Uncle Stupid is dumping $109 billion in new debt on the bond market this week. This week alone, taxpaying chumps. And everybody has his eye on the new issue of inflation-protected bonds, which hit the market at 1 p.m. today. And what an interesting development it is:
The government bond market this week will also have to contend with $109 billion in new debt. Auctions kick off at 1 p.m. Monday with a $10 billion sale of five-year Treasury Inflation-Protected Securities. The notes are likely to be auctioned at a negative yield, the first ever negative yield for the issue. TIPS yields have declined as buyers have stepped into the market on the belief that more QE could stoke inflation down the road. TIPS return real yield plus inflation, and provide protection from rising prices.
Inflation fears are now sufficient that investors are prepared to take a less-than-zero yield on government bonds, calculating that the inflation bonus will be more profitable than the next-to-nothing yields everything else is paying in our present loosey-goosey cheap-money environment. Inflation is a cruel and rapacious tax on the people who make the economy go — savers, who provide the capital for real investment. With an economy in dire need of a lot of new saving and investment, Washington is getting ready to put the screws to the people best positioned to help turn us around. To what end? More dubious stimulus? Fiscal stimulus is not working and monetary-policy stimulus is not working, because the problem is not lack of consumer appetite. The problem is a broken banking system, a trillion dollars or more in dead or devalued capital, and a national commitment to sustaining the ragged remains of the real-estate bubble that helped to cause this mess.
That sound you hear? That is the sound of future generations cursing us for the tax we are levying on them today.
– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.