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Obviously the Fed has to raise rates eventually (right?) with the current glut of cheap debt and record stocks the fallout wont be good will it? What president is going to appoint a fed chairman that will actually raise rates, even if the fed has already said they will be near zero for a few more years.
Obviously the Fed has to raise rates eventually (right?) with the current glut of cheap debt and record stocks the fallout wont be good will it? What president is going to appoint a fed chairman that will actually raise rates, even if the fed has already said they will be near zero for a few more years.
Bond investors have been doing it for them ..some of the bond rates are 2x what they were at the lows
It won't happen until inflation forces the Fed's hand.
As to the political fallout, the last time interest rates were reset to a long-term higher level (1979-1982), two nasty recessions ensued. The inflation situation had gotten out of control so much so that triggering such a big correction was the lesser evil. Carter lost because of inflation, not because of the Fed's response to inflation. It was this extraordinary political climate (an administration short-circuited by a landslide election loss) that gave the Fed freedom to do what it had to do.
It won't happen until inflation forces the Fed's hand.
As to the political fallout, the last time interest rates were reset to a long-term higher level (1979-1982), two nasty recessions ensued. The inflation situation had gotten out of control so much so that triggering such a big correction was the lesser evil. Carter lost because of inflation, not because of the Fed's response to inflation. It was this extraordinary political climate (an administration short-circuited by a landslide election loss) that gave the Fed freedom to do what it had to do.
Good points, I just see so much about how we are fine economically but I think low interest rates are much of keep things stable at this point (as intended) but rates were just starting to be raised from the Great Recession then covid there them back down, that is a long time at historically low levels per length of time. I do not think things are as rosy as some predict. But I am by no means an expert.
The mix in the issuance of debt had changed. The Treasury is issuing more long-term bonds. Yields have been dropping on the shorter-term bills.
Things are different than 2014 to 2018. The ECB and Bank of Japan were just starting to monetize debt. They still had room to buy more debt than their governments' issued, enough to offset the reduction in purchases from the end of QE3. That is not the case now. The question is what other assets they buy.
Powell is gone next year. He failed twice to end QE. He is kicking the can down the road.
Probably will see more negative rates overseas to force money into the US financial system. Economic sanctions on foreign governments also seems to be having an effect on the large growth in assets in custody.
Obviously the Fed has to raise rates eventually (right?) with the current glut of cheap debt and record stocks the fallout wont be good will it? What president is going to appoint a fed chairman that will actually raise rates, even if the fed has already said they will be near zero for a few more years.
That's a pure misread. Powell and other Fed. decision makers would tighten if the tea-leaves indicated.
That's a pure misread. Powell and other Fed. decision makers would tighten if the tea-leaves indicated.
I don't think the Fed is independent of political pressure.
William Miller was chosen to fight unemployment, and he resisted raising interest rates during his tenure despite inflation getting out of control, and in fact there was a lot of second guessing of him. Maybe he was just incompetent and never saw the error of his ways, but it sure looks like he was hired with marching orders and he carried them out until the situation became untenable.
I'd like to think the Fed has since been more independent, and that's probably true. But it was suspicious when Powell eased off on the rate increases after Trump made a ruckus.
I don't think the Fed is independent of political pressure.
William Miller was chosen to fight unemployment, and he resisted raising interest rates during his tenure despite inflation getting out of control, and in fact there was a lot of second guessing of him. Maybe he was just incompetent and never saw the error of his ways, but it sure looks like he was hired with marching orders and he carried them out until the situation became untenable.
I'd like to think the Fed has since been more independent, and that's probably true. But it was suspicious when Powell eased off on the rate increases after Trump made a ruckus.
That and now pushing the fed to do more to address racial inequality it has been political and getting to be more so. You hear the kids pushing for the fed to adress this reference when Volcker upped interest rates and it led to double the number of jobs lost for black people. So these racial issues have come to the fed and I think will start to impact decision making in the future.
I don't think the Fed is independent of political pressure.
William Miller was chosen to fight unemployment, and he resisted raising interest rates during his tenure despite inflation getting out of control, and in fact there was a lot of second guessing of him. Maybe he was just incompetent and never saw the error of his ways, but it sure looks like he was hired with marching orders and he carried them out until the situation became untenable.
I'd like to think the Fed has since been more independent, and that's probably true. But it was suspicious when Powell eased off on the rate increases after Trump made a ruckus.
The Burns + Miller era is precisely why The Fed. has fought hard and well to at least insulate itself from politics.
I'm not a big fan of Powell's FWIIW but he handled overtures from Trump quite well IMO.
FWIIW Burns left an even worse reputation than Miller for caving to political pressures.
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