Tuesday, January 14, 2014

Rising Interest Rates Are Going to Ripe Through the Economy

The Fed stopped the yield on the 10-year T-note from rising above 3% in September, but I don’t think the central planners and market interventionists at the Fed can stop what now looks like a locomotive building up a head of steam. The long-term trend that had been leading to lower yields changed back in May. Investors are selling long-term paper. The writing is on the wall, and it says higher inflation is coming.

It seems pretty likely that rising interest rates are going to rip through the economy and global financial markets like a tsunami with damaging consequences. Rising interest rates could well be the most important factor impacting domestic as well global markets in 2014.

The other major disruptive force in 2014 is probably going to come from Japan. The so-called Abenomics program, named after its prime minister, is failing. Inflation is rising in Japan, but wages and economic activity are not benefiting from the Bank of Japan’s money printing. Earlier today Bloomberg reported that consumer prices in Japan are rising 5-times faster than wages. Japanese consumers are being squeezed, just like what is happening to US consumers and indeed, most countries today.

- James Turk via King World News: