I believe I might have found an answer to my question in the Farm Journal magazine, of all places. The economist said, how much longer can the Fed continue supporting historically low interest rates? Look at what's behind their decision making. First, they have implemented policy to keep interest rates low in order to reliquefy the banking sector. By keeping the discount window cheap so banks can borrow money from the government and then loan it to the public to replenish their margins, but it's going to take some time. The second reason interest will stay low is because of the governments massive spending. Essentially, the government has been forced to aggresively spend money to replace the major reduction in consumer spending and stabliize the econmy. Since the government spending is based on short-term, rather than long term rates, it's bias is to keep rates low. Granted the Fed is supposed to be independant of political pressure but it still exists. The government continues to pour money into the economy to offset the lack of consumer spending. In the meantime, consumers continue to contract their spending and save more to reduce debt because of the continued uncertainty about employment. When jobs are lost, reduced tax revenue is available to the government, which forces it to borrow more money. This is a dangerous pattern that any person with common sense realizes cannot go on indefinitely. The question that's now starting to develop is, What's the Feds endgame? How does the Fed ease up on the gas pedal? If it lets interest rates rise too quick, it could possibly kill the economic recovery at the same time it's starting to get traction. On the other hand, if the Fed waits too long, it could cause an overstimulated economy that would require a drastic increase in interest rates in order to cool off. Anybody remember the early 1980's? Right now everybody is worried about deflation than inflation. We must keep housing & commercial loan values firm on the bank's books or everything goes up in smoke. An important political lesson was relearned in 2008: If your the party in power and you allow fuel prices and food prices to explode before a primary election, you are going to pay for it in the end. So what is my point? The potential of a major economic meltdown has been avoided, but we are now hooked on the cure. The longer we take to wean ourselves off the drug, the worse the withdrawl symptoms will be. It is human nature to avoid pain; we all want jobs right now regardless of the future inflation pain we'll suffer. Recommendation for producers; I believe you have 2-3 years to work down your debt load before interest rates start to creep back up and are a real risk. Now is the time to pay off loans. Convert existing debt from variable to fixed. Lock in longterm rates by being short 10-year notes or 30- year bonds. Short term not looking good for the bears. Any other suggestions, anybody?








tiger