Monday, March 30, 2015

Warren Mosler — Credit check, Fed check


What is the Fed thinking? Seems be that they've held interest rates down "too long." What's the criterion for "too long." Warren investigates some charts.

The Center of the Universe
Credit check, Fed check
Warren Mosler

4 comments:

Michael Norman said...

Warren doesn't get it. It's not about operational feasibility or even what may or may not be the fundamentals. It's about belief. And the Fed believes that rates are artificially low and need to be raised. They also believe that the eocnomy has improved enough to handle it and they could be right on that.

It's also just like the Swiss National Bank believing it could no longer hold the peg or, the belief that austerity in the Eurozone will eventually lead to growth.

Warren's been bearish for two years and he's been wrong. If you traded off his advice (short stocks, long euro, etc) you would have gotten killed. Maybe made some money on bonds, who knows?

What's he gonna say when the deficit starts rising again as it's expected to do this year?

When he's running the Fed he can do what his charts tell him. Until then, his "shtick" is getting old.

Matt Franko said...

Seems to me they would want to back out reverse of the way they went in which would be to let the portfolio run off first and then raise rates...

They seem to want to raise rates first now and hardly mention letting the portfolio run off these days if at all..

Hope they know what they are doing... and dont end up "bankrupting" themselves....



Tom Hickey said...

Hope they know what they are doing... and dont end up "bankrupting" themselves....

Knowing how these people think, their first priority is not bankrupting themselves, no matter the unintended consequences for others.

Matt Franko said...

Tom if they keep the portfolio at the same size and raise rates then the ior goes up and they might not have enough portfolio income to pay it depending on the distribution of the term characteristics of the portfolio....

What if the curve inverts on the short end? etc...

I have never read anything out there as evidence that they are aware of these issues....

rsp