US to Sell More TIPS

Thursday, August 06, 2009

The Treasury Department, responding to growing demand from China and other investors, will boost the sale of inflation-protected bonds that hold their value as consumer prices rise.

"We continue to hear growing demand for the product," Treasury Deputy Assistant Secretary for Federal Financing Matt Rutherford said at a news conference announcing the plan on Wednesday.

The decision to increase sales of Treasury Inflation-Protected Securities, or TIPS, is part of a broader effort to ensure there...(Wall Street Journal)

Increase in TIPS demand = Increase in inflation expectation = Inflation = More burdensome debt over time. 

The US government may be setting itself up for failure just like that common American who was suckered into an adjustable rate mortgage loan when rates were at historic lows. Now, we're bordering on deflation and the US government is increasing sales of inflation-protected securities. This is another short-term trick with long-term consequences, basically what we have seen out of Americans for the last decade.


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