading Signals, Dubai in Danger and More!

How do you measure these things? In yields. This, by the way, is how you’ll know the bubble is popping. When that happens (bond yields rise like a rocket ship) it’s going to unleash financial chaos. But for now, the bubble just keeps on getting bigger and yields on short-term U.S. bonds keep approaching-and even reaching-zero.

“The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent,” reports Bloomberg. It’s, “the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.”

How do you think that conversation goes?

“Thirty billion you say? For four weeks? And you’ll pay me how much interest?”

“Nothing.”

“I’ll take it!”

“If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56,” reports Daniel Kruger.

Yes. That’s how much investors currently prefer government backed bonds to equities at the moment. It implies there will be hardly any inflation at all over the next yen years. But that notion should make you spew milk through your nose as you laugh, unless you’re unfamiliar with the growth in the global monetary base. If so, let us remedy that.

Source: Federal Reserve Bank of St. Louis

You can see that in the U.S. alone the adjusted monetary base is…growing. So why isn’t the increase in the monetary base showing up in the kind of inflation that would terrify bond investors and lead to a rebound in commodity prices and equities? That’s another question we got last night.

The answer is that so far, the huge liquidity injections have been quarantined in the financial sector, mostly on bank balance sheets, or on deposits by banks at the Federal Reserve and other central banks. In other words, all the new money is going into bonds and central bank accounts, not into new business or consumer lending.

Put another way, the quantity of money is increasing, but its velocity is not. That’s because the new money isn’t getting into the hands of people who are just itching to spend it. But it will soon enough. And when it does, look for bond yields to rise and the great inflation to begin. Also, televisions and hookers.

“I think this will be the greatest time in my life to buy stocks at these prices. I just wish I had more capital,” said one of the attendees at the Doomer’s Ball last night on Southbank. We heard this sentiment time and again over the course of the evening. And there is no doubt that the valuations are good.

There is doubt, however, about what the Australian resource sector will look like in a world where capital is scarcer. Will it lead to a contraction in the number of viable firms? Is the credit crunch like a meteor strike that kills all the giant reptiles that fail to adapt to the new conditions? If it does, there will be a huge survivor bias favouring the stocks that remain.

But there was also some anxiety about further falls in stocks, especially the longer the bar was open at the Ball. One reader is forecasting another 20% fall on the ASX before the lows are in. In fact, if the All Ords reaches the 2003 lows (2,673) it’s a decline of 24% from today’s levels. If it overshoots that low-as markets tend to do when they correct-you’re looking at a thirty percent fall from current levels.

If you treat it as a thought experiment and ask yourself what would have to happen for the ASX to fall that much, you get some alarming possibilities. The liquidation of Oz Minerals? The dismemberment of Rio Tinto? The fall of a major investment bank or leveraged institution?

Or perhaps it’s something simpler: more falling prices for commodities. That’s what the World Bank seems to think anyway. As reported in the FT, the World Bank’s Global Economic Prospects report says the commodities boom has, “come to an end.” It adds that, “Over the longer run, the price of extracted commodities should fall.” It reckons slower population and income growth will contribute to slower resource demand growth.

Naturally, this is diametrically opposed to the logic of the boom that began in 1999. Then, you had 200 years of falling real prices for tangible goods seemingly reverse itself, mostly because of growth in global population and per capita income. So which thesis is right?

Well you know what we think. We think the Money Migration is the long-term transfer of the world’s wealth from the debt-based consumption economies of the West to the world’s savers and producers, roughly in the “East.” This certainly favours Aussie resources for at least a generation.

But the migration has been massively disrupted by the credit crisis, which is really just an epic attempt by the U.S. and other English-speaking economies to avoid their Day of Reckoning. But don’t you worry. That day is coming. It’s just taking longer than we originally thought. Ben Bernanke is a creative man. And he’s desperate too.

But why don’t we ask China what it thinks? After all, it’s a pretty important party to this discussion. China? What do you think? Hello China. Are you there?

Hmm. China is not taking our calls. Maybe that’s because some Chinese firms are too busy looking for ways to take advantage of the current situation by securing long-term supplies to resources at lower market prices. And maybe actions speak a lot louder than words about Chinese desire for Aussie resources.

“Shenzhen Zhongjin Lingnan Nonfemet Co., China’s fourth-biggest zinc producer by output, said it agreed to acquire a 50.1 percent stake in Australian miner Perilya Ltd. through a private placement,” reports Bloomberg. And Forbes reports that Chinese steel-makers are set to push for a major reduction in iron ore prices to reflect the fall in global steel prices.

The average price in October for a metric ton of iron ore fines, according to Forbes, was $US90.60. But Chinese steel makers reckon that with steel prices back at 1994 levels, iron ore prices should roll back to. In 1994, a metric ton of fines was US$20.40.

A lot has changed since 1994. Supply of ore is up. Demand is up too. But costs for resource producers are way up too. It’s unlikely the steel-makers are going to get a price cut that large. And if they do, it will put some smaller ore producers under enormous pressure (even harder to with stand if you don’t have access to credit).

