Treasury bonds fell like a rock today despite the Fed buying $7.3B in bonds and in fact investors were selling everything in all markets and prices fell as the dollar strengthened against the Euro. This is reported in scary terms like the Fed is ineffectual but its too early to tell. The whole purpose is to shake money loose that is sitting in corporate money bins but the sell off today did just the opposite as investors were selling and staying in cash.
If selling continues the risk increases that deflation will set in and panic selling would drive down prices of everything. Deflation makes repaying debt impossible and is what made the last Great Depression so difficult to overcome. Lower prices sound great but deflation drives income down even faster than prices. People with cash assume they can make a killing like the people who are buying McMansions for 30 cents on the dollar. But if prices don’t rebound your investment becomes just as worthless as it was for the guy who paid the original price and lost it when his income dried up.
The Wall Street bankers and corporate predators however will buy assets that make money in themselves. This works especially well if you can create yourself a monopoly and then you don’t have to compete on price anymore. That’s why anybody who thinks deflation is going to be a good deal is kidding themselves. You’ll find your income is down but the cost of essentials will continue to go up driving down your standard of living, assuming you still have a job.
I’m personally hoping the Fed is able to make this work but I’m not confident. Guiding an economy with monetary policy is like steering a ship by firing broadsides. It can work but it raises hell with your port city.
The corporate media is painting Obama’s trip to the G-20 as a complete failure but Obama can’t do miracles. This same corporate media spread the lies that allowed the dismantling of Alexander Hamilton’s manufacturing and trade policies after 200 years of incredible success. Now they are cheerleading for the dismantling of the New Deal on the pretense that it is a failure after 70 years of success.