Morgan Stanley Predicts Fed to Cut US Rates to Near Zero

Clarion News ^ | Aug 13, 2019 | Thomson/Reuters

[Hostage]

Morgan Stanley analysts said on Monday that they now expect the U.S. Federal Reserve to cut rates in September and then again in October.

… snip …

The bank joins a number of investors betting that the Fed’s first rate cut since 2008, late last month, will be the first of several moves to lower borrowing costs. Goldman Sachs said earlier this month it sees a strong chance of rate cuts in both September and October.

[Garth Tater]

You are absolutely right when you say that in the future we will not need central banks, banks and the Fed. Modern technology already provides us with all that we would need to make the banks and the bankers unnecessary, but just because they are unnecessary does not mean that they are going to go away.

The wealth generated by the power to create an interest bearing, self-extinguishing currency, literally out of thin air, is so immense that the families that hold that power will not give it up voluntarily - and you, I, and the rest of the free men in this world, simply do not have enough firepower to make them do it. They are going to continue using the wealth that they derive from this government granted power to keep buying up our world, including our "leaders," until they own everything.

It would be nice if we were actually free to use some of the wonders that modern technology is creating to improve our world, but we're not free (our leaders and our markets have been corrupted in every way imaginable) and that same modern technology is a two sided sword that provides our would-be owners with many tools that they can use to keep the vast majority of us under their control.

[Garth Tater]

"We’re killing the fed."

LOL   Talk about the gold standard - that's right there is comedy gold!

[Lurker]

Interesting take on things.

Thanks.

L

[dp0622]

That makes sense.

Being 51 and way overweight i will be in the cold ground by then :), but it does seem about right.

I haven’t been in a branch in forever and the online banks give the best interest rates already.

and that’s just the beginning of the change i guess.

[dp0622]

Anything can happen and that is smart to remember so one doesn’t put all their eggs in one basket.

Thanks for reminding.

[dp0622]

35 dollars.

Anyone with great foresight left their children or grandchildren a FORTUNE in gold.

[zeestephen]

Re: Zero percent. What’s after that?

Well, in Japan and Germany, their ten year sovereign bonds pay “NEGATIVE” interest.

Germany: -0.618% (per year)

Japan: -0.225% (per year)

In other words, after bond holders loan money to their government, the government does not pay interest to the bond holder.

Instead, the bond holder pays interest to the government!

Can anyone give me a basic explanation as to why any rational person or corporation would “loan” money on those terms?

[Pelham]

Put down the bong.

Gold has absolutely nothing to do with the Fed planning to cut its Discount Rate to zero.

The Fed has no control over whether or not we are on the gold standard. In case you missed it, Nixon broke our last link with gold, not the Fed.

[Pelham]

Negative interest rates on large deposits comes after zero.

Which is why it doesn’t seem wise for the Fed to drop its rate below the 2.5% it’s currently at.

[Pelham]

The Fed rate that Morgan Stanley is talking about is the Fed’s discount rate. That’s the rate that banks pay to borrow directly from the Fed. It has little to do with the rates that we earn on our savings. That rate is set by the market.

[Pelham]

” Keep in mind that for years and years the price of gold was fixed at $35 per ounce. Fixed as in in never varied. “

Actually it started to vary around 1960. There was a dual gold market, the official gov’t to gov’t one valued at $35 and a free market one trading higher.

This was the result of using the dollar as the world’s reserve currency, and the resulting Triffin Dilemma when the number of dollars being held outside the country exceeded our gold supply.

This was the pressure that ultimately led Nixon to scrap the Bretton Woods gold standard. Maybe we could have kept the gold standard if Nixon instead had ended the dollar’s role as world reserve currency.

[Pelham]

“We never heard the word inflation until tricky dick took us off the gold standard in ‘72.”

Inflation began showing up around 1960. It’s one reason why we ended silver coinage. It’s why there was a dual gold market during the ‘60s, with France redeeming its dollar holdings for gold. It’s why Nixon decided to scrap the Bretton Woods agreement, because otherwise France alone could have drained our entire gold supply.

The inflation following Nixon’s decision was just much, much larger and obvious to all of us. But it started in the last years of Eisenhower.

[northislander]

Pretending debt is money will continue to produce disastrous consequences...

[Pelham]

“basically give it away to bankers, who then turn around and charge everyone else a 2.5% spread. “

Banks must pay the discount rate to the Fed to borrow from them. Which right now is 2.5%

[Sequoyah101]

I remember the latter and not so much the former but I’ll take your word for it without verification.

One has to wonder how defeated France acquired so many gold certificates?

I do recall that a ‘63 pickup was about 1200 and a ‘68 about 1800 or so. In ‘72 it was 2800 but for a much nicer truck with AC.

[Pelham]

“Pretending debt is money will continue to produce disastrous consequences...”

Debt money existed even during the gold standard.

It’s the “credit” referred to in the title of Von Mises’ 1912 book “The Theory of Money and Credit”.

You can read it here if you care to:

https://mises.org/sites/default/files/The%20Theory%20of%20Money%20and%20Credit_3.pdf

[northislander]

Pretending that unsecured debt is money will continue to produce disastrous consequences...

[Pelham]

"We reinterpret the commonly held view in the U.S. that France, by following a policy from 1965 to 1968 of deliberately converting their dollar holdings into gold helped perpetuate the collapse of the Bretton Woods International Monetary System. We argue that French international monetary policy under Charles de Gaulle was consistent with strategies developed in the interwar period and the French Plan of 1943. France used proposals to return to an orthodox gold standard as well as conversions of its dollar reserves into gold as tactical threats to induce the United States to initiate the reform of the international monetary system towards a more symmetrical and cooperative gold-exchange standard regime."

France and the Bretton Woods International Monetary System: 1960-1968

"In October 1959, a Yale professor sat in front of Congress' Joint Economic Committee and calmly announced that the Bretton Woods system was doomed. The dollar could not survive as the world's reserve currency without requiring the United States to run ever-growing deficits. This dismal scientist was Belgium-born Robert Triffin, and he was right. The Bretton Woods system collapsed in 1971, and today the dollar's role as the reserve currency has the United States running the largest current account deficit in the world..."

How The Triffin Dilemma Affects Currencies How The Triffin Dilemma Affects Currencies

[Pelham]

Let me guess what your pet parrot says.

[SaxxonWoods]

Trump can’t “lower interest rates” nor raise them.

The Bond Market does that. The FED follows if the Bond Market moves far enough in either direction. It has no choice, it has to stay in balance with longer term rates set in the Bond Market.