Posted on 09/21/2023 12:17:08 PM PDT by davikkm
This crisis has unfolded by design, leading to significant shifts in market expectations and Fed policy.
In a recent development, the 10-Year Note Yield has surged to 4.45%, a level not seen since November 2007. Markets have adjusted rapidly to this change, with rate cuts no longer being priced in until September 2024. Just three months ago, the expectation was for four rate cuts by the end of 2023, but now the possibility of another rate hike by December is back on the table, and rate cuts are not expected for a year.
This shift indicates that the Fed is more hawkish than anticipated. They’ve held the benchmark rate within the 5.25-5.5% target range, with 12 officials foreseeing one more hike this year and 7 expecting it to remain on hold. Median rate forecasts for 2023 and 2024 have also changed, indicating a more aggressive stance.
The 10-year yields are hitting 16-year highs, potentially signaling concerns about inflation. Historically, the Fed’s policies have influenced markets mainly through their statements. However, over the past two years, a growing number of market participants have become skeptical of the Fed’s intentions, leading to a lack of confidence in their guidance. To bring inflation back under control, the Fed must regain the confidence of the markets, which is now a significant challenge.
Duh?
Of course they have.
How else can they steal all the peasants’ money?
The day will come, and is already here, when the Federal Reserve is the object of a type of engineering. Of the terminal kind.
this was predicted by Milton Friedman
https://www.youtube.com/watch?v=B_nGEj8wIP0
Recorded at University of San Diego & San Diego Chamber of Commerce ©1978
27:16 min
"In the United States, we have also had, and in most countries, a third less important factor that has contributed to excessive increases in the quantity of money, and that has been mistaken policies by the central bank." "Professor Siegan referred to the mistake of the Federal Reserve Bank inthe late '20s and early '30s. From 1929 to 1933 the quantity of money in the United States went down by a third, and that was a major factor that produced the catastrophe. That was the great mistake of the Federal Reserve. It learned from that mistake. Government agencies, like people, don't always make the same mistake the next time; they make a different one. And since that period, the central banks have tended to make the mistake in the opposite direction. Their mistake has almost always been caused by confusing their function, by thinking that they had something to do with interest rates instead of recognizing that their real function was to control the quantity of money."
“In a recent development, the 10-Year Note Yield has surged to 4.45%, a level not seen since November 2007.”
So is the sky falling yet? These 10 Year rates are still much lower than every single year of the Reagan administration, the last time that the Fed was fighting an inflation rate similar to today. We managed to survive.
1981 . 13.92%
1982 . 13.01%
1983 . 11.10%
1984 . 12.46%
1985 . 10.62%
1986 . 7.67%
1987 . 8.39%
1988 . 8.85%
“The Federal Reserve’s recent actions have raised concerns that they may have intentionally engineered the most significant financial crisis in a century.”
“this was predicted by Milton Friedman”
Well you’ve managed to guess wrong on both accounts.
Friedman’s talk that you’ve cited is about what he and Anna Schwartz wrote about in their magnum opus “A Monetary History of the United States”.
In the chapter “The Great Contraction” they criticize the 1930’s Fed for failing to act as lender of last resort, which could have prevented the domino collapse of thousands of American banks and the resulting destruction of 1/3 of the US money supply mentioned in the quote that you cited.
What the Fed is fighting right now is the opposite problem, an overexpansion of the quantity of money. The appropriate Milton Friedman quote is his definition of the cause of inflation:
“It is always and everywhere, a monetary phenomenon. It’s always and everywhere, a result of too much money, of a more rapid increase in the quantity of money than an output.”
Covid and Biden have created an unprecedented plateau in money suppy and an equally never before seen volatility. We are in new territory and we will not find our way back home for a very very long time. The markets are treading water and there are no life rings being thrown. You can't tread water forever. Neither can you cook the books against recession as has been done by Biden forever or even very long. The money floating around has little value. Even if your portfolio is even with EOY of 2021 you have taken at least a 20% haircut from just inflation.
Bidenomics is just so much horseshit and fairy dust.
So is the sky falling yet? These 10 Year rates are still much lower than every single year of the Reagan administration, the last time that the Fed was fighting an inflation rate similar to today. We managed to survive.
