Death, taxes and easy money

Most European bond markets remain under pressure again. Whatever happens with Greece now, the cost of capital is going up for most of the Euro region and that has implications for companies and consumers that borrow in these markets. Death, taxes and easy money, the only certainties in life. Actually the last one is not always the case but REAL interest rates have been negative for 5 of the last 8 years and the FOMC will tell us today that they will remain that way for an ‘extended period.’ They will tell us that inflation is benign, even as the Journal of Commerce index is up 9% from the last meeting at the highest level since Aug ’08 and just 7% from a record high. There will be some coffee talk on selling their large pile of MBS at some point. Unwinding the largest monetary easing in the history of the world will not be easy and the longer the Fed waits, the more rough it will be due to the misallocation of capital they have created, again.

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