Dot Plot
The Dot Plot is a summary of where the FOMC members see future interest rates.
It’s unanimous there will be no hikes this year. And by a 14-4 supermajority there will not be hikes in 2022.
In 2023, the expectations are 11-7. Two brave souls actually think the Fed will hike 4 times in 2023. [Note: a reader commented that foolish is a better word than brave. I agree.]
Longer Run Silliness
The longer run is a real hoot. A majority think rates will be 2.5% to 3.0%.
US National Debt is over $28 trillion. Click here to see a continually updated Debt Clock as in every second.
Three Percent Interest On $28 Trillion
Three percent of $28 trillion is $840,000,000,000. That’s $840 billion annually.
Some debt will be long-term financed lower, but $28 trillion isn’t constant.
And what about future recessions?
These projections are nothing more than economic silliness.
Three Related Articles
- Fed Commits to “Full Range of Tools” Seeks Inflation Above 2% “For Some Time”
- Inflation is Poised to Soar, 3% by June is “Almost Certain”
- Hello Jerome Powell We Have Questions
Repeated Error
Finally, please note Fed hubris. The Fed is Making the Same Inflation Mistake once again.
Mish
The FED will never allow rates to normalize. If rates normalized, the US would become insolvent. They’ll continue to buy MBS and treasuries every month. They’ll pretend that low rates and QE are temporary measures, but in reality, they’re permanent.
why? as long as borrowers accept dollars its just a journal entry
Models are just that models. They’re both data dependent and only as good as the timliness of the latest regression or white paper. I take this all with a grain of salt. As far as laying out their predict range of future rates, I think something more is going on. Most likely its a more complicated version of jawboning the markets and trying th convince participants that current Fed policy is not simply for today but will extend for some duration. I think the more intelligent among us know that any such talk is non-sense and will change once the facts as we know them today change, otherwise everyone can simply make their decisions and go on vacation for a year or longer.
Debt — $28T
2020 GDP — 20.3T
Debt/GDP — 133%
Plenty of space til we’re Japan.
Just grow the economy to $30T GDP and we’re all good.
Japan is different. Historically, they haven’t run huge trade deficits and almost all their debt is held inside Japan.
I would say Japan exists within its box and the US exists within its box.
When the US hits 250% debt/GDP, the US will have reined in trade deficits and will no longer sell its debt. Which is to say that US debt/GDP will never hit 250%, most likely because GDP growth will continue rising.
I definitely ‘believe this’ since, as Keynes said ‘in the long run we are all dead’ Obviously the fed is making a joke here and someday the fed funds rate will be in that range. Someday after we’re all dead.
The big problem with many government statistics is that the government shouldn’t be both the data collector and statistic generator, given that the government stands to benefit based on the outcome of the numbers.
Inflation, unemployment numbers, etc. should be collected & calculated by a politically independent body that doesn’t have a stake in the magnitude of the number one way or the other. Only then will we get honest numbers that reflect the real world.
The title isn’t as accurate as it could be relative to the content in the book
0% chance interest rates move up anytime in the near future
I also love that book. Felt like it should be a lot longer, but glad they didn’t do it otherwise it would turn into a Rothbardian epic
The 60 year interest rate cycle has bottomed and will force ALL central banks to raise interest rates.
i think that i must be stupid. i think to move the economy forward we need to lower credit card rates below 6%, and raise the minimum wage. i call it creating customers. seems home ownership is out of reach for the majority of most people. this is a huge problem.
“A new report from Bloomberg reveals that up to two-thirds of entry-level tech jobs go to foreign guest workers from low-ranked colleges who don’t dare complain about long work long hours and low wages lest they destroy their chances of a green card…”
Open borders drive wages down. Raising the minimum wage will incentivize investment in automation of more low skill jobs.
Wanting higher wages and an increase in immigrants makes no sense. You can’t have both. Too bad our media is too complicit with the democrats or too stupid to bring this up.
It’s all why they call it building CONfidence …
By definition, those participating in a game they know is corrupt, are corrupt …
Depends what they have in mind. 28T doesn’t get refinanced yearly, plus they could refinance into long term debt before raising rates, etc. Equally by the time they raise rates to 3% then 28T might be worth 28 cents, so a bargain. I don’t expect them to raise rates much though, because those guide other rates in the wider economy, and its finances would not support higher rates…I suppose if they wanted to wipe out the private sector or something they might though.
