US Monetary Tightening

This morning the Ten Year Treasury yield is 3.88%. That is up from 3.20% a little over a month ago. Since the US Government is trying to shift its borrowing out on the curve and since Federal stimulus is the only game in town when it comes to economic expansion since debt is being pared in the private sector, this is in effect a monetary tightening. I don't know why it is occurring and whether it will continue. It may be the bond vigilantes. It may end up being noise. But if it sticks for any period of time in 2010 (I think it will and I think there is a good chance of 4.50%) it will be destabilizing to the global economy. The US Dollar is the world reserve currency and it tightening occurs, the consequences of even a small fraction of the $50-150T sloshing around the world could be immense. [3.88% of $1T is $39B. Double that to $78B and you have the cost of financing the US debt to be issued next year alone, assuming it had a ten year duration, which is probably not true, but it is an indicator of the cost of the US Federal folly]. 30 year fixed mortgage rates are now above 5 1/4% and at this rate may be pushing up against 6% in a few months. No wonder the Treasury decided to make an open-ended commitment to Fred and Fan.