This short term bond rally also is at least correlated with some recent USD weakness as these USD financial assets increase in price in USD terms; similar in response to whether autos, oil, ores, ag products or any other internationally traded goods were to increase in price in USD terms.
Where is the Fed hike? Lots of talks, market doesn't believe: US 10-Yr Treasury Yield Falls to 5-Month Low Below 2% http://t.co/pp5VZlmJFf
— Millenia Panama (@TweetsMillenia) October 15, 2015
18 comments:
Even the hint of a measly 25 basis point hike has the markets shitting over themselves. Sorry, but we are Japan 2.0 for as far as the eye can see.
Exposes the emptiness of financial capitalism.
If they can't survive without government interest payments, nationalize them.
Right I was going to say to Mal here Tom a key difference between us and Japan is I dont think Japan pays the support rate...
so if this trend continues then eventually the Fed cant pay the support rate or even their own salaries .... I think this is what they are finding out at the ECB with the negative rates over there... iow without a positive yield they cant pay salaries at the ECB so they have been loading up on US Treasuries as they have maintained a slightly positive yield, but this is now collapsing and they may be in trouble....
I dont see how the Fed can continue to pay the support rate if rates keep collapsing... right now they are using mortgage interest from the MBS to pay the Fed salaries and the support rate to the banks but that cant go on forever eventually we (non-govt) "run out of money!" as the mortgage interest eventually goes back thru the Fed and in to the Treasury... US homeowners are footing the whole bill....
Their only chance is if they can get a majority to vote for higher rates even in the face of lackluster economic data... you need a coalition of "hard money" people there and maybe some others that at least can see the headlight of the freight train that is heading right for them... maybe they can get a majority between those two moron camps at the FOMC and raise them anyway...
but to Mal's point the hardcore monetarists I dont think are ever going to budge...
but to Mal's point the hardcore monetarists I dont think are ever going to budge...
I don't see this kerfuffle being about monetarism. The world is slipping into deflation and on monetarist rules the nominal rate needs to be negative.
This is about bailing out the banks and financial industry again. They don't give a hoot about pensioners. They are only looking at their own interests and that of their class.
Financial capitalism is exposed as rent dependent and that the rent comes ultimately from the government, in their paradigm, from the taxpayers.
Low life.
What Tom said.
The world IS slipping into deflation and thus a rate raise would be economic suicide, especially in a credit based consumer economy which at best is muddling through..
Matt, what is the support rate? And under what conceivable model could the Fed not pay it's own salaries? The Fed doesn't need positive net income to pay either its own expenses or the mandatory 6% dividends on paid-in capital it pays out to its member/subscribers. If the fed has negative income after meeting those expenses, the loss is booked as a "deferred asset" that is essentially charged back to the treasury in the form of a reduction of future disbursements.
Dan they pay ior at 0.25% have over 4T out... so this is 10B+.... probably need another 10B to run the fed.... so lets say 20B... if the portfolio yields less than 20B they are tits up... (to them...)
Deflation is a natural consequence of both aging population in developed nations and massive systemic leverage in the private sector.
Capitalism has now devolved into a series of financial schemes and ponzis plus massive state support to keep the big corporations ahead and sustained, including financial.
All the developed nations are Japan now, as long as there is no some massive redistribution (or recirculation) of assets and/or population growth this ain't going to change.
Is not a problem really if people in charge understood we can't run out of money, deflation then would be good, it would allow for very needed structural changes in our logistics, production, energy and environment management systems. A bearish commodity super-cycle is what is needed to do this before it's too late (as we have yet to reach the plateau of population growth).
Moron fest at institution's leadership will prevent this.
Matt, that's no problem for the Fed. They can't go out of business, and their capacity to pay themselves isn't limited by their income. The dent would go to the treasury. There might be some political blowback to deal with however.
Dan you may know that and I may know that but they dont know that....
Dan they went in by FIRST lowering the rates THEN increasing the portfolio....
To back out of that, LOGICALLY, one would let the portfolio run off FIRST, THEN start thinking about a rate increase.... "LIFO"...
No one is even talking about reducing the portfolio.... WHY NOT?.... all they are talking about is the rate .... BECAUSE they NEED the portfolio income....
Dan here:
"Systemic problems arise from the structure of the system. Since the sustainability problem is a systemic system, its solution requires deep systemic change to the fundamental layer of the system's structure. This differs radically from popular solutions, which because they don't go deep enough are superficial solutions.
The guiding principle is: Systemic problems require systemic solutions."
http://www.thwink.org/sustain/glossary/Systemic.htm
Their knowledge is superficial all they know is they NEED the portfolio income for purposes of self-interest.... this is as far as they can take it ..... they are not qualified.....
IIRC, when the Fed went to QE they also got permission to run negative equity if circumstances required. They were thinking ahead and covering theirs asses, oops, I meant, covering the bases..
Tom,
Are your last few responses suppose to be in this thread? I'm not making a connection.
Oops wrong thread. Will fix. Thanx.
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