The Fed just announced a new monetary framework. Is it any better?
Framework Review
Please consider Powell’s speech on Monetary Policy and the Fed’s Framework Review
At the time of the last review [5 years ago], we were living in a new normal, characterized by the proximity of interest rates to the effective lower bound (ELB), along with low growth, low inflation, and a very flat Phillips curve—meaning that inflation was not very responsive to slack in the economy.
Drawing on an extensive literature on strategies to mitigate risks associated with the ELB, we adopted flexible average inflation targeting—a “makeup” strategy to ensure that inflation expectations would remain well anchored even with the ELB constraint. In particular, we said that, following periods when inflation had been running persistently below 2 percent, appropriate monetary policy would likely aim to achieve inflation moderately above 2 percent for some time.
Rather than low inflation and the ELB, the post-pandemic reopening brought the highest inflation in 40 years to economies around the world. Like most other central banks and private-sector analysts, through year-end 2021 we thought that inflation would subside fairly quickly without a sharp tightening in our policy stance. When it became clear that this was not the case, we responded forcefully, raising our policy rate by 5.25 percentage points over 16 months. That action, combined with the unwinding of pandemic supply disruptions, contributed to inflation moving much closer to our target without the painful rise in unemployment that has accompanied previous efforts to counter high inflation.
Elements of the Revised Consensus Statement
This year’s review considered how economic conditions have evolved over the past five years. During this period, we saw that the inflation situation can change rapidly in the face of large shocks. In addition, interest rates are now substantially higher than was the case during the era between the GFC and the pandemic. With inflation above target, our policy rate is restrictive—modestly so, in my view. We cannot say for certain where rates will settle out over the longer run, but their neutral level may now be higher than during the 2010s, reflecting changes in productivity, demographics, fiscal policy, and other factors that affect the balance between saving and investment.
First, we removed language indicating that the ELB was a defining feature of the economic landscape. Instead, we noted that our “monetary policy strategy is designed to promote maximum employment and stable prices across a broad range of economic conditions.” The difficulty of operating near the ELB remains a potential concern, but it is not our primary focus. The revised statement reiterates that the Committee is prepared to use its full range of tools to achieve its maximum-employment and price-stability goals, particularly if the federal funds rate is constrained by the ELB.
Second, we returned to a framework of flexible inflation targeting and eliminated the “makeup” strategy. As it turned out, the idea of an intentional, moderate inflation overshoot had proved irrelevant. There was nothing intentional or moderate about the inflation that arrived a few months after we announced our 2020 changes to the consensus statement, as I acknowledged publicly in 2021.
Third, our 2020 statement said that we would mitigate “shortfalls,” rather than “deviations,” from maximum employment.
We still have that view, but our use of the term “shortfalls” was not always interpreted as intended, raising communications challenges. In particular, the use of “shortfalls” was not intended as a commitment to permanently forswear preemption or to ignore labor market tightness. Accordingly, we removed “shortfalls” from our statement. Instead, the revised document now states more precisely that “the Committee recognizes that employment may at times run above real-time assessments of maximum employment without necessarily creating risks to price stability.” Of course, preemptive action would likely be warranted if tightness in the labor market or other factors pose risks to price stability.
The revised statement also notes that maximum employment is “the highest level of employment that can be achieved on a sustained basis in a context of price stability.” This focus on promoting a strong labor market underscores the principle that “durably achieving maximum employment fosters broad-based economic opportunities and benefits for all Americans.” The feedback we received at Fed Listens events reinforced the value of a strong labor market for American households, employers, and communities.
Fourth, consistent with the removal of “shortfalls,” we made changes to clarify our approach in periods when our employment and inflation objectives are not complementary. In those circumstances, we will follow a balanced approach in promoting them. The revised statement now more closely aligns with the original 2012 language. We take into account the extent of departures from our goals and the potentially different time horizons over which each is projected to return to a level consistent with our dual mandate. These principles guide our policy decisions today, as they did over the 2022–24 period, when the departure from our 2 percent inflation target was the overriding concern.
We continue to believe that setting a numerical goal for employment is unwise, because the maximum level of employment is not directly measurable and changes over time for reasons unrelated to monetary policy.
We also continue to view a longer-run inflation rate of 2 percent as most consistent with our dual-mandate goals. We believe that our commitment to this target is a key factor helping keep longer-term inflation expectations well anchored. Experience has shown that 2 percent inflation is low enough to ensure that inflation is not a concern in household and business decision-making while also providing a central bank with some policy flexibility to provide accommodation during economic downturns.
Powell Five Key Statements
- Through year-end 2021 we thought that inflation would subside fairly quickly without a sharp tightening in our policy stance. When it became clear that this was not the case, we responded forcefully, raising our policy rate by 5.25 percentage points over 16 months.
