Use Theirs First

[candrew]

Why do interest rates have to go up in your scenario?

Prior to the last 3 recessions the fed interest rate was somewhere in the 5.25 to 7.75% range. The fed was able to drop the interest rate 4-5% to stimulate the economy. Right now the interest rate is 2.5% - it's pumping trillions of dollars worth of free money to prop up the economy. If Trump has his way it will go even lower. So what happens when the inevitable occurs and corporations and individuals can't carry anymore debt and/or start defaulting and the slowdown begins - the fed has no leverage to stimulate the economy.

This isn't a partisan hit job - this has been going on way before Trump. In fact, Trump himself correctly called this a "false economy" when he was running for president. We're literally in uncharted territory economically.

 

[Hotdog]

Prior to the last 3 recessions the fed interest rate was somewhere in the 5.25 to 7.75% range. The fed was able to drop the interest rate 4-5% to stimulate the economy. Right now the interest rate is 2.5% - it's pumping trillions of dollars worth of free money to prop up the economy. If Trump has his way it will go even lower. So what happens when the inevitable occurs and corporations and individuals can't carry anymore debt and/or start defaulting and the slowdown begins - the fed has no leverage to stimulate the economy.

This isn't a partisan hit job - this has been going on way before Trump. In fact, Trump himself correctly called this a "false economy" when he was running for president. We're literally in uncharted territory economically.

Maybe Im missing something, but I still dont see where you explain why the rates would go up. You basically said the fed has been lowering interest rates, and said really nothing else.

Rates are not balls. They dont bounce off the ground and go up once they hit bottom. In fact, there has been a lot of talk of negative interest rates.

 

[idestroyedthetoilet]

Prior to the last 3 recessions the fed interest rate was somewhere in the 5.25 to 7.75% range.

Rates were 1% prior to the last recession at the beginning of the Fed's tightening cycle. We're lucky to have an environment where tightening to the point of choking off the economy hasn't been necessary (or a dumb Fed that tightens regardless of learned lessons).

The fed was able to drop the interest rate 4-5% to stimulate the economy.

Fed policy intentionally constrains demand (and speculative excesses) through higher rates when the economy is seen to be overheating. Lowering rates frees demand up from their tight grip. If AD stagnates at low, unconstraining rates then there is no demand for the Fed to free up from their constraint.

Right now the interest rate is 2.5% - it's pumping trillions of dollars worth of free money to prop up the economy.

How is 2.5% pumping free money into the economy? Please explain this mysterious mechanism.

So what happens when the inevitable occurs and corporations and individuals can't carry anymore debt and/or start defaulting and the slowdown begins

What else does your chrystal ball show?

You would think this alleged excess debt would show up in inflation, somewhere, anywhere, but it isn't, and so rates are still low.

We're literally in uncharted territory economically.

Rates were realy low in the early 1960's too, and weren't [gradually] tightened to all that high of a level prior to recession. Again, 2003 saw 1%.













I am One Brow

 

[candrew]

Maybe Im missing something, but I still dont see where you explain why the rates would go up. You basically said the fed has been lowering interest rates, and said really nothing else.

Sigh.....I meant if the interest rates are at or near zero at the START of a recession they can't go any lower and the fed will have no power to stimulate the economy. Sorry, I didn't think I had to spell it out for people.

In fact, there has been a lot of talk of negative interest rates.

Right. All time high consumer debt, corporate debt, a massively over-valued stock market and negative interest rates - what could go wrong?

 

[TheStormofWar]

Margaret Thatcher is loved by many conservatives for a few pithy little quips, like "The Trouble with Socialism is that sooner or later you run outta other peoples' money."

Andrew Wilkow has a great line "Socialism is not for the Socialists", explaining in detail how socialists never do live like the great unwashed masses of governed peons.

In fact, "Socialism" works about like Timeshare property. If you buy one, you soon find out that you're too broke to use it. Nothing about the deal turns out to be true. The fees and maintenance go through the roof, and nothing ever works out in "trade deals" for a place where you actually want to go...

Given current spending trends, how other countries manage "socialism", and other factors, I stopped about here. The rest is tripe.

