Ready for the surge in interest rates?

The yield on the US Ten Year Treasury, 1962 to 2012

The yield on the US Ten Year Treasury, 1962 to 2012

The chart above shows the yield on the Ten Year, US benchmark treasury security. This issue is tremendously important as it used as a reference for all consumer loans – mortgages, credit cards, whatever type of debt an American wishes to take on. Since 1981 we’ve seen a tremendous amount of money flow into US Treasuries, as American borrowing continues unabated.

Warren Buffett (Berkshire Hathaway) calls US Treasuries “the most dangerous of assets” and Bill Gross (PIMCO) has warned about the bubble in US Treasuries, but as Americans continue to live beyond their means, they’ve got to borrow the money from somewhere. Only question is: when will this bubble pop? When it does, interest rates will surge, just like they did from the late 1970s to 1980s.

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