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Very Hot Topic (More than 25 Replies) - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds (Read 181 times)
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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #10 - Aug 14th, 2019 at 12:37pm
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Vypr wrote on Aug 14th, 2019 at 12:22pm:
Preparing the excuses to blame anyone but Trump when the economic downturn comes.

- Trump was right about the Fed - all those that criticized Trump for his criticism of the Fed were wrong - lets hear them all now say Trump was right
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #11 - Aug 14th, 2019 at 12:38pm
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admin wrote on Aug 14th, 2019 at 12:19pm:
- i always  say inflation is low world wide - over supply of everything - that's why long rates are low


Yeah, that's a bad read. We don't have oversupply, we have diminished investment and production. Those are the activities which generate growth and inflation. Expansions push up prices on commodities and raw materials because firms are bidding them up, and the same goes for labor.

The fact that this is not happening reflects the muted nature of the global economy.

It's not a story of a supply glut. Recall we have unlimited needs and demands! There is no such thing as too much.

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- makes little difference the Fed buying long bonds - they could buy 95 percent of all long bonds and if there was high inflation the yields would be high and bond prices low- investors would dump the last 5 percent supply cheap to bring yields high (if high inflation)

It certainly does make a difference who is buying the bonds, the Fed does not care about earning an income, it's focused on trying to influence our behavior.

A private investor wouldn't bid those bonds up so high, meaning price would be lower and long term rates higher.
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #12 - Aug 14th, 2019 at 12:38pm
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admin wrote on Aug 14th, 2019 at 12:37pm:
- Trump was right about the Fed - all those that criticized Trump for his criticism of the Fed were wrong - lets hear them all now say Trump was right

Trump said the Fed was holding rates too low and creating an artificial economy.

Trump does not agree with himself.
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #13 - Aug 14th, 2019 at 12:46pm
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TowardLiberty wrote on Aug 14th, 2019 at 12:28pm:
I probably should have said "expansion," but I chose "bubble" because I tend to link the recovery to monetary policy and perhaps that's a partial misread.

Regardless, the expansion started in 2009 and was real old in the tooth by the time the Fed started tightening.

And the Fed telegraphed their plans to reduce their balance sheet and tighten for a long time before they actually started. It's what the market wanted to avoid blowing an even bigger bubble.

The key question was how to normalize policy without spooking markets.
Because of low inflation & growth.

We've discovered that central bankers aren't as all-powerful as we once thought. They can create money but creating inflation has proved illusive.

Perhaps a liquidation approach in 2008 would have been better for growth in the here and now.

- dont see that the market "wanted" the Fed to raise rates - the Fed raised rates last year and the market plunged into then end of Dec on expectations of Fed rate increase and the Fed already raising rates - the pundits and stock commentators like on cnbc were calling for higher Fed rates- not the market - and those pundits/experts were wrong

- it was a slow economy for 10 years - so the Fed said its time to kill the economy to fight inflation that's wasn't coming and choke the first strong economy in 10 years - why not let the economy grow 4 or more percent? - we're getting out of a 10 year slow or recession - not a 10 year boom or bubble
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #14 - Aug 14th, 2019 at 12:51pm
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- btw - Japan has been in s slow economy or recession for 40 years and europe has been in a bad economy for 20+ years
- should their "Fed" break their imagined bubble with no inflation?
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #15 - Aug 14th, 2019 at 1:02pm
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TowardLiberty wrote on Aug 14th, 2019 at 12:38pm:
Yeah, that's a bad read. We don't have oversupply, we have diminished investment and production. Those are the activities which generate growth and inflation. Expansions push up prices on commodities and raw materials because firms are bidding them up, and the same goes for labor.

The fact that this is not happening reflects the muted nature of the global economy.

It's not a story of a supply glut. Recall we have unlimited needs and demands! There is no such thing as too much.

It certainly does make a difference who is buying the bonds, the Fed does not care about earning an income, it's focused on trying to influence our behavior.

A private investor wouldn't bid those bonds up so high, meaning price would be lower and long term rates higher.

- any good libertarian knows raw material prices dont go up causing inflation due to growth - because the market finds new supplies and alternatives - like oil supply increased and alternatives and efficiency
- only reason production or investment isnt high is because the supply of everything is available like on the net and competition and alternatives and china driving down prices killing businesses - all deflationary - people dont have unlimited buying power to buy more of everything- plus lower prices mean incomes are less for workers and investors - and robots still coming to produce more and more - Trump is trying to slow cheap china imports to save jobs, incomes and increase US investment to produce American made products
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #16 - Aug 14th, 2019 at 1:10pm
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TowardLiberty wrote on Aug 14th, 2019 at 12:38pm:
A private investor wouldn't bid those bonds up so high, meaning price would be lower and long term rates higher.

- sure investors would- high inflation would mean investors would only buy or hold a long term bond at a high yield - no matter how many the Fed bought - no one would want a sure loss on a bond because of high inflation - they would buy alternative better investments stocks and gold and realestate
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #17 - Aug 14th, 2019 at 1:11pm
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admin wrote on Aug 14th, 2019 at 12:46pm:
- dont see that the market "wanted" the Fed to raise rates - the Fed raised rates last year and the market plunged into then end of Dec on expectations of Fed rate increase and the Fed already raising rates - the pundits and stock commentators like on cnbc were calling for higher Fed rates- not the market - and those pundits/experts were wrong


In 2015, it did want it and even rallied after the announcement. The switch in policy signaled confidence in the economy. We no longer needed extraordinary emergency measures to support the economy.

By late 2018, markets we're already under pressure from trade war woes.

But ultimately I agree with you that contractionary monetary policy (to target higher rates) will tamp down economic activity and asset prices.

That's the whole goal. You do that in the good times so you have ammo to shoot in the lean times.

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- it was a slow economy for 10 years - so the Fed said its time to kill the economy to fight inflation that's wasn't coming and choke the first strong economy in 10 years - why not let the economy grow 4 or more percent? - we're getting out of a 10 year slow or recession - not a 10 year boom or bubble

Look at the markets from 09 to the present. It's clear we had an amazing run. A 10 year recession? Nonsense.

We've been living high on the hog. It's been a boom period.

It hasn't always been equally felt on main street, in real wage growth, or labor force participation, but it's simply untrue to say we have not been in an a very long expansion.
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #18 - Aug 14th, 2019 at 1:12pm
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TowardLiberty wrote on Aug 14th, 2019 at 12:38pm:
Trump said the Fed was holding rates too low and creating an artificial economy.

Trump does not agree with himself.

- long ago he said that - he wasnt President then
- hes been saying the Fed should cut rates and shouldnt have raised them - he was right
  

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Re: - Fed inverts yield curve - Fed funds rate at higher rate than long term bonds
Reply #19 - Aug 14th, 2019 at 1:14pm
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Inflation is trending up.  There will be much more incentive for the Fed to keep rates stable (or higher) as a result.

https://www.cnbc.com/2019/08/13/consumer-price-index-july-2019.html

And signs of recession keep popping up.  The Purchasing Managers Index is at a 10-year low.  It's a leading indicator that means, essentially, that people are buying less stuff.

https://tradingeconomics.com/united-states/business-confidence
  

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