Bondholders Pick a Fight With Banks - WSJ.com

MORTGAGES AND GOVERNMENT BONDS - HOW SIMILAR?: Bondholders Pick a Fight With Banks - WSJ.com: "- Sent using Google Toolbar"

A related question would seem to revolve around US government bonds. How would this work?

Start by considering the fact (not hidden but not highlighted either) that the Fed has been purchasing (or read "injecting") roughly a trillion dollars into the bond market. Not exactly the amount borrowed each year by the Obama Administration (but somewhat close).

Imagine what the cost of borrowing would be to the government should the Fed have not been trying to drive down interest rates?

When the inevitable hits the inevitable and inflation and interest rates go up...and, when investors in longer term treasuries start to see major losses, would a lawsuit against the Fed for distorting the market not be somewhat akin to the buyers of mortgage securities that anyone with half a reflective thought would see had to come to grief?

After all, housing prices can't go up forever far beyond any increase in incomes; and, likewise, there comes a time when interest rates have to go up to reflect more and more demand and at some point an exhaustion of the money to lend or the inflation that comes from an out-of-control printing of new money.

(One can't help but think of how many times in the 17th and 18th centuries the Spanish went BK on their Genoese bankers.)