US interest rates cut for first time in a decade

worldtraveller

The US central bank, the Federal Reserve, has cut interest rates for the first time since 2008.

The Fed announced a 0.25 percentage point cut, taking the federal funds target range to 2-2.25%.

BBC News

triathlon

worldtraveller wrote: »

The US central bank, the Federal Reserve, has cut interest rates for the first time since 2008.

The Fed announced a 0.25 percentage point cut, taking the federal funds target range to 2-2.25%.

BBC News

Bang goes the property crash that was never going to happen :rotfl:

Thrugelmir

Doesn't seem if there's sufficient debt in the financial system yet........

US share prices will continue to trend upwards

Sailtheworld

Thrugelmir wrote: »

Doesn't seem if there's sufficient debt in the financial system yet........

US share prices will continue to trend upwards

.....and obviously insufficient for the whole of the previous decade you've been warning about rising rates.

Thrugelmir

Sailtheworld wrote: »

.....and obviously insufficient for the whole of the previous decade you've been warning about rising rates.

Abnormal central bank interest rates do not bode well. Pulling a lever tends to have an unintended consequence elsewhere.

westernpromise

After 10 years at 0.5% +/- 0.25%, at what point do these rates become by general consensus 'normal'?

When you can get through a whole mortgage term I'd say they were pretty normal.

Base rates have only been above 10% in 20 of the last 300 years and all of them were between 1970 and 1995. Maybe those years were the abnormal ones?

Thrugelmir

westernpromise wrote: »

After 10 years at 0.5% +/- 0.25%, at what point do these rates become by general consensus 'normal'?

The Central Banks balance sheets will ultimately need to be unwound. If there's a recession there's little ammo left in the locker. The ECB already charges banks (and therefore their depositors) for holding overnight cash. Yet has little impact in boosting Eurozone growth or inflation. The Eurozone banks (some at least of the majors)are a decade behind the restructuring undertaken by the US and UK ones. There's more debt globally now than when the crash occurred in October 2008.

The BOE would like a base rate in the range of 3% - 4.5%. That would considered normal.

With low base rates there's an issue that some banks will struggle to maintain profitability. Profitability being required to bolster their capital solvency. Which is progressively ratcheted up.

Still in the midsts of an experiment. May last two decades yet......

GreatApe

All assets will tend towards zero and then negative

Government bonds and mortgages and the safest corporate paper is already zero or negative

Houses the next big asset class is arguably also already at zero. A house yields just 4% gross 3% net and 1.5% after taxes. That 1.5% is less than inflation. People have relied on house price gains to buff returns but house prices at some point will be worthless so although prices may go up for a number of years houses will become worthless at some point. This may take 30-60 years but it will happen. The world needs a total of 5 billion homes and we are building 0.5 billion a decade. When we get to 5 billion we will continue building and second hand homes will be worth-less in the way second hand cars are worthless

Some regions will get there before others
Some regions (like London) will hold their value because it's not only housing it's more than housing for some areas/locations

And the last assets class .... Business...well what is going to happen to the share price of business when AI arrives? I'd suggest the concept of business won't even exist when the AI produces everything there will be no business no stock market no shares and the current business will all go to zero (bust) so negative real returns

So there you go, a pathway to zero returns for all the asset classes

The only thing that will have value, so long as humanity 'protects it' is IP and copyright. The sports stars and artists and movie stars will continue to grow their income exponentially

Sailtheworld

Thrugelmir wrote: »

Still in the midsts of an experiment. May last two decades yet......

I'm pretty sure that a decade ago when you were saying people would be unwise to consider these rates normal you didn't suggest they might 'only' last 30 years.

Thrugelmir wrote: »

Abnormal central bank interest rates do not bode well. Pulling a lever tends to have an unintended consequence elsewhere.

If we've got another 20 years before the (unspecified as usual) bad thing caused by low rates materialises that might suggest quite a low correlation between low rates and the 'bad thing'.

MobileSaver

GreatApe wrote: »

second hand homes will be worth-less in the way second hand cars are worthless

One of my second hand cars bought 20 years ago is now worth 800% more than I paid for it...

... you are still making the same mistake of treating all homes as equal and the false assumption that a home is just a pile of bricks. Many houses are genuinely unique and even similar brick buildings can be more desirable than others simply because of their unique location and/or the amount of land they are situated on.

Many (most?) people do not want to live in high-density, high-rise buildings and varying and increasing house prices support that; consequently your idea of AI being able to create housing for practically free and thus making houses worthless is fundamentally flawed.