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For anyone old enough to remember, let’s hope the boys are back in town. For anyone born after, say 1980, here is today’s history lesson:

As Paul Volcker was choking out the ravages of inflation, beginning with 1979-1980, the Prime Rate (remember that) was 21.5%, it started an old fashioned, 4-decade decline on interest rates. The stagflation of the Carter Era was killing the economy in every possible way. So America took it’s painful medicine in hopes of a better future. Guess what? It worked. Short term pain, long term gain.

Fast forward to today and no one, the Fed, Treasury, the DC talking heads, can allow a little short term pain, for long term gain. Our current/world’s high wire act of ultra low and even negative rates ($17 trillion+) to reflate world economies, continues unabated. Wisdom screams for normalized rates; But no one let’s it happen.

Well, during the Greenspan Era, a small, but powerful cadre of traders took matters into their own hands. As ‘Helicopter Ben’ dropped copious amounts of money into the market, this cadre managed to push UP interest rates. A classic example of ‘checks and balances’. Don’t look now, but interest rates are heading north, no thanks to the Fed. Perhaps the bond vigilantes are riding back to the rescue.

Greg Zandlo

Greg Zandlo

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