Posted on 12/19/2018 11:35:31 AM PST by Enlightened1
We’ll show them some market changes again if necessary. We’ll choose the time.
To clarify that, you know that a recent trend could come back with more intensity and diversity. The end is near! Don’t spend! Cash deposit time! ;-)
Inflation in 1981 was running at 10.3%.
Meaning that when the Fed raised the nominal Fed Funds Rate to nearly 20% the real yield was 9%.
The current real interest rate is at most 2.5% assuming non-existent inflation.
But that all has little to do with why the Fed would be raising the Fed Funds rate right now.
And unless you’re a deposit taking bank that needs to cover an overnight shortfall in your reserve balance you aren’t borrowing Fed funds anyway.
After the 2008 crash the Fed was considering the use of negative interest rates.
The reason being that after the previous recovery interest rates had never risen, and this removed one of the Fed’s main tools for pushing a stalled economy into recovery. And that tool is the ability for them to drop their interest rates. You can’t drop them if they are already extremely low.
The Fed is raising rates here so that they are prepared for the next recession. And this is only the rate on funds that they lend to their member banks. The Fed has no control over long rates, those are determined by the bond market.
Trump appointed the fed chairman. If the guy is a never-trumper trying to sabotage the economy, who’s to blame?
Damn right it is.
Yes but is clearly the reason the market is tanking. What has changed? Prior to this appointment the Federal Reserve was always very sensitive to stock market changes - and NOW it doesn’t care?
They work for Wall Street and the banks.
“Yes but is clearly the reason the market is tanking. “
It’s hardly “clear” that that’s the cause.
There’s dozens of reasons that markets go down.
It could be profit taking or year end tax loss selling or margin calls or an algorithm that decides that index stocks are fully priced.
A quarter point rise in the Fed funds rate isn’t a big deal.
A rise in bond yields would draw money from out of stocks and into bonds but that’s determined by bond traders, not the Fed.
Yes.
It was so obvious that the Fed totally propped up Obama by keeping interest rates at -0. That made no financial sense. Now they are doing everything to nose dive the economy prior to the presidential election.
This is not 1980. We have almost 22 Trillion in National Debt. What was our National Debt in 1980. Further more, we had Glass Steagall act that had been in place since 1933. It was a different world.
China has 10% quarterly growth. Yet when the USA has above 4%, first time in decade, then the Fed says our economy is overheating.
We have a huge National Debt that is 3 times larger than what it was before the crash 2008. They did not fix anything in 2008. All they did was print more money through the TARP, QE1, QE2, QE3 and QE Unlimited. Now we are in huge economic trouble unless our economy booms.
What do you think is going to happen to the Dollar when the U.S. cannot make the minimum payments because the Fed keeps raising the interest rate? Think of it like a credit card and your monthly interest rate goes up. What happens when you cannot make the minimum payment???
We default and say good bye to the U.S. Dollar being the world reserve. It will kill all your Pensions, your IRAs and your 401ks. The U.S. will drastically change. We will turn into Argentina economically.
Keep in mind the Federal Reserve is foreign. It is not federal but a FOREIGN PRIVATE BANKING COMPANY that has not allowed us to audit it one time in its 104 years in existence.
I cannot help but wonder if the Chinese have paid our Fed off? In other words the Fed is working with Communist China and are attempting to destroy our economy.
Remember during World War II we bombed Germany factories to sabotage their war making making from producing more weapons. At the time we were trying to shut down the German economy on top of their military. I bet China is using the Federal Reserve to shut down our economy.