1981 . 13.92%
1982 . 13.01%
1983 . 11.10%
1984 . 12.46%
1985 . 10.62%
1986 . 7.67%
1987 . 8.39%
1988 . 8.85%
*****************
We’ll survive, but people and businesses hooked on cheap money will have a hard learning curve.
It won’t be easy for them, but it has to happen in my opinion, or our currency will be weakened & eventually destroyed with current monetary practices.
Also, on the high interest rates from 1981-1988. From a demographic perspective.... Boomers were 17-24 years old on the low end & 35-42 years old on the high end.
IMO with their peak earning years still ahead of them, they could absorb the high interest rates & inflation. I’m not sure the younger generation will be able to handle the current accumulated asset inflation.
“Time Will Tell.”
I also noticed a shift in my 401K value also, Bidens economy is not a very good one
Ya think? 🙄
I am surprised that posts on Free Republic rarely mention the massive Covid era spending approved during the Trump Administration.
Oh yah! Pelosi controlled the Congress. Faw Chee controlled the mask messaging. But if one were to truly consider the amount of spending that began in March of 2020 ... well that would be a more balanced presentation.
That walking bonehead of a resident from Delaware would have much for which to answer, if he was coherent and responsible.
Dumb, evil, or both.
The Covidcation was so bad here that one of the local creek swimming holes had to be closed. There were too many fights and too much trash. Covid was a scam made to destroy Trump and it worked. Stealing the election was just the icing on the cake against his unexpected popularity and successful campaign.
I have a very long memory. The last three or four years have been the greatest cluster fuck of my 70 years and the most change I have ever seen, none of it for the good.
BTW, there is no such thing as an honest nigerian. I worked there for three years and I know better.
So is the sky falling yet?
Central Banks (another form of central planning) never have the nation’s or the citizens’ best interests at heart. They are just another tool that’s used to transfer wealth from the many to the few. The market is the only mechanism that works for everyone, and the elite hate it for that reason. Think about this: the FED employs 400 or so PhD economists along with hundreds more highly educated individuals, and yet they are always wrong in recognizing the harm they do, late in recognizing it, and then wrong in what they try to do to minimize the damage they have caused. Even in the worst calamities, the elite always seem to wind up with more of the pie. All that inside information sure comes in handy.
Yes, and you can go one step beyond Friedman’s observation and realize that all the problems that the Soviets had in trying to predict market demand are also duplicated if a central bank tries to predict how much productivity increase will occur to justify new money printing. There’s no way they can obtain that information in advance reliably.
And if they wait until the year is over to judge productivity and start printing the appropriate amount of money (if needed), then they are behind the curve and always playing catch up. And you can get quite a bit of inflation/deflation in one year while the Fed is waiting to get that information. So what would appear to be the better solution is some type of free market answer to the problem of issuing money, rather than the central government doing it, since the market solves such information problems most efficiently out of all the options we have tried so far.
Of course, that’s assuming the Fed actually understands its job and is trying to fulfill it, neither of which seems to be true.
“Too many became too used to cheap money of the last 15 years”
Historically low interest rates began around 2001, with what was called “the Greenspan Put”. That was probably enabled by a huge accumulation of dollars by China; they were willing to “recycle” them into low yielding American debt.
Americans born in the 1980s and after only experienced a low interest rate world, and they never lived through an inflation like today. You really have to remember the 1970s economy to know what inflation like this was like.
“They need to figure out something, because Carter era level interest rates will devastate the economy.”
The Fed knows what they can do. Fed Chairman Paul Volcker choked off the growth of credit which sent interest rates into double digits. But he also had some help from incoming President Ronald Reagan.
Carter, like the fools running the “Biden” regime, punished energy production. Oil companies, not being fools, responded by not investing in new energy production, which results in higher prices. Higher oil prices ripple all through the economy and make inflation even worse. Unless our next President rewards energy production the inflation fight could drag on for years.
“Also, on the high interest rates from 1981-1988. From a demographic perspective.... Boomers were 17-24 years old on the low end & 35-42 years old on the high end.”
I was in my 30s with an 8.75 % mortgage that I struggled to cover. The Reagan economy was a godsend after the depressing decade of the ‘70s. And while Carter deserved a lot of blame for 1977 - 1980 the inflation actually began biting hard during Nixon and continued through Ford and into Carter.
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