The Bond - Inflation Conundrum

If inflation is spiraling higher, then why have bond prices remained relatively firm? Despite the sell-off in U.S. government debt over the past few months (see the heavy volume of selling in the lower panel of the chart), bonds had remained relatively well-bid. Each time the stock market sells off, bonds tend to rise temporarily. I emphasize the word "relatively", because in fact, U.S. government debt has been selling off, and interest rates have been rising despite the best intentions of the Fed. The chart (above) doesn't lie.

Here is a superb article, by one of my favorite investment advisers, Michael Pento, explaining why. Pento is a well-read and superbly educated Senior Market Strategist for Delta Global Advisors (I have no affiliation with them of any kind, either as investor or client). I just like Pento! He is a practitioner of the Austrian School of economics. He is absolutely right about why this discrepancy appears in the markets between bonds and inflation.

7 Reasons Why the Bond Market is Wrong About Inflation

The Austrian School of Economics teaches that sustainable prosperity can only occur in a environment of free markets, unrestrained by government interference, productivity, savings, and retrained debt accumulation, both individually and nationally. They also teach the need for limited fiat money growth to restrict inflation. They have vast resource material available for study on the website named after the father of Austrian Economics, Ludwig Von Mises. This is likely the finest website dedicated to free markets and economics on the web.

Ludwig Von Mises Institute