All that matters to us is how the STOCK market is doing.
Today was an good day as we made $6K.
If inflation goes over 5% for a year won’t they pretty much be forced to raise rates? Price stability is a primary mandate.
I’d say the Fed’s primary mandates now are to finance government spending, keep assets high, and keep the government solvent by subsidized low rates. Price stability is a myth now
The FED is a market pumper and a lier. There is a lot of inflation. My property taxes are up 4.75% . Since Jan 2021 Building lots are up 30 to 40% in my neighborhood. House prices are up 20% and bids are higher then listings. Framing lumber up 30%. Plumbing fixtures and parts up 25%. elctrical wire up 20%. Has Powell bought any food lately.? The FED has to get their head out of the sand and see the real prices and not the FAKE WHATEVER THE MARKETS WANT TO HEAR gibberish.
“The FED has to get their head out of the sand…”
Why?
Powell doesn’t even set foot in a grocery store. Like Yellen, his slaves do the shopping.
Powell is the richest Fed chairman in history: Well over $50 million in his personal piggy bank. Oink.
I wonder how much of that 28 trillion comes from 1 dems social programs /2 republican tax cuts / 3 unfunded wars.
A lot of it was spent on bailing out insolvent politically connected institutions.
‘Never interrupt your enemy when he is making a mistake.’
-Napoleon Bonaparte
Wouldn’t a hike be necessary if the dollar was collapsing? As long as the dollar holds up I don’t know what would force them to hike rates.
If the Fed told the truth in its financial projections, the markets would roll over and we would have an instant recession, and it wouldn’t be a short one. It might cause a depression.
The Fed Chairman’s job, or a big part of it, is to take whatever horrible, crappy, scary reality that we happen to be in…..and somehow put out a narrative that makes it sound like thing are gonna be JUST FINE……we just need some more stimulus, some more inflation, and the massive economic engine that is America will come roaring back. Right!
Who believes that shit? Not me.
It’s bullshit, but if Powell DOESN’T say things like that, then sentiment will go right into a black hole and no light will ever emerge again.
Smoke and mirrors…It’s ALWAYS a game of smoke and mirrors….to try to goose consumption. If they can goose consumption, it carries us stumbling along…..to the next crisis.
Rinse, repeat…..until it stops working, which it has to….I get that…..But it kinda works to kick the can.
What was Goyette’s first book? Oh, yeah….The Dollar Meltdown.
I haven’t read it, but I have a pretty good idea what it said. He wrote it in what? 2009? ….and I’m sure many people who read it thought the whole banking system would collapse very soon…but it didn’t.
I am not worried too much about the debt. It’s just a way of sending money into the economy to get it off the ground and get people back to work. Those who complain about it are those who are already sitting pretty enough not worry about where their next meal comes from. The debt can be rolled over as long as necessary and at the price they choose. The FED could even buy it back and cancel it if they want. After WW II the US didn’t real pay it down. It was inflation and GDP growth that brought it under control.
The banking system did collapse in 2009. That’s why we had TARP and the FEDs balance sheet going from $800b to $4t.
There were no ordinary bank closures, no bank runs, and no unusual defaults, other than Lehman and investment banks, most of which were quickly papered over.
They papered over that Minsky momentt pretty well, I’d say. I understand that the entire system came very close to locking up…..but I call it a pretty good stick save.
I borrowed over a million dollars in 2009…..so it didn’t affect me much..other than increasing my liability as a citizen of the US.
No, the banking system didn’t collapse in 2009. The secondary mortgage market collapsed. TARP was a fool’s errand. We’d have been better off had the gummit just left the marketplace alone. 2009 and 2010 would have been a deeper ditch but 2011 forward would have been a lot better.
If you think the fed is flailing now just wait until Biden and his socialist buddies start pushing their tax increases, especially the “wealth tax.” Fit meet shan.
No, the banking system didn’t collapse in 2009, the secondary mortgage market collapsed. We’d have been much better off without TARP, that was a fool’s errand. No TARP, 2009 and 2010 would have been a little deeper but 2011 going forward we’d be a whole lot better off.
And just wait until Biden and his Socialist buddies in the Congress start wailing on new taxes. Especially the “wealth tax.”
“It is difficult to get a man to understand something when his salary depends upon his not understanding it”
The Fed in a nutshell