bostonbubble.com

[Guest]

[admin]

[admin]

Also, we're about to find out what an orange swan does to rates.

- admin

[Former Arlingtonian]

Right on Admin and thank you for keeping this site going.

People need to remember that in the long run Governments have never been able to control interest rates.

Why? Every government in history at some points finds the economy stuck and they seek ways to push money into economy to stimulate growth/add jobs/make voters feel good. Ultimately, pushing money into an economy through low rates causes things to get expensive and inflation becomes a major concern. Inflation forces the hand of Government and they have to raise rates to protect the value of the currency.

https://fred.stlouisfed.org/graph/fredgraph.png?g=ccII

What could possibly go wrong!

[Guest]

I too don't see how the FED would like to raise interest rate above 6%, doesn't matter how bad the inflation is. I am always skeptical on low inflation rate situation that the FED told the public for the last 5 years.
Based on the fact that we owe the world a lot of money. Won't raise interest rate causing us a heck more on interest payment of our national debt? Why would the FED like to payment more interest on the ever raising national debt?

[admin]

Outstanding debt is already at a fixed rate. For future debt, if the rest of the world doesn't buy it, then there is no choice but to raise the rates until they will.

- admin

[Former Arlingtonian]

Here is a fairly good explanation on how the Fed can effect interest rates in short term, but in the longer term - NO

http://www.econlib.org/library/Columns/y2013/Hummelinterestrates.html

The important part - is the conclusion:
"Conclusion
None of this is to deny the existence of the Fed's initial, short-run liquidity effect. As I conceded at the outset, central banks can affect interest rates somewhat. What is incorrect is the now-common but simplistic belief that the liquidity effect is so powerful that it allows the Fed to put interest rates wherever it wants, irrespective of underlying real demands and supplies in the economy. Nor do I deny that central banks have other far-reaching economic repercussions, often detrimental.17 But in a globalized world of open economies, the tight control of central banks over interest rates is a mirage. Central banks remain important enough players in the loan market that they can push short-term rates up or down a little. But in the final analysis, the market, not central banks, determines real interest rates."

[Guest]

[admin]

The article you linked to is referring to future borrowing costs being higher. Existing debt has a fixed rate, apart from things like TIPS, which make up a small portion of outstanding debt. "A treasury note is a marketable U.S. government debt security with a fixed interest rate" http://www.investopedia.com/terms/t/treasurynote.asp

- admin

[Former Arlingtonian]

Admin,

I think the disconnect is that people don't understand how much money the US government borrows every week to continue to operate by issuing Treasuries.

At some point, Quantitative Easing, The Federal Reserve had been buying as much debt as possible - the more buyers of Debt the low interest rates drop.

OF course the little wrinkle is the Federal Reserve was buying Debt with Money /US Dollars that the Federal Reserve conjured out of the air or created.

So, the money in existence in the USA Federal Reserve system and on reserve in the Banks of USA accounts is massive.

Equally hard to understand is that Quantitative Easing experiment has NEVER been tried in the history of Banking. 100 years ago the Federal Reserve would have had to hire printing press to create money and thanks to computers it is like magic.
https://fred.stlouisfed.org/series/EXCSRESNS

[bugelrex]

[guest]

[victorgbishop]

[Former Arlingtonian]

Stay calm - I agree the current pricing of homes and rent is criminal.

Irrational markets won't last forever!

Stock market is up, real estate prices are up, unemployment is an historic low what could go wrong??

1999 - https://www.bls.gov/opub/ted/2000/mar/wk4/art03.htm

Keep the faith - that what we are all experiencing is painful - and temporary.

[victorgbishop]