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Volcker: Taxes likely to rise eventually to tame deficit

USA_1

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Those long term CDs helped my parents in their retirement. With all of this debt, we might wind up with high interest and relatively low inflation.

I think though that this administration is going to favor inflation. The way to do that with a slack economy will be to devalue the currency. Like is being pushed with the Chinese currency. Look at what has happened to the dollar against the Looney.

Right now I would be thrilled with a long term insured CD paying 7%. I think I would put everything into them, retire and relax.

Interest rates can not go up as long as the FED is giving banks all the money they want at zero % interest.
 

washunut

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Right now I would be thrilled with a long term insured CD paying 7%. I think I would put everything into them, retire and relax.

Interest rates can not go up as long as the FED is giving banks all the money they want at zero % interest.

What I am not sure about is how high the long term rates can be when the Fed holds the ST rates at 0%. That is why I have built a ST bond ladder, putting money into LT bonds just does not seem to be worth the risk.

I would not be comfortable putting a bunch of money into a long term bond or CD because of inflation/ interest rate risk down the road.
 

USA_1

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What I am not sure about is how high the long term rates can be when the Fed holds the ST rates at 0%. That is why I have built a ST bond ladder, putting money into LT bonds just does not seem to be worth the risk.

I would not be comfortable putting a bunch of money into a long term bond or CD because of inflation/ interest rate risk down the road.

I don't worry about inflation so much. I worry more about losing the money I have. Some co-workers 401ks are still down 30-40% from their highs. That loss has a bigger impact and hurts more than inflation.
 

Lord Tammerlain

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What I am not sure about is how high the long term rates can be when the Fed holds the ST rates at 0%. That is why I have built a ST bond ladder, putting money into LT bonds just does not seem to be worth the risk.

I would not be comfortable putting a bunch of money into a long term bond or CD because of inflation/ interest rate risk down the road.

Long term bonds are not a good idea (at least US long term bonds). I would avoid them untill they get to 7-9%


US interest rates at least longer term have no where to go but up. Expect a very steep yield curve for a few years. Should the fed continue with trying to keep long term bond prices low (as it has been buying up debt) it will cause inflation making your LT bonds worth less. Your idea of keeping your bonds in the shorter term area is good and will serve you well.

Even Greek bonds at around 7.5% for a 10 bond is not a particularly good value
 

Lord Tammerlain

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As for currency's

The following currecies will go up vs the USD in my opinion over the next few years

Australian
Euro
Brazilian
South Korean
Malaysian
Various ME countries with plenty of oil

Flat vs USD

Canadian
UK (it may go down actually as it is worse shape then the US)
 

washunut

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As for currency's

The following currecies will go up vs the USD in my opinion over the next few years

Australian
Euro
Brazilian
South Korean
Malaysian
Various ME countries with plenty of oil

Flat vs USD

Canadian
UK (it may go down actually as it is worse shape then the US)

Agree on most. Not sure about the Euro as they are in essentially the same debt mess as we are. Also The Loonie may continue to go higher as the Canadian economy is so natural resource based.
 

washunut

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Long term bonds are not a good idea (at least US long term bonds). I would avoid them untill they get to 7-9%

I will just avoid them and just replace rungs on my ladder as they become due.


US interest rates at least longer term have no where to go but up. Expect a very steep yield curve for a few years. Should the fed continue with trying to keep long term bond prices low (as it has been buying up debt) it will cause inflation making your LT bonds worth less. Your idea of keeping your bonds in the shorter term area is good and will serve you well.

The Fed has said they were going to stop buying mortgages. I hope they stick to that. Inflation is a killer for folks who have retired.

Even Greek bonds at around 7.5% for a 10 bond is not a particularly good value

agreed I would also stay clear on that type of risk.
 

Lord Tammerlain

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Agree on most. Not sure about the Euro as they are in essentially the same debt mess as we are. Also The Loonie may continue to go higher as the Canadian economy is so natural resource based.

The major countries that use the Euro have far lower budget deficits and the Euro zone has a balanced current account. It has been beaten down quite hard so a bounce back is likely.

The loonie is a question mark as much of our trade is directed towards the US. If it wasnt for that I would say it would follow the Austrilian dollar upward
 

washunut

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The major countries that use the Euro have far lower budget deficits and the Euro zone has a balanced current account. It has been beaten down quite hard so a bounce back is likely.

The loonie is a question mark as much of our trade is directed towards the US. If it wasnt for that I would say it would follow the Austrilian dollar upward

The Euro will have the PIIGS to contend with for a while

Perhaps not in the very short term, but I think the looney has a long way to go against the dollar if oil continues strong. I am sure you know better than I the potential of the tarsands.
 
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