Where are we then? A year ago BHP held the whip hand and chased Rio in a dream of grand ambition. Now BHP is reconsidering its strategy. Rio is reeling. And pricing power has switched back to resource consumers in China, who are eager to use the whip as well, it appears. There’s been a lot of whipping going on, hasn’t there? More on what it means tomorrow.

Finally, yes. We too saw the reports circulating that the International Monetary Fund is getting ready to dump a bunch of gold on the market. So far, we haven’t found anything to substantiate them. We’re looking around, and will report back on what Diggers and Drillers editor Al Robinson digs up as well. Until then…

Source: The World Bank Goes Nuclear on Commodities

I said out loud to the family, “This is interesting news! Bloomberg.com says, ‘The U.S. government’s borrowing needs will almost double to $2 trillion this fiscal year, prompting the Treasury to revive three-year notes and hold more frequent sales of 10- and 30-year debt, according to Goldman Sachs Group Inc. (NYSE:GS)’”

I forced a wooden smile onto my face as I stood up and slowly – so as not to draw attention to myself – started walking towards the kitchen so as to run out of the back door, bolting like a scared little coward to the Mogambo Secret Bunker Of Security (MSBOS) so that I could frantically lock myself in, throw a couple of security systems to the “Fully Armed” position, and clutch my teddy bear tightly to my chest until I finally settled down.

Normally, this would be catastrophic, as that much money added to the money supply would send inflation raging to the moon. But these days, so much money is being lost that even this $2 trillion is not enough to make bond investors wake up out of their fearful trance and demand higher yields in the face of impending inflation, and these bond buyer guys are real idiots, accepting about 4% as a yield on a 30-year bond! Hahahaha! Morons!

In fact, I assume that bond buyers are all drug addicts who are not aware of what they are doing, morons who are not aware of what they are doing, or grubby slicksters who are buying them on behalf of drug addicts and morons! Hahaha!

Bill Bonner here at The Daily Reckoning is apparently not ready to ascribe to my new Mogambo Drug Addicts And Moron Bond Theory (MDAAMBT), but seems more horrified by how much money has been lost, as “Stock markets around the world have deflated by about $10 trillion. U.S. housing has deflated by about $5 trillion”, and I seem to recall that the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past year or so.

And as insane as all that seems, it is destined to get a lot more insane, as we can infer from a Wall Street Journal article titled “Two-Year Yield (If You Can Call It That) Tilts Lower”, which refers to the ludicrously low yield on government bonds these days with a humorous degree of surprised disbelief.

The article notes, “Last week, the Fed cuts its fed-funds target rate to 1%. Then, the two-year yield touched a historical low of 1.06%”, which is so low that I cannot stop myself from laughing at any moron buying a government bond and paying such a high price for it that the imputed yield is one lousy percent!

Hell, the government’s new and “official” GDP deflator (the amount of inflation in prices that must be wrung from raw GDP data to produce “real” GDP) just jumped to an annual rate of 4.2%! Just how stupid do you have to be to lock up your money for two years in order to get $1.08 per hundred dollars, while you lost $4.20 per hundred in buying power? Hahaha! Morons!

Well, as bizarre as that is, it is going to get even MORE bizarre, as the WSJ article went on to say that rate cuts by the Fed are just getting started, and that “HSBC (NYSE:HBC) economists expect the Fed to trim the target rate to zero by the end of June”! What? An interest rate of literally zero? Zero! Hahahaha! The mark of the truly, truly desperate!

And, even more startling, “Credit Suisse predicts the two-year yield will drop to 1% by the end of the year and dive to 0.5% by the first quarter of 2009″, which is such insanely low yield in light of the sheer amounts of money that the central banks of the world are suddenly creating, and promise to keep creating, that you involuntarily leap atop your desk and howl like a wounded wolf out on the lone prairie, going “OwwwooOOOOoooo!”, pausing only to scratch a few fleas while everyone around you is yelling at you to shut up, and then you snarl at them.

In short, I’m insane, and everybody is insane for ever believing that the morons at the Federal Reserve and their childishly-simplistic, brain-dead ilk that infest the majority of the nation’s universities know what they are talking about, when their stupid neo-Keynesian, equation-driven “econometric” stupidities have failed so miserably!

Perhaps Sam Mathid in his essay at 321Gold.com says it best when he notes that “Nowhere is there reference to prior criminality and stupidity on such a grand scale. There is no historical precedent.”

This would usually lead me to a long harangue about how you should be buying gold, silver and oil at these low, low prices in response to such monetary and fiscal outrages, but it is late, I am tired, I already have plenty of each.

And if you, too, have plenty of each, then relax, as you have nothing to worry about, and you should go to bed and get a good night’s sleep, too.

And if you do not likewise have plenty of each, then while I am not in the mood to call you a halfwit lowlife ignorant moron who deserves economic death for not having plenty of each, consider yourself enlightened as to your true status, and tremble.

Source: Wounded Wolves on the Financial Prairie