Fed Hike

padington

Thrugelmir wrote: »

Equally as bad for leveraged borrowers as means we are heading for deflation.

Deflation in many things maybe, not property because the tools to fight deflation will keep the fire lit under the property market.

michaels

MARTYM8` wrote: »

People can of course choose to do what's best for the wider economy today or alternatively save for the future because if it goes pearshaped the Government won't have any money left to support them.

Without a growth in debt there is no growth.:D

But save where, if the govt don't have any money then they won't be able to bail out bank deposits either.

I hope you aren't turning all 'its hard and shiny' on us....

DiggerUK

worldtraveller wrote: »

Federal Reserve Chair Janet Yellen told Congress Thursday the central bank has not ruled out imposing negative interest rates if the economy takes a downward turn but is investigating their viability...........

The Federal Reserve can't introduce negative rates, Yellen knows this, and is just dancing round her handbag saying anything else.
The Federal Reserve Act, that legalises the banks existence, mandates the Fed to maintain "moderate long term interest rates"http://www.federalreserve.gov/pf/pdf/pf_2.pdf

So when she says "We didn't fully look at the legal issues around that," I suspect she is lying through her teeth, because she hasn't got a fully worked out strategy to sucesfully circumvent the law..._
http://www.cnbc.com/2016/02/10/yellen-conditions-less-supportive-of-growth-reiterates-rate-path-is-data-dependent.html

Thrugelmir

padington wrote: »

Deflation in many things maybe, not property because the tools to fight deflation will keep the fire lit under the property market.

Property is not immune to the effects of deflation. If banks continue to operate on lower and lower margins. Then even offering mortgages as a product won't be worthwhile doing.

worldtraveller

DiggerUK wrote: »

The Federal Reserve can't introduce negative rates, Yellen knows this, and is just dancing round her handbag saying anything else.
The Federal Reserve Act, that legalises the banks existence, mandates the Fed to maintain "moderate long term interest rates"http://www.federalreserve.gov/pf/pdf/pf_2.pdf

So when she says "We didn't fully look at the legal issues around that," I suspect she is lying through her teeth, because she hasn't got a fully worked out strategy to sucesfully circumvent the law..._
http://www.cnbc.com/2016/02/10/yellen-conditions-less-supportive-of-growth-reiterates-rate-path-is-data-dependent.html

I still have no comprehension, whatsoever, why they ever raised rates when they did, just as the global economy was going into a nosedive, as seen by anyone living in the real world!

Does anyone trust these idiots? They really are, IMHO, pointless, beyond belief!

michaels

worldtraveller wrote: »

I still have no comprehension, whatsoever, why they ever raised rates when they did, just as the global economy was going into a nosedive, as seen by anyone living in the real world!

However, my ongoing, long term view, of idiot, pointless, ivory-towered economists, probably answers that question pretty quickly!

The US economy is 90% closed (ie imports/exports are only 10%) and the Fed set monetary policy for the US not the world.

(That and the fact they said they were going to and didn't want to look stupid)

Thrugelmir

michaels wrote: »

The US economy is 90% closed (ie imports/exports are only 10%) and the Fed set monetary policy for the US not the world.

(That and the fact they said they were going to and didn't want to look stupid)

In 2015 imports still amounted to $7,240 per person living in the USA. Likewise an increasing dollar exchange rate is hurting exports.

Yellen has maintained her stance that in the longer term interest rates will rise.

cells

whats clear is that nobody knows with certainty what seems to drive inflation up or down, nor is there a tool to accurately manipulate it

one theory put forward by some is that in developed nations the interest rate drives inflation. So central banks that set a low interest rate see low inflation and central banks that set a high rate see high inflation. Sounds kind of stupid but as each week passes it seems to sound less and less stupid.

clearly the economy and market participants will try to earn real returns rather than fake nominal returns so if the real return expected is say 1% then whatever the interest rate is inflation will be some 1% below that.

That seems to be what is happening now. With interest rates around the world at about 0.5% inflation is about zero.

Thrugelmir

cells wrote: »

whats clear is that nobody knows with certainty what seems to drive inflation up or down, nor is there a tool to accurately manipulate it

Perhaps Keynes (in what was introduced as a temporary) concept to kickstart the economy post WW2 has run it's course. Adopted by politicians permanently as it gave them a get out from ever having to repay borrowed money. The sums of debt involved now are simply too large to inflate away.

DiggerUK

One reason they may have made such a move is to stay legal. In answers to the politicians she acknowledged for the first time, as far as I can recall, that they had looked in to negative rates, on more than one occasion since 2010.
I suspect somebody pointed out they weren't operating within their legal mandate at 0/0.25%, so decided to go with the raise.

Listen to the section were 'negative rates' are addressed.
http://www.cnbc.com/2016/02/10/yellen-conditions-less-supportive-of-growth-reiterates-rate-path-is-data-dependent.html

If they are going to do 'whatever it takes'.....then it's QE4, or Palookaville.