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So let’s freestyle this article a bit today because our brains are trying to connect a few dots. Inflation is falling, but hovering around 3-4%. It’s beginning to look like it’ll anchor near there, higher than the Fed’s 2% target. Here’s CPI . . .Overnight rates (i.e., the fed funds rate) though are running around 5.5%, but they “feel” much tighter at 6.7%.This “real” cost of capital is severely restricting economic momentum, which is why the market anticipates the Fed will be able to cut rates in a few more meetings. Historically though, when the Fed starts cutting rates, that’s when things start … (full story)
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| Joined Apr 2023 | Status: Member | 7 Comments
You guys suffer from several problems:
1. Memory limited to the time since the inception of Twitter.
2. Forgetting that we are coming out of nearly two decades of unprecedently low interest rates that may or may not repeat themselves in the future.
3. Wrongly assuming that Fed Funds Rate of 5.5% would damage the economy and cause a severe recession while the rate of inflation, 3.2% today and 3.6% on the average over the last 50 years, was 13% in 1981 when FED Chairman Volker tamed it by creating a recession by jacking the Fed Funds Rate to 22.36% effective rate.
4. As a result of all the above, engaging in endless discussions of “soft landing for the US economy,” which is as fictitious as the term itself with the attendant nonsense of “people are suffering everywhere,” “bankruptcies are increasing,” “people are being ravaged by high inflation” and the communist mantra “rich are getting richer and poor are getting poorer” – all of which we have also heard from the REPUBLICAN presidential candidates during the presidential candidates’ debates. At the same time, Americans have been living in the richest, most democratic and the freest country of the world with the highest standard of living on the Earth ever when, only for instance, meat is being sold at prices that are 40% to 90% lower than in 1975 adjusted for inflation.
5. The fact that Secretary Yellen is using the term “soft landing” notwithstanding. She is also worried about the inescapable fact of “income inequality” – the sine qua non of the well functioning capitalist economy as it provides a measure of effectiveness of individuals’ actions and a measure of self-improvement – see the Nobel Laureates in economics on this subject. The communists provided a perfect solution to “income inequality” by (1) taking money away from the “rich” and “giving” it to the “more deserving” and (2) by assuring that a tractor driver on a farm was making the same salary as a surgeon. The result? It made all of us living in a communist country at the time poor, with the exception of the communist party brass who were “more equal” than the rest of us.
1. Memory limited to the time since the inception of Twitter.
2. Forgetting that we are coming out of nearly two decades of unprecedently low interest rates that may or may not repeat themselves in the future.
3. Wrongly assuming that Fed Funds Rate of 5.5% would damage the economy and cause a severe recession while the rate of inflation, 3.2% today and 3.6% on the average over the last 50 years, was 13% in 1981 when FED Chairman Volker tamed it by creating a recession by jacking the Fed Funds Rate to 22.36% effective rate.
4. As a result of all the above, engaging in endless discussions of “soft landing for the US economy,” which is as fictitious as the term itself with the attendant nonsense of “people are suffering everywhere,” “bankruptcies are increasing,” “people are being ravaged by high inflation” and the communist mantra “rich are getting richer and poor are getting poorer” – all of which we have also heard from the REPUBLICAN presidential candidates during the presidential candidates’ debates. At the same time, Americans have been living in the richest, most democratic and the freest country of the world with the highest standard of living on the Earth ever when, only for instance, meat is being sold at prices that are 40% to 90% lower than in 1975 adjusted for inflation.
5. The fact that Secretary Yellen is using the term “soft landing” notwithstanding. She is also worried about the inescapable fact of “income inequality” – the sine qua non of the well functioning capitalist economy as it provides a measure of effectiveness of individuals’ actions and a measure of self-improvement – see the Nobel Laureates in economics on this subject. The communists provided a perfect solution to “income inequality” by (1) taking money away from the “rich” and “giving” it to the “more deserving” and (2) by assuring that a tractor driver on a farm was making the same salary as a surgeon. The result? It made all of us living in a communist country at the time poor, with the exception of the communist party brass who were “more equal” than the rest of us.
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