They were all wrong about monetary policy and in particular the rate
cuts, ZIRP, QE, balance sheet expansion, everything. They had it all
wrong.
People like Schiff, Faber, Rogers, Reinhart & Rogoff, Bill Gross, Martin Feldstein, the GOP, Obama, and so many more.
Quacks and elite quacks. Ideologues. Snake oil salesmen and snake oil saleswomen.
We were told that interest rates would spike,
there was going to be hyperinflation, gold
would soar to $5,000 an ounce or higher, the
dollar would get crushed, yada, yada, yada.
Some are still saying it.
Now as we are on the verge of the
first rate hike in seven years many of these same quacks and fools are warning of
dire consequences. They're saying that the Fed has no room to "undo" what it did, that it
will bring on dire consequences, that the bubble it created will blow up with a ferocity of the Bikini Atoll H-bomb test.
What do YOU think will happen?
I'll tell you what I think will happen. The exact opposite of what the aforementioned, "Gang of Clueless" think is going to happen.
Even if I didn't know a stick of
economics (MMT economics), I would bet the ranch and do the opposite of whatever those idiots say just because they've been sooo wrong
for so long on so many things. Now they're talking about the dire
consequences of the coming rate hike cycle.
Ha!
Wild horses couldn't keep me from betting
against these fools even if I knew nothing.
Any good horse racing handicapper will tell you that you always bet on form. If a horse is prone to winning and if that horse is prone to winning even more consistently
under certain conditions then you bet and you bet aggressively. But these horses are prone to BEING WRONG AND LOSING! So I will bet heavily against them.
That’s what I will be doing.
So...rate hikes? Yep...and stocks soar, dollar crashes, commodities finally
get off the floor.
Why?
Because it's the opposite of
what we've been doing for the last eight years, which has been to cut rates, strip the economy of assets
(central banks are doing this) and take income
away from people.
Sure, you're helping a few folks get cheaper credit, but they have to pay it back to the banks so the banks are the ones who earn and more importantly, lower rates set the price lower of many other things.
On the other hand, when the
government starts issuing people
checks--I don't care whether that's a Social Security check or
a payment to a doctor via Medicare or INTEREST
PAYMENTS--that's money to keep and money to spend and that's a fiscal stimulus.
The past eight years have been
deflationary. The idiots got it wrong. WE got it right. The next few years of
rate hikes will start the boom cycle
again. Buy stocks, buy commodities, short
the dollar, short bonds, clean up make a fortune and invite me
on your sailboat or yacht, but make sure it's somewhere warm where the water's nice and clear.
14 comments:
Mike,
I agree on everything you said, but don't you think that there will be a very trade able psychological hissy fit in the markets when rates rise? Might be short term, but there could be some delicious percentage gains.
Mike - I think you may be on to something, but what if the Fed blinks? Japan has been stuck in ZERO INTEREST RATE POLICY for two decades.
Great article.
Dean Baker also thinks a rate hike will slow the economy, and so does everyone at Economic Policy Institute, especially Josh Bivens.
I would love to see the economy boom after a rate hike.
As far as I can see, the chief results of a rate hike will be more interest income to non-government but perhaps a bit higher mortgage rates, which would offset the income injection by raising the monthly nut on housing purchases.
What's the distribution of new purchases of treasuries? If it's mostly rich people with low propensity to spend....
What's the demand for credit look like. Seems to me that the impact of a rate hike would be greater if demand is higher. If no one wants credit, then it doesn't really matter what the rate is.
How does one find out these things?
That was a frightening video. My uncle--a WWII hero--concluded his AF career in the late 1950s as a navigator of B-36s out of Puerto Rico. His ship's mission was to fly over his father's 1871 birthplace in the Ukraine go another 100 or so miles and drop one big bomb. In those days the bombs were so physically big the gigantic bomber could only carry one. I asked him if the B-36s could have gotten through: "Get through!? Ha!"
The B-52, still flying, then replaced all the B-36s. I watched them fly over me in Tucson as a boy on their last flight to be melted down, landing at our Davis-Monthan AFB. They were so gigantic 1000' over my head they seemed to be moving slower than they were.
Last year we buried Dave at Arlington. He was 95. He should have died in 1943, shot down or shot up by a Japanese Zero. His B-17 made it back. He couldn't move for his wounds so he passed ammo up to the nose gunner. The nose gunner died.
--Brant Gaede
I'm confused
I always thought a rate hike sucked currency out of the system because everybody would be paying more on debt.
So how can people save more when more currency is getting sucked out of the system ?
Surely there is more people in debt than save ?
Will the fiscal stimulus (interest income) be sufficient to offset the fiscal contraction (taxes and spending cuts)?
Foot,
"currency is getting sucked out of the system"
C'mon man!!!
Matt,
That's what I always thought.
I thought a rate hike is just the same as a tax hike or a VAT hike or a national insurance hike and takes our spending power away.
Yes, sure you earn more interest but how many savers are their in comparison.
You'll need to explain it in more detail.
The only workers in the non govermental sector who would benefit from this are those without mortages or the retired surely. There's no way these people who's mortgages have just gone up by £150 a month will have enough savings to off set that.
'More importantly lower rates sets the price lower of many things'
- huh,what going on their
These interest payments are going to tsy holders :mainly the banks again,or have I got something mixed up.
The interest payments increase interest income to the non govt sector period.
It will end up as bank account interest or Erisa account interest, etc... Rsp,
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