Posted on 07/11/2019 9:17:16 AM PDT by SeekAndFind
“Obama recovery”
The danger of keeping interest rates so low is that there won’t be any room to drop them in the face of the next recession. We may be eating the seed corn.
The purpose of a rate cut is generally to stimulate economic activity when the economy is WEAK or facing a serious threat — like when it was reduced to less than 0.15% after the financial collapse of 2008, for example.
The danger of keeping interest rates so low is that there won’t be any room to drop them in the face of the next recession.
...
Recessions are caused by the Fed manipulating rates too high, as they are now.
By too high, I mean rates that are higher than what the market would charge.
And even then, they will be taxed, no?
When retired, about half the amount of your SS income can be taken from your IRA without triggering any income tax.
I only began doing that a few years ago, having lived on SS and minimal IRA withdrawals before. After seventeen years of retirement, I have not paid one dime in federal or state income tax.
Powell is only one vote on the FOMC. Last months meeting was the first time that the FOMC vote wasn’t unanimous since Powell took office. There is no guarantee that Powell has the four other votes to push the reduction through.
Pedal to the metal!
Death to savers. Gotta inflate the asset bubble. This only makes debt easier to ‘produce’. Somebody ping me when we grow enough to counter the growth in .gov.
The market is predicting at the 100% level that there will be a rate cut at the next meeting:
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
Steve Forbes will not be pleased
When he gets around to publishing a new issue his wrath will come forth as he reiteratres for the 3,483 time the evils of a soft $$$
Meanwhile that great sucking sound is foreign capital coming to America
We will see in a little less than three weeks.
“I suspect that our interest rate policy is being driven by a desire to inflate the prices of assets that are typically purchased using loans or other means of interest-based financing. “
That is an effect. I am not sure all the fed policy makers see that or have that as a motive, other than when it is their policy/belief that “money is too tight”.
By “too tight” they actually mean locked up in not-liquid assets/accounts. But, doing so is what more Americans have intentionally been trying to do since the last bubble burst - hang on to more of what assets they already have as a hedge against another bubble bursting. Lower interest rates are the fed’s way of asking the public to loosen their purse strings more, but the fed has no way of directing where in the economy that loosening will happen most. Will the stock market rise to new levels, will people increase their personal consumer borrowing, will mortgage rates relax, will more equity be pulled from homes by refinancing and spent, will business find some additional capital demands worthy of financing, and myriad other possibilities, including all of the above. But generally, when the fed is careless, one area of those possibilities becomes more exaggerated than others and a new bubble develops. If that is what happens this time, it will take time to see where that bubble is - real estate?, stocks?, personal finance?, where? No one knows.
A recession in the U.S. is generally defined as two consecutive quarters of declining GDP. And GDP generally declines for one or both of the following reasons: (1) population declines, and/or (2) productivity declines.
Over the last 20+ years, we have seen weak growth in this country for one reason related to Item (2) above: Our overall productivity has declined as we have had more retirees and generally unemployable people living in this country.
Interest rate reductions aren't going to do anything to change these things. What they ARE going to do is make it easier for people who ARE productive to borrow more money to keep their standard-of-living treadmill going.
“Guess what happens when interest rates decline, folks. A home that used to cost $400,000 now costs $535,000.”
Huh??? When interest rates DECLINE a home you want to buy will cost you MORE????
A “perverted” twist I heard on that joke was: son answers, “but I don’t need to see to do it”.
On a monthly basis an existing home with a refinanced mortgage will cost you LESS.
But read the numbers I posted carefully. For someone buying a home, the price of the home will end up being HIGHER even if the monthly cost of the mortgage payments -- due to the lower interest rate -- is the same.
I have been saying there not only is no reason to reduce interest rates, there are sound reasons to keep rates inching up.
And getting roasted for it.
For just a fleeting moment I had this ludicrous notion that the president‘s policies might have had something to do with it.
Here are some quotes about and from Judy Shelton, one of Trump’s Fed nominees:
*** Steve Forbes:
Great news that @realDonaldTrump plans to nominate the brilliant @judyshel to Federal Reserve Board. She will ask hard questions. She is stout foe of nonsense idea that prosperity causes inflation.
*** Judy Shelton:
I will indeed, Steve. You’re an inspiration. Productive economic growth, which leads to higher levels of output, justifies wage gains. It is not inflationary @SteveForbesCEO
https://twitter.com/judyshel/status/1146540713645154305
_______________________________________________________________________________
*** Stephen Moore:
Judy Shelton is a champion of sound money and a stable currency. She understands growth does not cause inflation, and is a great choice for the Fed.
https://twitter.com/StephenMoore/status/1146403319306424320
_______________________________________________________________________________
*** Judy Shelton:
Artificially suppressed/elevated interest rates cause malinvestment. Should minimize central bank intervention in favor of market-determined rates.
https://twitter.com/judyshel/status/1143103060631146496
_______________________________________________________________________________
*** President Trump:
I am pleased to announce that it is my intention to nominate Judy Shelton, Ph. D., U.S. Executive Dir, European Bank of Reconstruction & Development to be on the board of the Federal Reserve....
*** Judy Shelton:
I am very honored and grateful for the statement from President Trump and will strive to support the U.S. pro-growth economic agenda with the appropriate monetary policy. Unlimited potential beckons for America and the world.
https://twitter.com/judyshel/status/1146228871118938113
_______________________________________________________________________________
*** Judy Shelton:
Phillips Curve reasoning leads to harmful monetary policy: high employment is not inflationary when increasing productivity results in higher output.
https://twitter.com/judyshel/status/1141689318307696641
_______________________________________________________________________________
Judy Shelton’s Gold Standard:
A gold-backed bond was first proposed in 1981 by Alan Greenspan. I think the U.S. should issue them as an experimental pilot program, similar to the TIPS bond, that compensates people who are concerned about the future value of the dollar. For those who are concerned about a big financial meltdown, these bonds would give them some insurance, as gold tends to rise in price during periods of financial stress.
The Chinese would welcome this development, because it would likely be a stabilizing force for the value of the dollar and protect their dollar holdings. I also think they are the most likely country to provide a parallel instrument. If China were to offer a similar instrument where five years from now you can get back x amount in yuan or an ounce of gold, five years from now both the U.S.-issued instrument and the China-issued instrument are worth the same thing, an ounce of gold. So now you start getting projections of a stable exchange rate determined by market forces.
If this practice starts to spread to even more countries, you would start to see the semblance of a future stable exchange rate system with those exchange rates being determined by what market forces believe about the future value of those currencies.
https://fortune.com/2016/08/18/trump-gold-standard-economic-advisor-woman-judy-shelton/
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