Author Topic: POLL: Fed and interest rates  (Read 9654 times)

shalab

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Re: POLL: Fed and interest rates
« Reply #20 on: January 02, 2019, 09:10:06 PM »
Market expecting the fed to stay pat on rates - with 80% probability

https://www.wsj.com/articles/investors-are-betting-that-the-fed-hits-pause-on-rate-hikes-11546449520?mod=hp_lead_pos2#comments_sector

Apple CEO also came out and said the dollar appreciation is impacting profits.


LC

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Re: POLL: Fed and interest rates
« Reply #21 on: January 02, 2019, 11:11:56 PM »
Nothing the fed does is a market phenomenon.  It is government setting rates. No different from the USSR setting prices in their economy either by their own opinions or sometimes by looking at ads in London Newspapers. If the rate is set by the fed then it isn't being set by the market. If the price of Avocados was set by a government board and you asked me "What do you think about the Federal Avocado Board reducing prices in 2009-2013?  Did they do the right thing?"   My answer would be the same.  I don't know. The market should be setting the rate not some board of bureaucrats/experts.
My point is that it was a period of time where market pricing would have made things worse.

Credit was incredibly tight. If the market had set rates, they would have risen or stayed at spiked levels:

https://voxeu.org/article/credit-conditions-and-great-trade-collapse

Interbank rates (here, the one-month rate) spiked in September 2008 in many economies, as banks became extremely averse to lending and the supply of financing tightened. There are nevertheless key differences in the severity and timing of the credit crunch. In countries such as Germany and Bulgaria, the interbank rate was on an upward trend until an abrupt reversal in November 2008. In contrast, these rates were declining from a much earlier date in Canada and Singapore, reflecting earlier interventions made by central bankers there to cope with the impending downturn.


Our results suggest that the impact of credit conditions was sizeable. The decline in trade volumes would have been about twice as large in percentage terms had interbank rates instead remained at the high levels of September 2008 throughout the rest of our sample period.




Central Banker's/Avocado's decision to cut rates has been universally acclaimed and is evidence of a Central Bank's positive contribution.
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JimBowerman

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Re: POLL: Fed and interest rates
« Reply #22 on: January 03, 2019, 12:29:44 PM »


Nothing the fed does is a market phenomenon.  It is government setting rates. No different from the USSR setting prices in their economy either by their own opinions or sometimes by looking at ads in London Newspapers. If the rate is set by the fed then it isn't being set by the market. If the price of Avocados was set by a government board and you asked me "What do you think about the Federal Avocado Board reducing prices in 2009-2013?  Did they do the right thing?"   My answer would be the same.  I don't know. The market should be setting the rate not some board of bureaucrats/experts.

The fed controls the supply of base money, so how can the market ever truly be setting rates?  If you're going to have a national currency, someone has to decide how quickly to grow money supply, no?

rkbabang

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Re: POLL: Fed and interest rates
« Reply #23 on: January 03, 2019, 02:08:27 PM »


Nothing the fed does is a market phenomenon.  It is government setting rates. No different from the USSR setting prices in their economy either by their own opinions or sometimes by looking at ads in London Newspapers. If the rate is set by the fed then it isn't being set by the market. If the price of Avocados was set by a government board and you asked me "What do you think about the Federal Avocado Board reducing prices in 2009-2013?  Did they do the right thing?"   My answer would be the same.  I don't know. The market should be setting the rate not some board of bureaucrats/experts.

The fed controls the supply of base money, so how can the market ever truly be setting rates?  If you're going to have a national currency, someone has to decide how quickly to grow money supply, no?

Bingo.

Money should also be a market phenomenon.
 

shalab

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Re: POLL: Fed and interest rates
« Reply #24 on: January 03, 2019, 05:28:22 PM »
Looks like sanity is prevailing with some folks - Dallas Fed thinks we shouldn't raise rates:

https://www.cnbc.com/2019/01/03/robert-kaplan-says-central-bank-should-pause-rate-hikes-amid-turmoil-in-markets.html

WSJ chimes in with the prospect for rate hikes -

A bond-market indicator also is sending a bad signal. The difference between the three-month Treasury bill and the 10-year note has narrowed considerably. With the former at 2.41% and the latter at 2.58% midday Thursday, an inversion in the yield curve is a real possibility.