Yes, Agree, this is enough to trigger a recession and defeat President Trump. TMany people have no idea of how important interest rates are. They are also talking about more transparency next year which will only give more bad press. From Buffet and Beyond Analyst:
“The Fed did what everyone thought it would do and all was good with the market as the market rose 350 Dow points, but then Fed chair Powell gave a Q&A session and the market went down 700 points to close 350 points down. During the day, the short-term market indicators turned up and to tell the truth, the market was rebounding with good market internals. But Powell spoiled the party by talking about two more rate hikes and also strengthening its balance sheet which means it is draining liquidity out of the market just as the money supply in China is declining and the ECB has stopping its easing. As
you can see by the close yesterday, the market certainly didn’t like to be told that the Fed is implementing recessionary measures at least according to market participants.
I heard that the Fed meetings may be open to all next year in the name of transparency. I don’t agree with that at all. I want full transparency when I can do something about it such as knowing what our elected representatives are doing and what positions they take on certain measures. I can do something about a representative, especially a local politician, if that person is not representing the will of those who elected him or her.
However, the Fed is totally independent, and we cannot do anything about Fed policies.
The more we know about the internals of the Fed, the more the market becomes confused. If the Fed voted to raise interest rates, does it matter if it is an 8 to 4 or a 12 to 0 vote? The result is the same and there is nothing we can do about it. In this case with the Fed, transparency just confuses the market and the whole idea about the stock market is to keep stability so folks like us don’t take our money out of the market because of the
volatility caused by, in this case, too much transparency which Powell gave us yesterday. I think Powell should ride the subway once in a while and witness just what a
20% decline in the market does to the average person on the street.”
Yes and normally I would agree with you that there is no one reason 10,000 stocks move this way or that.
Thing is isn’t this the 7th time in Trump’s administration. Nothing wrong with raising rates but why this quickly? The Fed seemed to want to accommodate Obama so why are they pissing off Trump?
The old adage is that the Fed’s job is to take away the punch bowl when the party gets going.
The economy was barely growing during Obama. It’s growing just fine now and will likely sustain itself.
This chart shows the Fed funds rate for 62 years; you can see that they were absurdly low from 2009 to 2017.
This is political and no time to risk any slow down in the economy. Even the slightest blip and the President is in danger. DON’T YOU GET THAT? Where is the ups side to this UNNECESSARY raising of rates? Answer: There is none!
Maybe you should try paying attention to news like:
"The economy expanded at a 3.5 percent annual rate in the third quarter, the Commerce Department said Friday. That's slower than the second quarter's blockbuster 4.2 percent, but it puts the economy on pace for the fastest annual growth in 13 years. Oct 26, 2018"
Exactly so why endanger that growth ONE BIT? HMMMM?????
Some would say because of this:
https://mises.org/library/cure-low-interest-rates-disease
“As a reaction to the global financial and economic crisis, central banks around the world have cut their interest rates to the point of disappearing, because they see low interest rates as being conducive to making economies return to growth and prosperity.
“According to the Austrian School of economics, however, the latest crisis has been brought about by a monetary policy of artificially suppressing the interest rate; and pushing interest rates down even further will only make matters worse.
“To Austrian economists, a monetary policy of keeping the interest rate at an artificially low level causes malinvestment and prevents the market from correcting misguided production that has been provoked by the monetary policy of suppressing interest rates in the first place.
“The conclusion — which stands in sharp contrast to the mainstream economic gospel — rests on the Austrian School of economics’ sound analysis of the nature of and the relations between time preference, the interest rate, and the boom-and-bust cycle.
So you must think we are being paranoid to think that Powell is trying to derail Trump’s Presidential bid?
“So you must think we are being paranoid to think that Powell is trying to derail Trump’s Presidential bid?”
Trump appointed Powell Chairman. If Powell wanted to “derail Trump” he’s just one vote out of 12 on the FOMC. Manipulating that requires a conspiracy rather than a single zealot who wants to put his personal politics ahead of his job.
If the FOMC was up to something political it should show up in the numbers.
But 2.5% is the lowest end of the historical sweet spot for Fed funds, that range being 2.5% to 5%. And all interest rates are still very low, the 30 yr is just 3%, there’s no credit crunch. The yield curve isn’t inverted, there’s no indication of looming recession.
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