There’s a lot of concern that the Federal Reserve is going to keep raising interest rates until it forces something to “break.” I share that concern....The Lens
(When) Will the Rate Hikes Break Something?
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders
8 comments:
Their terminal rate is already priced in..,,
3Q GDPNow increased 3 times in last 10 days:
https://www.atlantafed.org/cqer/research/gdpnow
Now 2.9% which is higher than annual growth ever achieved under 14 years of ZIRP….
She's scratching her head wondering why they haven't "broken anything" already. Maybe she should talk to Mosler one more time. He gets it.
Kelton wants soooo bad to be in the mainstream of economics. She keeps pumping their playbook.
I don’t know what these people mean by their figure of speech “broken”?
NPV of high quality Financial assets has been significantly reduced (NDX100 down over 25%, long bonds down more than that, etc) but as long as the risk free rate increase doesn’t reduce NPV of regulatory assets below their required minimum proportional ratio to consolidated assets there isn’t going to be any problem….
Unless you think the reduction in financial asset NPVs itself is a problem… it’s certainly unpleasant to those of us who possess them but beyond that I don’t see any problem… or anything “broken”…
And why the guessing game? All you have to do is monitor the levels against the regulatory minimums … requires 8th grade Algebra…
Like she says here:
“ There’s a lot of concern that the Federal Reserve is going to keep raising interest rates until it forces something to “break.” I share that concern.”
All they have to do is make sure banks maintain a high enough NPV of their regulatory financial assets as a function of the risk free rate increases and nothing is going to “break”….
It's probably not the banks she's worried about. There's talks of pension funds having liquidity issues probably due to drops in "financial asset NPVs" that may cause some forced liquidations. Kind of like Archegos. Basically localized blow ups rather than systemic 2008 banking crisis.
Well then why dont they just increase rates to a level that those liquidations are not required?
Applied 8th grade algebra…
Pensiion funds are government regulated entities too just like banks are government regulated take your pick….
You people keep taking about this like we don’t know how to do this..
You say “forced liquidations” like alien invaders from Mars are suddenly going to show up unexpectedly and force the pension funds to sell something or they will zap them with their atomic ray guns…
It’s a simple regulatory functional equation….
“forced liquidations “
Yo, Who’s doing the forcing?
It’s the same Art Degree morons who are increasing the rates … hello!
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