As the Fed Turns

I was flying to the UK on Friday so I missed the second 3 percent drop in the stock market in three weeks. When I landed I discovered that Everyone is agreed that President Trump is to blame because of his tweets jawboning the Fed to lower interest rates.

Well I’m not a credentialed journalist or a credentialed economist or a credentialed central banker, but all I can say is that I have been worried about the inverted yield curve for months.

The inverted yield curve is when short-term rates for U.S. Treasury securities are higher than longer-term rates. Right now for August 23, 2019, from the Treasury website, 1-month T-bills are yielding 2.07%, 5-year Notes are yielding 1.40%, and 30-year Bonds are yielding 2.02%. Not good, according to my understanding of the credit markets.

In healthy credit markets with economic growth as far as the eye can see, the 1-month T-bill has the lowest rate, and all longer-term Treasury securities have progressively higher rates. The yield curve is right-side up.

My understanding is that, in order for banks and other intermediaries in the credit markets to stay in business, the Treasury yield curve must be right-side up. This is because your banks and other credit intermediaries borrow short-term -- such as borrowing from you in your checking account -- and lend long -- such as lending to you for your mortgage. They need the longer-term rate to be higher than the short-term rate in order to make a profit.

So, if you are a credentialed central banker, in my understanding, you fix the inverted yield curve with interest rate cuts, to avoid a nasty recession. Pronto.

The Fed screwed up when they kept the 0bama economy from face planting to the tune of a $ Trillion a year. One might think that would cause run away inflation but the economy didn’t seem to crater. IMHO, it DID crater but the hole was papered over with Federal Reserve Notes. Ten Trillion of them. Economic theory I do believe requires these notes be sucked back in but now they can’t do so without “revealing the crater”. So the Fed is kind of stuck. Unless there is some kind of economic mystery no one understands. Like, maybe, the economy of the USA can’t be steered with the puny rudder of the Fed because what the Fed sees is just the tip of the global iceberg the USA economy is towing. The 0bama crater may be “behind us” now but a crater that large can probably suck us all in for many years to come. But I know nothing about economics.

"When I landed I discovered that Everyone is agreed that President Trump is to blame because of his tweets jawboning the Fed to lower interest rates."

As a side note to this thread, please consider this.

When PDJT, FLOTUS had state dinner w/Queen a few months ago, it was noted that fake news CNN is only US media that is available outside US.

So foreigner opinions, in this case about PDJT and Fed, are likely based on what anti-PDJT CNN indoctrinates foreign viewers with.

OUCH!

Corrections, insights welcome.

You are right about about that only seeing CNN’s view outside the USA as representative of the whole countries perspective of the in country news. I stayed at a Marriott in Bangkok on two different occasions this summer, when I arrived the first time they where steaming CNN 24/7 on all lounge and other in house common area TVs. Pissed me off and there were quite a few foreigners there to say the least. I asked to speak to the manger of the lounge I was in, and expressed how CNN was viewed here and the fact that their viewership was so low in country that it was not a fair representation even in the USA and was in fact anti current government and one party vs another.

She claimed to have no idea about that and also stated that CNN was their only USA option with the package Marriott had purchased to stream????? She immediately change to BBC in that area and asked if that would be better and I said yes in comparison to CNN.

The next day I was back in the lounge and her Director came to speak with me and we had a long discussion about my concerns and etc. Before I had left all of the TVs were on BBC. He was going to speak with higher mgt (in USA, because he had taken the time to speak with other Americans there and his poll showed I was correct and he was surprised and couldn’t understand why Marriott had such arrangement with CNN, although the ultimate choice of station to stream at each hotel is up to the management, they only can select from the package available to do so contractually?????. They did have FOX on the room TVs, but couldn’t stream it and it doesn’t have a so called international options as does CNN and BBC - like for Airports.)

What does Barry OZirp say? We are still paying for the

Worst

President

Ever

9 trillion 300 billion added to debt. (from 10T to 19T)

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