Debt Rattle Sep 12 2014: The Fed Has A Big Surprise Waiting For You
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Risdon Tillery Greenwich House day care, New York May 1944 The topic of potential interest rate hikes by central banks is no longer ever far from any
[See the full post at: Debt Rattle Sep 12 2014: The Fed Has A Big Surprise Waiting For You]@Illargi
re: TAE’s position on Deflation and low Treasury rates
My understanding from reading TAE for several years was that you (at least Nicole) saying that when the Big Deflation hits, “Cash is King” and Treasury rates will fall, even go negative on the shorter end, because of flight to (perceived) safety and demand for cash and cash equivalents.The Primers I’ve read on your sight over the years have recommended buying Treasuries, even at very low rates, anticipating rates will go even lower.
But lately you’ve been predicting rates will rise. That’s a big switch. What does Nicole think about this?
@Illargi
You said, …They’ve spent trillions of dollars backed, in the end, by American taxpayers, …
We’re in for big surprises …
But it can suck a lot of wealth out of it.The tax payers,( at least 75% of them) cannot bleed anymore they are dry as stones.
The sucking of wealth will have to come from the remaning rich 20%.Put up your hand if that is you who is next in line.
MayAllBeWell….if im note mistaken, treasure rates (at least on the 10Y bonds) are down from about 10-15% since January to about 2.6%, historically im not sure when its been lowers, but thats very low going on recent history i think.
If the Fed hikes the fund rates up as anticipated by todays blog, its gonna go either lower as all the dollars around the world are gonna start rushing back to the U.S. bond market, at least thats what i think Ilargi supposes (quite rightly imo).
I think what youve misunderstood is that Ilargi is saying the fund rate will rise, not the treasuries.
Given that, i dont think todays blog is a big switch at all to the narrative provided by Nicole.
Of course, im no financial expert, so maybe ive got it horribly wrong, but in any case, im pretty sure that answers your question. If not, im sure Ilargi will clarify (please do ilargi! i wanna know if i’ve gotten this right!)
If there is even a remote hint out there in the ” New Plateau” of the Bond Market, of an inversion of the yield curve anytime soon, the ash cloud will make the eruption of Mt. St. Helens look like a backyard BBQ. Stawks may join the soirée, as well.
If Granmma Jan is going to tinker around with the FF Rate, and boost it even 1 basis point here, she better have her apron on, cause there might be cookie dough hangin’ from the rafters.
On the other hand, after she is finished apologizing, and exclaiming she will never again let such thing happen on her watch, until the CPI is well into double digits, what happens to Capital on a 10 year bond when rates go to zero or negative? Yup, it goes up!
So, Gramma Jan? Do you feel lucky?
On the deflation front, how can rates go up when the real return on a security is actually positive at zero or below in a scenario of deflation?
Jal,
Yessir. The anointed passing the hat? Ha! Gross has a lengthy tome under Ilargi’s great piece on ZH, that lays out the usual Trickle Down meme of Keynesian nuttery, mainly that stuffing the banking system with free money will somehow fill it up to the point it will begin lending again, firing off Main Street, and all will be well. Well, $4 trillion later and the “Laggard” wages haven’t caught fire yet.
Seems the demographic element entering retirement now, coupled with those “Consumers” who have been living on credit this last half decade, waiting for hope to save em, coupled with those who are still traumatized by the shit storm that hit ’em in the house and stock part of their well being around 08′ are just not lined up to do it all again. Many were burned, most are deeper in debt than before.
Add the assorted implosions in Euro land, the disorder in China, and the sanction lunacy spreading around the planet.
So, the laggard, wages, are down for the count. Trickle down isn’t trickling any longer. Joe 6’er isn’t a team player here. The only way the Fed is going to ignite this thing now is full on, maniacal double throw down direct distribution of free money to downtown heartland America.
This is the short version of why I can’t see rate rises now. Or anytime soon. Call me dense, or what ever else will roll off like water off a ducks back, but the Ten Year looks pretty good, just a little bit longer. Guess I can do a cardboard sign if I’m wrong.
While watching a 9-11 program, I reflected on the fact that the hijackers took over the planes, no one on board could do a thing about it, the passengers didn’t know where the hijackers were taking them. Their fate was in the hands of the hijackers. The worst situation you could ever imagine.
The economic situation in no way compares to what those poor people went through, but we are, all of us, at the mercy of the very people who have hijacked the world’s economic system. They have taken over, they are flying the plane. We are told that things are improving, the light is just around the corner, sit tight and we’ll come out the other end.
Most everyone is going along, not really complaining much, just sitting complacently with their seat belts on. Some hope that if they’re quiet, their gold will rise, their stocks will too; somehow they’ll be safe. Meanwhile, the hijackers continue.
Tell me, how are these people not a whole lot like hijackers?
“Between 1979 and 2013, productivity [in the U.S.] grew 64.9 percent, while hourly compensation of production and non-supervisory workers, who comprise over 80 percent of the private-sector workforce, grew just 8.0 percent. Productivity thus grew eight times faster than typical worker compensation.”
Raleigh:
Your hijacker comparison is certainly a good one, but the 9/11 hijacker narrative is a myth.
Also, I’ve changed my mind on the Scottish “independence” vote this Thursday. I’m now in the “no” camp, and chastened for feeling so sure of myself when it now turns out I didn’t know all the facts after all. I wonder how many readers here will also have a change of heart after hearing Farage speak.
