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The article says Hatzius believes inflation will stay lower, longer, and so will interest rates.
The risk of higher inflation because of limited investor patience is also highlighted. But there is no mention of what could happen if Hatzius's base case is correct. If inflation and interest rates stay low because the recovery is not so far advance as commonly believed, we may get a severe market correction and political panic. Already, corporate profit forecasts are tanking...
Tom wrt "recovery" I think Dan is looking at "market perceptions" which is similar to "financial terms" versus what you are talking about which is the "real terms"...
TPTB take a lot of solace from the fact that the market is at/near all time highs.. if we lose this due to a bad Q4 off the bad fiscal, then TPTB heads will start spinning in earnest... then who knows what they will come up with.... Fed buys ALL Treasuries? Negative rates? who knows...
3 comments:
Good article. Thanks.
The article says Hatzius believes inflation will stay lower, longer, and so will interest rates.
The risk of higher inflation because of limited investor patience is also highlighted. But there is no mention of what could happen if Hatzius's base case is correct. If inflation and interest rates stay low because the recovery is not so far advance as commonly believed, we may get a severe market correction and political panic. Already, corporate profit forecasts are tanking...
Right, Hatzius think that U6 is more significant than U3. U3 is falling but U6 is stuck above 13%. That corresponds historically to U3 of 7.5-8%.
What recovery?
Tom wrt "recovery" I think Dan is looking at "market perceptions" which is similar to "financial terms" versus what you are talking about which is the "real terms"...
TPTB take a lot of solace from the fact that the market is at/near all time highs.. if we lose this due to a bad Q4 off the bad fiscal, then TPTB heads will start spinning in earnest... then who knows what they will come up with.... Fed buys ALL Treasuries? Negative rates? who knows...
rsp,
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