Jamie Dimon Warns of Inevitable "Crack" in Bond Market. What Investors Need to Know
Will you panic when the bond market cracks? Or will you be prepared to profit?
I've a confession to make: I love the term "bond vigilantes."
Admittedly, it's a bit esoteric -- not something that comes up in everyday conversation. Derived from the Latin vigilare, meaning "to keep awake," Merriam-Webster defines a vigilante as "a member of a volunteer committee organized to suppress and punish crime summarily (as when the processes of law are viewed as inadequate)." In the world of finance, a bond vigilante is someone (or a group of someones) who prevents government from taking on more debt than it reasonably should, by demanding higher and higher interest rates in exchange for buying increasingly shaky Treasury bonds.
As interest rates skyrocket, and it becomes more expensive for the government to sell its T-bills, the government is effectively forced to rein in its debt spending and act more responsibly -- like it or not.
