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Seven years of ZIRP has allowed speculative positions of a monumental magnitude to accumulate. Even a quarter point hike will send asset prices plummeting and the Fed will quickly be forced implement a negative interest rate policy and QE4eva to support asset prices. The speculators know the Fed has their back, so the dip after the interest rate raise will be bought aggressively.
Just enjoy these years since you can speculate risk free and make money without any of the sacrifice of saving and hard work of running a company. If your looking for a Fed that supports savers and investors over speculators, Yellen is not for you.
Seven years of ZIRP has allowed speculative positions of a monumental magnitude to accumulate. Even a quarter point hike will send asset prices plummeting and the Fed will quickly be forced implement a negative interest rate policy and QE4eva to support asset prices. The speculators know the Fed has their back, so the dip after the interest rate raise will be bought aggressively.
Just enjoy these years since you can speculate risk free and make money without any of the sacrifice of saving and hard work of running a company. If your looking for a Fed that supports savers and investors over speculators, Yellen is not for you.
This is far too general. Exactly what assets or commodities are you talking about? Margin accounts are somewhat regulated by the Fed and everybody else like the NYSE and NASDAQ have margin rules.
And what are these "risk free" investments? We've all lived through housing market corrections, commodity price corrections, and stock market corrections. Any leveraged position can be completely wiped out and it happens all the time. Other than an FDIC-insured bank account or government bonds, nothing is risk free.
Seven years of ZIRP has allowed speculative positions of a monumental magnitude to accumulate. Even a quarter point hike will send asset prices plummeting and the Fed will quickly be forced implement a negative interest rate policy and QE4eva to support asset prices. The speculators know the Fed has their back, so the dip after the interest rate raise will be bought aggressively.
Just enjoy these years since you can speculate risk free and make money without any of the sacrifice of saving and hard work of running a company. If your looking for a Fed that supports savers and investors over speculators, Yellen is not for you.
It's not called speculation it's called "every stock crash since the dawn of time".
Not to mention the United States debt is tied to interest rates, so if the Fed raises rates the interest on the United State's debt goes up.
Why someone thinks they can control market principles. Interest rates should be allowed to float with the free market.
Unregulated capitalism is inherently unstable. We use regulation, fiscal policy, and monetary policy to try to make it more stable. Since humans are at the controls, we screw it up quite badly at times. It's pretty easy to cite stupid mortgage policy & banking/finance regulation, and misguided fiscal and monetary policy to avert a mild recession right before Dubya's second election as the contributors to The Great Recession.
That doesn't mean we shouldn't be using a blend of regulation, fiscal, and monetary policy to try to make our economic system more stable. We just need to do a better job of it.
Odds are that they'll probably hike once in September. That gives them time to hold off the next one till next year and not do the first one in the middle of Christmas season. They seem pretty confident that the stock market can be held in check (with a lot of help from their friends in Europe and Japan) so that the reaction is muted. They've tested the waters with jawboning the markets. If the market goes down after a first rate cut, they'll say something supportive of stocks or let the balance sheet balloon as they did last fall.
If you guys remember back in I think 2013 they tried hiking up loan rates and literally killed the loan origination and refi for the next few quarters. The rate went back down.
The problem with keeping these low rates is people get used to them and then if they go up they freak and panic. The sky is falling. I remember 20-23 years ago 8% rate was the norm and considered a good rate. Before that it was even higher. Granted houses were cheaper (compared to today's prices) but that's semantics and arguable. Higher rate lower price usually balances out with lower rate higher price because affordability comes into play. It takes time which seems nobody is willing to do with the market.
I feel that even if the house prices get lower it won't make a difference to most buyers unless you're literally buying with unleveraged cash. Because any kind of leveraged "cash" purchase is still going to be subject to a borrowed rate from somewhere. And I bet a lot of "cash" purchases are made with leveraged cash.
Not to mention the United States debt is tied to interest rates, so if the Fed raises rates the interest on the United State's debt goes up.
Why someone thinks they can control market principles. Interest rates should be allowed to float with the free market.
The Fed sets the overnight lending rates, and along with the Treasury they set short term rates. This can be quite helpful in managing spending, investment, business and economies. Especially as in recessions. Free markets setting rates might not be in sync with our general economic interests at any one time. Central banks controlling these rates have long since been a well known and significant part of markets and economies all over the world. For good and bad.
IMO if the Fed raises rates at all this fall, it will be by the very meagerest amount. i would bet on none right now.
I don't think a rate hike of the likely 25 basis points we'll get is going to be the end of the world.
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