...The Fed's worst fear is that despite its long-term commitment to buying up government debt, it will lose control of interest rates. That's why the early-January upward blip in bond yields was a yellow warning light. If Treasury bond prices decline significantly from the artificial levels that massive Fed purchases have supported, several things will happen, none of them good.
...Inflation can ultimately destroy the bond market, as it did in 1960s Britain during the government of the socialist Labour Party. No one wants to commit to an investment that might be worthless in 10 years, never mind 30 years.
Throughout history, governments have inflated away their debts by cheapening the currency. That process is well under way through the Fed's abdication to irresponsible government. If Fed policies continue, another huge tax—inflation—will weigh down the American people. The politicians will try to escape public censure, as they always do, by blaming it all on "price gouging" by producers, retailers and landlords. A substantial cohort of the press will buy into that phony rationale and spread it as gospel.
You can almost hear Obama now, demonizing producers, wholesalers and retailers for raising prices and arguing for price controls. And when he says it, know that he is responsible for the catastrophic deficits, he is responsible for debt monetization, he is responsible for inflation, he is responsible for the destruction of the currency, and he is attempting to skirt culpability for his own irresponsible actions.
President Obama's true legacy will be this: the Zimbabwe-ization of America.