Inversions have often preceded recessions, even as economists still debate whether they correlate with downturns, or cause them. A recent San Francisco Fed paper said a sustained three-month to 10-year inversion is the most reliable market indicator of recession.

https://www.wsj.com/articles/analysis-bad-news-barrage-dims-hopes-fed-can-deliver-2019-rate-hikes-11546545691
« Last Edit: January 03, 2019, 07:13:09 PM by shalab »

Cardboard

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shalab

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Re: POLL: Fed and interest rates
« Reply #26 on: January 04, 2019, 08:33:15 PM »
Hope so - but looking at comments from others - it looks like the Fed may still raise rates

Cleveland Fed:

https://www.cnbc.com/2019/01/04/feds-mester-says-if-inflation-doesnt-rise-fed-could-stop-hikes.html

"If we don't see inflation picking up and we see the labor market staying reasonably strong from where we are now, that may tell us we're not neutral."


Cramer thinks Fed has outdated models and I tend to agree:

https://www.cnbc.com/2019/01/04/cramer-fed-will-hike-rates-until-there-are-firing-and-layoffs.html

CNBC's Jim Cramer argued Friday that the Federal Reserve's policies are severely outdated, and said the central bank won't stop its rate-hike policy until Americans suffer from "firings and layoffs."

Ah... the guy woke-up!

https://www.cnbc.com/2019/01/04/powell-says-fed-will-be-patient-with-monetary-policy-as-they-watch-how-economy-does.html

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james22

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Re: POLL: Fed and interest rates
« Reply #27 on: January 05, 2019, 12:09:57 AM »
I like Uncle John's take:

1.  Greenspan, Bernanke, and, in particular, Yellen all gave the markets a ďputĒ optionóbasically a third unofficial mandate to make sure that asset prices keep rising. Now, of course, thatís not the way they would express it, but that is, in fact, what they did. They created a series of bubbles, which spectacularly (and predictably) blew up, particularly screwing the little guys who didnít know better and could least afford losses. We should not be where we are today, and we would not be here today, without their seriously screwing up Federal Reserve policy.

2. The Federal Reserve is running a two-variable experiment without the benefit of ever having run a one-variable experiment to determine what the results would be. It is decidedly the stupidest monetary policy mistake in a long line of Fed mistakes.

What are the two variables? They are raising interest rates (albeit slowly) and aggressively reducing their balance sheet. I think many of the problems we see in the market are results of this combination. They should do one or the other, not both.


3. Powell and the Federal Open Market Committee listen to extremely smart PhDs from all the best schools with their fabulous multi-algorithmic models, which prove that you could raise rates and reduce the balance sheet at the same time with no problems.

Bluntly, those smart people (many of whom are actually quite brilliant, and Iím sure they are nice people, and their kids and dogs love them) mistakenly trust models based on past performance, and even worse (much, unbelievably, really badly, worse, which I canít emphasize enough!) on monetary theory that is clearly, evidently, badly, manifestly wrong.

They have been using these models to forecast future market actions and the economy for decades, and they are about 0 for 300 in being right. It is statistically impossible to be that bad unless your models/assumptions are fundamentally flawed, which they are. Their underlying economic theories manifestly donít work.


https://www.mauldineconomics.com/frontlinethoughts/bear-markets-fed-mistakes-and-quick-shots-from-john%2Bmauldin+fed+uncle+john&client=safari&rls=en&hl=en&ct=clnk

wachtwoord

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Re: POLL: Fed and interest rates
« Reply #28 on: January 05, 2019, 05:50:19 AM »
I'm missing the option: "Interest rates should be set by the free market rather than a central bank."

Edit:
While reading all the posts saw rkbabang already made my point.
« Last Edit: January 05, 2019, 05:52:17 AM by wachtwoord »
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shalab

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Re: POLL: Fed and interest rates
« Reply #29 on: January 06, 2019, 09:49:35 PM »
Yes, ideally it is how it should be but it isn't. It is unlikely to change anytime soon.

https://www.wsj.com/articles/fed-faces-a-fresh-test-engineering-a-soft-economic-landing-11546822609?mod=hp_lead_pos1

Here is another article on the motivation of the fed - they would like to push unemployment up without triggering a recession. Seems like a tough job when asset and commodity prices are dropping. As others have said, Fed seems to be having some outdated models.

I'm missing the option: "Interest rates should be set by the free market rather than a central bank."

Edit:
While reading all the posts saw rkbabang already made my point.
« Last Edit: January 06, 2019, 09:53:52 PM by shalab »