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How The Fed Controls The Roughest Bond Bubble Implosion Ever Made

By Warnor Bright    6/25/13

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As a general rule, the Fed can just keep printing cash and investing in Treasuries or useless actions until the end of life. The ones represented by the Fed have already started to figure out that such activities are going to cause severe losses in the long run, so they have begun expressing their points of view publicly.

Less than two weeks ago, Lloyd Blankfein (CEO of Goldman Sachs) has claimed that interest rates are supposed to reach to a normal level quite fast, since 2% quotes can be devastating. A few days ago, John Strumpf (CEO of Wells Fargo) has come out publicly too, only to agree that savers have lost a lot of money in this so called recovery, even if it was not really beneficial.

It looks like such names are actually worried about the savers, but the truth is that they are more concerned about their own private system. If the bond bubbles are allowed to go on with the inflation, there is a huge risk for the control to be entirely lost. At that moment, there are no doubts that a few empires would seriously fall. From some points of view, this is actually the end.

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According to all these names, the Fed is actually responsible for preventing the disorganized reversion. The Fed is supposed to slowly calm down the situation, only for the yields to reach to their regular limits. Therefore, the Fed has not actually worked on this course yet, but it has claimed to do it pretty soon. The 10 year Treasury note has also raised a question mark, since it has the worst value since the summer of 2009. The yields are practically two times higher compared to how they were a year ago. Even the longterm mortgage rates have increased with 0.58% within the last month, leading to a Refinancing Index collapse.

In order to protect this system, there are no doubts that the Fed will try to recommend financial risks through its actions, but this idea will not help the economy advance. The statements are quite confusing, as well as the upcoming plans. However, most specialists agree that the Fed will try to control the bond bubble implosion, even if it does not want it to happen. Instead, its strategy implies creating confusion around, only for the big players to go in two different directions.

Before the Friday close, Jon Hilsenrath was officially dispatched because the stocks kept going down. The Fed is obviously taking him for having a big mouth. However, he claimed that the markets are unable to read the actions of the Federal Reserve. The stocks recovered for a little, while other players stepped in. In the end, this is exactly what the plan is about.

The Fed will obviously try to invest even more time in spreading some uncertainty and confusion, but also to combine problematic times with potentially positive hopes. The general idea is to delay the final result, but also to spread this process over many years. The big players get plenty of time to get back on their feet, while the small ones will deal with the consequences.

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