He calls this tomfoolery the craftily-titled “Piggy Banker Spread”:
Hedgeye: After WWII, inflation has been a popular short-term market solution for easy money politicians. With the exception of the late 1970’s and early 1980’s, most of the revisionist economists advising Washington have been able to get away with pretty much anything on this front. The US government has changed the calculation for inflation 9 times since 1996, so we’ve pretty much made this popularity-fest permanent.
If you are wealthy and fully invested right now, inflation has to be popular with you. The politicized Federal Reserve is keeping interest rates at an “emergency” rate of ZERO per cent, so that the bankers get paid while savers in America pay the bill. We call this the Piggy Banker Spread and the US government underwrites it. At +285bps wide this morning (10-yr yield minus 2-yr), it is within 0.08% of its all-time widest spread ever. Oink, oink.
If you are poor and fully committed right now, inflation is not popular with you. It’s your cost of living. You feel it at the pump. You feel it in your wallet. No matter where you go, there it is. Don’t even try thinking about saving either; you wouldn’t be making any money on those treasury bonds or cash-savings accounts anyway. So you may as well buy yourself another scratch bingo card and hope to live another day; the rest of us will buy iPads.
Harsh words for America’s elite.
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