We have not even hit the starting point for the funds rate in the 20s. We should not be going back to the free money era we were in.
“the current Fed has increased interest rates 16-fold”
Yup—from one quarter of one percent to four percent.
This is the classic case of how “facts” can be hilariously misleading....
Context matters.
Inflation is easing??? LOL
The slight drop this month in YoY inflation is an artifact of the math calculation of YoY, not easing of inflation. Example:
Eggs cost $1/dozen 2 October’s ago..
Eggs last October cost $1.50/dozen - that is 50% inflation YoY
Eggs this October cost $2.00/dozen - that is only 33% inflation YoY.
both years had a 50 cent increase in eggs. But, don’t you just feel a whole lot better now that, in my example, inflation is easing!!
Ping
Woods bet big on high gain/high risk stocks. Won big, then lost big.
Amazon reportedly plans to lay off about 10,000 employees starting this week
https://freerepublic.com/focus/f-news/4108989/posts
Cathy Wood’s Twitter bio states, “Founder, CEO and CIO
@ARKinvest. Thematic portfolio manager for disruptive innovation, mom, economist, and women’s advocate.”
The current federal funds rate is 3.75%, which by historical standards is not high. The government’s current annualized inflation rate of 7.7% is high by historical standards. The current 1 year treasury rate is 4.59% Savers should be able to earn a 2-3% risk premium over the inflation rate for use of their money. Yet at 4.59% the US Treasury is paying US citizen buying 1 year bonds 5-6% less than the inflation rate plus risk premium. In fact a US citizen loaning funds to the US Treasury for 1 year will lose over 3% to inflation plus taxes paid on the interest income. Treasury debt is not a good investment.
So who is buying the debt, at interest rates well below the inflation rate, in this period of high inflation? Since the Covid crisis began the Federal Reserve has bought nearly all of the debt issued by the Treasury. In other words the Federal Reserve has printed money out of thin air to monetize the huge government deficit and this money printing has resulted in high inflation. The Fed is buying that debt at below market interest rates which has resulted in treasury securities being sold at a rate (4.59%) 3 to 4 percentage points below the inflation rate. Small savers are losing their savings as a result.
The economy will not normalize until the Federal Reserve allows market rates to return. Cathy Wood wants the Federal Reserve to return to easy money, monetizing the US government debt by buying it at below market rates. This subsidy of interest rates through money printing will allow the federal government to continue run trillions of dollars of deficit spending each year. She is not a voice for fiscal responsibility or low inflation.
Inflation at 7.7% is still high by historical norms. Wood suggestions that one month of declining inflation means the Fed should allow interest rates to drop and provide easy money for her wealthy clients, while allowing average savers to lose money to inflation on their purchases of federal bonds or on money invested at 2-3% in savings accounts.
The alternative, let rates rise to market levels and let small savers earn a risk premium over inflation on the savings they lend to banks and government.
Is Cathy Wood, (thematic portfolio manager for disruptive innovation, mom, economist, and women’s advocate) truly a friend of the middle class or is she another wealthy liberal who has found a way to accumulate significant wealth through the government’s easy money policies in recent years?
Absolutely, we are headed into another great depression. And it will be worse this time. But it is all part of the planned Great Culling.
The way this country is run, and with all the borrowing and debt. There is is only one outcome in the end. It is all going down.
Biden imagines himself another FDR. I shutter to think of the legislation the “Progressives” would pass when the citizenry is on its knees. SMDH