 

[babe]

It's a well known fact that there's a secret society of the five wealthiest people in the world, known as the Pentaverate, who run everything in the world, including the newspapers, and meet triannually at a secret country mansion in Colorado known as "The Meadows." This includes the Queen, the Vatican, the Gettys, the Rothschilds, and Colonel Sanders before he went **** up.

Srs.

Until now, I had never heard of "The Penaverate". The Queen, The Pope.......have you ever heard of The Anglican Church, or Henry The Eighth?

And even more seriously, nobody, not even Lucifer Himself, could get five ultrarich conspirators to leave their private tropical islands to go to Colorado three times a year.

Once every three years would be, perhaps "triennially", because "triannually" means three times in a year.

https://www.merriam-webster.com/dictionary/triannual

https://www.merriam-webster.com/dictionary/triennial

 

[babe]

Given current spending trends, how other countries manage "socialism", and other factors, I stopped about here. The rest is tripe.

OK, I wanna give your idea a whirl.

As a young man, I was in on some "Snipe Hunts" on the baseball park next to my mom's house, and it was a helluva lot of fun seeing the kiddos believe there were snipes out there in the dark, while we were shouting "I got one!!" . And as a sometimes poet, I'd really like "tripe" to be as real, and as beautiful.

why is the bad deal we've had with China "tripe", and why wouldn't even our conspiratorial honchos of the New World Order be serious about putting China back in the box? The whole program of Globalism hangs on achieving actual parity among superpowers, but Xi has moved back into Mao's headquarters, has achieved remarkable consolidation of power in the Chinese political world, is actually declaring that China will totally displace the US, Russia, the Commonwealth and will attain the Asian dominance that has eluded six historical dynasties. Xi actually preaches Asian racial superiority, tries to win neighbors by promoting Chinese men getting "mail order brides" from Korea, Vietnam, Thailand etc., One hundred million unmatched single Chinese men.... lessee..... would it add more to China's glory to send them marching with guns, or bouquets?

Hong Kong. Muslim re-education camps. Chinese buy-ins on western mainstream media and social networking corporations. "Social credit scoring" tied to economic privileges.

Of course, what I do is pretty much free association rhetoric, painting pics if you will. But what you do is not think.

 

[babe]

Sigh.....I meant if the interest rates are at or near zero at the START of a recession they can't go any lower and the fed will have no power to stimulate the economy. Sorry, I didn't think I had to spell it out for people.



Right. All time high consumer debt, corporate debt, a massively over-valued stock market and negative interest rates - what could go wrong?

Trump winning again????

srs. European banks have done some negative interest rates. Japan has had this lockdown on zero interest for thirty years.

If you can lose your bearings a bit.... yes, I'm very good at this exercise.... "debt" is King. The King of all managed, brokered national banks who float huge deficits by printing more money. When money is not "needed" as much as actual assets, and the prices of real estate, business operations retail and manufacturing..... with frozen wage scales, money is for spending on ever "better deals" in the big box stores.

Nobody wants to stop it. Lobbyists from business ply the halls of government with fake smiles and unmarked envelopes, pretty fat envelopes. "

Don't stop it, don't ever stop it."

In 1970, my connected buddy in the chem class, was shocked at my idea that actual production of stuff meant good times. His dad was a media chieftain, a CFR honcho. The lad was "in on" the superior wisdom of the Rockefellers. No no no. The worst thing you can do is increase production. Prices will go down, people will have more. You will lose control. Limit production, print more money. Paper the world, paper the walls. You win.

Trump has not been "in on" this sort of thinking, yet.

The Stock Market is the most negotiable, most fungible, most favorable position to take to hedge this kind of economics. Pack up your cash and wheel it into your brokerage.

 

[Jonah]

Sigh.....I meant if the interest rates are at or near zero at the START of a recession they can't go any lower and the fed will have no power to stimulate the economy. Sorry, I didn't think I had to spell it out for people. . .

This is not entirely true. If the target short term interest rate gets lower bound the Fed can still try quantitative easing (e.g. large-scale buying of treasury bonds and/or mortgage backed securities) as it did with good success when interest rates reached near zero during the recession that began in 2008.

 

[Hotdog]

Sigh.....I meant if the interest rates are at or near zero at the START of a recession they can't go any lower and the fed will have no power to stimulate the economy. Sorry, I didn't think I had to spell it out for people.



