Posted on 03/22/2019 7:13:29 AM PDT by SeekAndFind
The Federal Reserve, facing an inverted yield curve crushing Main Street’s small banks, panicked on March 20 and pledged no more interest rate increases this year.
The U.S. central bank’s Open Market Committee voted unanimously to maintain its lending benchmark interest rate in a range of 2.25% and 2.5%. Fed officials stressed to the financial press that they would be “patient and flexible” in the future before making adjustments to the closely followed bank borrowing rate.
When President Obama almost created a depression by raising taxes and increasing regulations during a bad recession, the Federal Reserve flooded the U.S. economy with liquidity by slashing its lending rate to below .5% and buying $2.5 trillion of assets. During the worst economic recovery since the Great Depression, Fed policy stayed unchanged.
But since President Trump was elected, the Fed has tried to strangle his tax cut and deregulation driven economic boom by raising its lending rate fivefold to 2.5% and selling off almost a third of the assets bought during the stagnant Obama years.
The Fed claimed it was running a tight money policy during the current boom to prevent an outbreak of inflation. But even Trump’s most ardent “hard-left” critics could find no proof of inflation. According to wildly progressive Vox that usually attacks Trump 24/7:
“But there’s no actual inflation problem in America today. The Fed is supposed to be targeting a 2 percent inflation rate, but once you strip out the price of volatile food and energy commodities, inflation has been consistently lower than that.”
What frightened the Fed to make a huge about-face was the normal lower short-term interest rates “inverting” to a higher yield than longer-term interest rates. Before the Fed raised its “Fed Funds” rate by .25% on December 20th,
(Excerpt) Read more at americanthinker.com ...
FROM INVESTOPEDIA :
https://www.investopedia.com/terms/i/invertedyieldcurve.asp
What is an Inverted Yield Curve?
An inverted yield curve is an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. This type of yield curve is the rarest of the three main curve types and is considered to be a predictor of economic recession.
A partial inversion occurs when only some of the short-term Treasuries (five or 10 years) have higher yields than 30-year Treasuries. An inverted yield curve is sometimes referred to as a negative yield curve.
Historically, inversions of the yield curve have preceded many of the U.S. recessions. Due to this historical correlation, the yield curve is often seen as an accurate forecast of the turning points of the business cycle. A recent example is when the U.S. Treasury yield curve inverted in late 2005, 2006, and again in 2007 before U.S. equity markets collapsed. The curve also inverted in late 2018. An inverse yield curve predicts lower interest rates in the future as longer-term bonds are demanded, sending the yields down.
The article wins the award for most confusing and awkward headline of the year.
Interest rates are historically low and taxes are historically low. Trump has gotten rid of some regulations. So what is the biggest drag on the economy? There has to be a powerful undertow. Is it the trade deficit perhaps? The cost of living? Perhaps this is just a transition period. Our economy has been repressed since 2006, thanks to Congress.
“Our economy has been repressed since 2006, thanks to Congress”.
Don’t forget Obama.
Off the top of my head, I would think that the rush to a 10-yr maturity instead of 3-mo paper would tell us--possibly--one of a couple of things (or both).
Whatever uncertainly causing the rush to quality isn't expected to resolve in the very short term (in a few weeks/months) or the rush to quality is also entangled in an expectation of a general decline in interest rates.
Usually, but not always, a pure interest rate wager is placed on bonds (i.e., long term paper) where the bang for the buck is biggest.
Another possibility is that Treasury traders are placing bets due to expectations re: the China trade situation but this is way above my pay grade.
Nonsense. Look at housing prices in most major cities, the cost of health-care, education, the cost of government or most services. Yes, we can buy cheap TVs from china or vegetables from Peru, but that's not a large part of people's income.
I confess I didn’t pay much attention to Obama at all. He was nothing but a dumb, vacuous, Globalist puppet married to an ignorant, bitter, closet she-male. It is what was behind Obama that I worried about that still exists today, not it’s talking head. But I get your point.
Our economy has been distorted for decades.
Interest rates are historically low
“But there’s no actual inflation problem in America today.
Exactly.
Rents here in the Los Angeles area are absurd. One-bedroom apartments in nice areas are easily $2,000 a month. Health care premiums can run a grand each month for a family. And USC just raised its tuition to $57,000 a year. Just tuition.
Obama did everything in every way possible to damage and destroy this country. “Death to America by a thousand cuts” was his agenda.
True about awkward headline.....first of all, the two year treasury is still at lower up yields than the ten year, but the five year treasury is lightly lower than the two year, suggesting inversion. Yet the longer maturities are still at higher yields than the shorter ones. Unless and until the ten and thirty year govies invert to yields lower than the two and five year yields, I don’t consider this inverted curve.
The American economy - corporations, small businesses and consumers depend on low interest rates. I think there’s hidden inflation and too many trade barriers erected by foreign countries.
You can now make more money in interest by lending the government money for 3 months as opposed to 10 years...and that’s not good. That’s an inverted yield and it’s worse than a 2-5 year inversion. There are bad signs everywhere and people don’t want to acknowledge it. The fact we can’t raise interest rates above 2.5% without crashing the market is very telling...the fact that the markets go up when the fed cuts growth expectations and goes super dovish is another. The fact that gold futures spike on all that news tells people who know where we truly are EVERYTHING.
When the government measures inflation, it intentionally doesn’t measure housing, food, or energy/utility prices.
In other words, they create a statistic to measure inflation that ignores the components of the economy where inflation probably has the biggest effect on the average person.
Yep. It’s a rigged game. And the way the measure goods is even screwed up.
Those gold spikes are COMEX spikes; they’re not even based in reality, just a PM stawk market. Physical PMs have been suppressed for a long time now. I buy every chance I get for after the collapse.
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