By John Galt
July 20, 2011
The economic situation began to deteriorate in February of 2007 as mid-sized lenders in the mortgage and finance industry began to collapse as has been documented for years now by this blog and many others. However the situation which indicates the strongest evidence of a lack of recovery for the economy as a whole has been the yields on the 4 week (1 Month), 3 month, and 6 month Treasury Bills which have been trading near zero for years because investors and nations have been terrified of both an economic collapse and the total mismanagement of the crisis since 2007 by the Federal Reserve and United States Government. Thus taking into account that the yields have been negative in some cases and hovering just above zero the majority of the past 3 years, I thought it would ban interesting exercise to use the monthly closing prices for the various Treasuries and overlay that with the CPI-U Seasonally Adjusted core rate of inflation.
I know my readers will scream “but you always say to include food and energy” and I can create another chart at a later date to validate that argument. I wished to use the politicians, Federal Reserve officials, and financial media’s perspective however as their incessant focus on the “core” rate is indeed a double-edged sword. With the core rate of inflation hovering close to zero as much as the short term Treasuries that should be warning enough that economic expansion is non-existent and if Federal Government largess were to be extracted from the economy, one would find that indeed we are still in a true recessionary period as deleveraging continues. I present this chart to provide a true, more realistic view of those investors and nations tying up money in the 1-3-6 Treasuries and the fact that the majority of the time they are paying the U.S. Treasury to hold their money because they are so concerned about the return of their principle as opposed to investing in things like the stock market which appears to be a very risky proposition at any given moment.
Click on the image to enlarge to full size.
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