Right. All time high consumer debt, corporate debt, a massively over-valued stock market and negative interest rates - what could go wrong?

10 to 12 months out you're probably safe-ish. Fourth quarter 2020 or first quarter 2021 at the latest the **** is gonna hit the fan - it'll be 2008-like - only much more complicated. And it's not just the inverted yield curve - the red flags are all over the place. World wide manufacturing slowdown, stock buyback slowdown, corporate debt is through the roof, 70% of the country (soon to be much more) with little to no purchasing power. And with politicization of The Fed the interest rate will have nowhere to go but up.

Why are you sighing at me. You still have yet to explain the sentence in bold from your post earlier.

Maybe you didnt mean it, or you dont quite or understand what my question was.

You said the rates have no where to go but up. Implying that they will go up. They dont have to go up. They can stay the same.

Thats all Im trying to get to the bottom of. Why you think they would go up.

 

[idestroyedthetoilet]

The Stock Market is the most negotiable, most fungible, most favorable position to take to hedge this kind of economics. Pack up your cash and wheel it into your brokerage.

The biggest thing not many talk about, something that has been very evident to me for a long time, is the rich world's need for retirement vehicles.

Mass retirement us a myth, a mathematical impossibility. There simply isnt enough to own for everyone to retire 10-30 years before dying and live off the production of the youngers.

There are 72.5 million baby boomers alone, each needing let's say $2,000,000 to retire comfortably, so about a $150 trillion need from them alone.

There is about $100 trillion debt on world markets, $50 trillion in US securities, and whatever other amount on global exchanges. So that matches the need of 72.5 million. What about the other 7 billion?

So this demand recession comes. It's not gonna be inflationary, Fed induced through higher rates, at least not under current conditions, it's not going to be a deflationary, balance sheet induced unraveling, a demand recession and
"we’ll never be able to develop macro models capable of predicting demand-side recessions.

And we shouldn’t even try." (Scott Sumner)

When this recession comes, where is all the money going to run to? Money doesn't go into or put of markets, it goes through them. For every buyer there must be a seller. So where do all the stock sellers run to? 2% bonds? Paper gold? Real assets?

While everyone the few hording cash hoping to catch a falling knife wait and pray, millions are dollar cost averaging in. They will continue averaging in during any downturn, and those trying to time the market trying to sell high and buy low will have nowhere to park, so back in they will come.

The next stock correction will be shallow and short lived.

Pundits have bemoaned stock valuations for two decades now. "The P/E is too high", "Ten year rolling P/E is too high, much higher than historical averages", "the dividend rate is too low, HISTORY!". Well guess what, when everyone needs yield and there are enough buyers then valuations are going to creep higher and dividends lower. 20 is going to be the new 18, putting the S&P value at $3,520 next year. It might take another five years or so before higher valuations become the norm and realized, which is good for everyone looking to accumulate now. Best to get ahead of the tide and do so before you're too late, and just another typical mainstreeter.

 

[TheStormofWar]

OK, I wanna give your idea a whirl.

As a young man, I was in on some "Snipe Hunts" on the baseball park next to my mom's house, and it was a helluva lot of fun seeing the kiddos believe there were snipes out there in the dark, while we were shouting "I got one!!" . And as a sometimes poet, I'd really like "tripe" to be as real, and as beautiful.

why is the bad deal we've had with China "tripe", and why wouldn't even our conspiratorial honchos of the New World Order be serious about putting China back in the box? The whole program of Globalism hangs on achieving actual parity among superpowers, but Xi has moved back into Mao's headquarters, has achieved remarkable consolidation of power in the Chinese political world, is actually declaring that China will totally displace the US, Russia, the Commonwealth and will attain the Asian dominance that has eluded six historical dynasties. Xi actually preaches Asian racial superiority, tries to win neighbors by promoting Chinese men getting "mail order brides" from Korea, Vietnam, Thailand etc., One hundred million unmatched single Chinese men.... lessee..... would it add more to China's glory to send them marching with guns, or bouquets?

Hong Kong. Muslim re-education camps. Chinese buy-ins on western mainstream media and social networking corporations. "Social credit scoring" tied to economic privileges.

Of course, what I do is pretty much free association rhetoric, painting pics if you will. But what you do is not think.

You invoked China, I did not. But whatever floats your boat chief.