Initial effect of the increase in the risk free interest rate component of Fed monetary policy to fight Art Degree figure of speech “inflation!” has wiped out over $6T of wealth in 90 days… Accordingly most people are bearish NOW…
The hit to Household Net Worth over the last 2 quarters is beyond even that of the GFC. Reverse Wealth Effect about to work with a vengeance. #Recession #Crisis pic.twitter.com/0lFzY3kVcy
— steph pomboy (@spomboy) September 9, 2022
Working as designed.
ReplyDeleteThis is 100% due to decline in fiscal support and record taxes. Has nothing to do with interest rates or inflation. Both are just income redistribution.
ReplyDeleteBond prices for sure go down when the risk free rate goes up…
ReplyDeleteMarch 1 TLT was 141 now it’s 108…. All bond mutual funds are down….
https://www.investopedia.com/ask/answers/061715/how-bond-yield-affected-monetary-policy.asp
ReplyDelete“ Falling interest interest rates make bond prices rise and bond yields fall. Conversely, rising interest rates cause bond prices to fall, and bond yields to rise.”
Has immediately to do with the rate setting aspect of monetary policy…
Positive Fiscal effects on interest income comes later….
Some people use risk free rate in valuation of equities too:
ReplyDeletehttps://www.investopedia.com/terms/b/bengraham.asp
“In 1974, the formula was revised to include both a risk-free rate of 4.4% which was the average yield of high grade corporate bonds in 1962 and the current yield on AAA corporate bonds represented by the letter Y:”
Buffett uses it.., all the “Graham-Dodd” people….
NOOOOOOOOBODEEEEEE (other than Mike) looks at the eventual positive fiscal effects of the rate increases….
Yes, but look how closer we're getting to "Balanced Fiat" !!!
ReplyDeleteTragicomedy writ large.
If the collective "Deficit in Fiat" comes down, surely that's better than citizens having that fiat currency in their pockets, bank accounts & purchasing cycles?
Right? :(
>210 years, and a smaller % of people understand currency systems every year