@ Diogenes Shrugged,
After being a wool dyed yes, I too turned against Salmond and the yes campaign months ago, he is an absolute charlatan who would sell his soul to the devil simply to beat Westminster (which I also despise, but not enough to disparage my English neighbours), he is tearing Scotland limb from limb by trashing our countryside, greenbelt and historic institutions all in a puerile attempt to match Westminster GDP figures and “prove” Scotland can mix it with the best….. destroying the village to save the village 2014 style if you like…., I dread to think how Scotland will develop if he wins and secures another term (inevitable if he wins) I’m heartbroken as I’d love to give the London establishment a kicking, but Edinburgh tyranny for the rest of Scotland is so much worse than it’s London counterpart, believe me I live in the next distict and it’s being destroyed to benefit its parasitic city rulerZ
RE Farage. I’ve remained agnostic on the Scottish question because I know nothing about it. I do know enough to know that how questions of the day are presented to us is always false or only offers a tiny fraction of the whole so as to be disinformation at best.
Near the end Farage says what I said here recently. There is no plan for a Scottish currency. Nobody who is within two degrees of power anywhere have a clue about how to create a sovereign currency or think such a thing is anything other than a nightmare. Nobody near power can imagine a world which is fundamentally separate from the growth/debt model, for want of a better shorthand description of Western Industrial/financial system. That said independence has to be a false word in the context of this vote.
I get that IM wants to kick the status quo in the nuts. That’s fine. However he and everyone who does and comes from the ‘collapse’ school should come forward and say what they want is to hasten the end, the collapse of the status quo. I don’t think this is a trick question.
PS
Then there is UKIP itself. Again I was clueless. WIKI will do for now. It is a party of the right.
https://en.wikipedia.org/wiki/UK_Independence_PartyZander, I hear you, but separation never takes place under ideal circumstances. What I think is most important is that the centralized power structures are broken up, the UK and the EU. When’s the last time Britain had a decent government? I really couldn’t tell you. And that must backfire at some point. As for the EU, it must be cut to size ASAP. It has become a nasty power podium for psychopaths, and it’s a huge threat to everyone in EUrope who’s not part of some elite. That was of course already evident in southern Europe, and it is now in Ukraine as well. If Scotland can be the catalyst that rips apart more EU countries, and their increasingly technocrat governments, that would be a very good thing for all Europeans except the elites, and I don’t think it will turn out nearly as bad for the Scots as people try to make them believe. Salmond is merely the spark needed for the break-up, others will stand up to lead the independent country after that.
Ilargi, I hear you too, and agree with your long term prognosis, however the short term is important here, this loony is destroying huge swathes of Scotland with industrial scale windfarming, the eastern side of Sutherland and large chunks of Fife and Galloway have effectively been ruined forever with more, much more to come, also a truly mind boggling house building and infrastructure program has been embarked upon with local communities ignored and big money construction and development interests blowjobbed, and this, as as we all know will end as stranded asset, ergo, in the short term Salmond may destroy this country beyond all repair before the true benefits of our independence and the EU blow up corollary can be enjoyed, a yes vote and another Salmond term would be enough for him finish his demolition job IMO.
Nothing is sacred for this money, prosperity, progress obsessed maniac. I want him gone by whatever means necessary.BTW have appreciated your sterling work lately, tenner coming.
Stay safe
Z.Yeah, well, you want Salmond gone and Cameron gone …
I see a lot of people saying what a success the Union has been for 300 years, but when I think about the list of Thatcher, John Major, Tony Blair, Gordon Brown, David Cameron, I just get the shivers. What about that is worth preserving? It’s just going to keep getting worse, even though one might think that’s not possible. Next one up may be Boris Johnson …
“I think what youve misunderstood is that Ilargi is saying the fund rate will rise, not the treasuries.”
True,,,at first. A yield curve inversion would most likely eventually result. The short end of the curve would begin rising until the 2’s rise above the 5’s rise above the 10’s etc.
What I read in the scribbles of BS coming from the planners is, QE isn’t ending by a long shot. It’s just changing it’s spots in a kinder gentler happy face kind of way, and going to be directed at Main Street. All the “living wage” headlines out there indicate this too. Next up, massive strikes and minimum wage hikes.
Book this. The Fed MUST get wages goosed to complete the devaluation cycle. They will, or they will die.
Besides, maybe they see a jump in sales activity in gardening implements, such as pitch forks, in their statistics, and would prefer to temper those numbers, lest they become too big to fail?
I’m not really at odds with your analysis or conclusions Ilargi, for me this is the mother of all Hobsons choices, as I see it : London = tyranny and neglect , Edinburgh = tyranny and brutal exploitation of areas outside Holyrood’s domain for Edinburgh and financial interest’s benefit , however, your take on the Macro consequences make a yes vote more desirable, unfortunately for people living up close and personal with SNP destruction and increasingly a nudge toward anti Englishness a no vote to stop Salmond’s malignancy is the only option.
I’m voting NO with a heavy heart.Z
Raul,
I appreciate your mind and your courage.
However, with regards to interest rates: Why would Fed need to raise rates? Their problems are solved by any number of things including expiring the currency/inflation. For instance, when the US loses reserve status the significant inflation to follow would remove the debt burden.
Thank you for your response,
Stew
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