For Garth

[Chris Becker]

I guess I'm spending this much time on the issue to defend the charge you made regarding austrians including me predicting higher interest rates in the US, and maybe even to help you understand the Austrian position.

Just to show you one can hold two opposing views on Treasuries, tactical and strategic. See the report attached, all 200 words of it plus a picture, fired off to clients last year. It was a follow-up to another more wordy report explaining this view.

Back when this report was sent out, the clients I spoke to in the US could not reconcile this view with what they were seeing in the data. This call was made right when everyone started to turn bullish of the US economy. My interactions with some really smart economists and investors has taught me they don't understand business cycles caused by monetary interventions.

Right now, and I can say with reasonable confidence, because I interact with them, economists and investors all generally share the view that the reason Treasury yields are this low is because of the prospect of low inflation. I believe this will prove to be dead wrong. 

So while you continuously hear Austrians predicting much higher interest rates in the future, bear in mind this is a longer-term strategic view, Austrians are not married to that view, and on the contrary, are looking out for, and predicting the countervailing trends. I think of all people austrians understand the market can get extremely extended into bubble territory.

This is why it is in a sense humorous to hear guys like Krugman emphasising the point that Austrians are bearish Treasuries and predicting higher interest rates, and that they've been wrong in their assessment because of where the market is right now. The rally in US Treasuries to where it is now was more a response to the Europe crash than what's going on in the US economy, anyway. He is missing the point completely, and will at some point be spectacularly wrong, just as Bennie and friends were wrong about the housing bubble.

In the meanwhile, it's back to monitoring what the money interventionists are up to to know when the big break will come.  

Cheers, Chris