- There was nothing intentional or moderate about the inflation that arrived a few months after we announced our 2020 changes to the consensus statement
- We cannot say for certain where rates will settle out over the longer run, but their neutral level may now be higher than during the 2010s, reflecting changes in productivity, demographics, fiscal policy, and other factors that affect the balance between saving and investment
- We continue to believe that setting a numerical goal for employment is unwise, because the maximum level of employment is not directly measurable and changes over time for reasons unrelated to monetary policy.
- We also continue to view a longer-run inflation rate of 2 percent as most consistent with our dual-mandate goals. We believe that our commitment to this target is a key factor helping keep longer-term inflation expectations well anchored. Experience has shown that 2 percent inflation is low enough to ensure that inflation is not a concern in household and business decision-making while also providing a central bank with some policy flexibility to provide accommodation during economic downturns.
“We Effed Up!”
Points one through three are as close as you will get to “We effed up big time.” And that is exactly what the Fed did.
Trying to make up for lack of past inflation is idiotic, especially when you don’t even know how to measure it.
The Bernanke Fed and the Powell Fed both ignored obvious asset bubbles because neither counts massive increase in home prices, homeowners’ insurance, or property taxes as inflation.
Then the Powell Fed failed to see what massive QE, interest rates near zero percent, a refinancing boom, and three enormous rounds of free money stimulus would do to inflation.
Numerical Targets
Point four is interesting and accurate. “The maximum level of employment is not directly measurable.”
Nor is the “effective lower bound” in interest rates. The ELB is the point at which further rate cuts are counterproductive,
But ELB isn’t zero (or negative where the ECB and Japan set rates).
But in point five, the Fed sticks to its absurd numerical target of 2 percent inflation, with nothing but a belief that 2 percent is correct.
Worse yet, the Fed still measures inflation ignoring housing bubbles.
BIS Deflation Study
The BIS did a historical study and found routine price deflation was not any problem at all.
“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the study.
For a discussion of the BIS study, please see Historical Perspective on CPI Deflations
Concerns about deflation – falling prices of goods and services – are rooted in the view that it is very costly. We test the historical link between output growth and deflation in a sample covering 140 years for up to 38 economies. The evidence suggests that this link is weak and derives largely from the Great Depression.
Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive.
Once we control for persistent asset price deflations and country-specific average changes in growth rates over the sample periods, persistent goods and services (CPI ) deflations do not appear to be linked in a statistically significant way with slower growth even in the interwar period.
Asset Bubble Deflation
It’s asset bubble deflation that is damaging. When asset bubbles burst, debt deflation results.
Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive build up of unproductive debt and asset bubbles that eventually collapse.
Inflation Expectations Do Not Matter
The Fed’s monetary framework sticks with disproved Phillips Curve and inflation expectation nonsense.
A Fed study and common sense show inflation expectation theory is economic nonsense.
For discussion, please see A Fed Economist Concludes the Widely Believed Inflations Expectations Theory is Nonsense
What little we know about firms’ price-setting behavior suggests that many tend to respond to cost increases only when they actually show up and are visible to their customers, rather than in a preemptive fashion.
The Fed Chases Its Tail Again
Many years late, the Fed is removing some Bernanke-installed policy nonsense.
Yet, the Fed retains a 2 percent inflation target without knowing how to measure that 2 percent. And it holds on to disproved Phillips Curve and inflation expectation theories.
Thus, the Fed ‘s monetary framework remains seriously flawed.
End the Fed
The one thing worse than having a clueless Fed, is a Fed beholden to the whims of politicians.
Neither Trump nor Powell knows where interest rates should be, but I would rather not have politics be the deciding factor.
We don’t need a new Fed framework or a Trump-appointed Fed puppet. We need to end the Fed.
I Officially Announce my Availability to Become the Next Fed Chair
Before howling, please note my first agenda item.
On July 9, I posted I Officially Announce my Availability to Become the Next Fed Chair
Mish’s 15-Point Fed Plan
- Explain to the nation why we don’t need a Fed and how independent central banks have created boom-bust cycles of increasing amplitude over time. The main corollary is history shows the one thing worse than independent central banks is a central bank run by politicians, frequently ending in hyperinflation.
- Surround myself with qualified insiders who understand the Fed but also believe in the mission to end the Fed.
- Stop paying interest on reserves, phased in over 18 months.
- Wind down the Fed’s balance sheet totally in 2-3 years.
- Require that assets available on demand such as checking and savings accounts are truly available on demand. That means demand deposits are parked in overnight US treasuries. This would be phased in over two years. As a result, we would have genuine safekeeping banks.
My 15-point plan is to orderly wind down the Fed, then fire myself.
Click above link for details.
The belief in the Fed and soviet-style planning is amazing isn’t it?
Jack thinks he knows the correct measure of inflation and so does Trump!
Who is the Fed supposed to listen to? Jack or Trump?
I am not foolish enough to believe I know. But I do know the Fed is essentially clueless and so is Trump.
Everyone would be astonished if the Fed set the price of orange juice. Yet I propose that would be a lot easier than setting the price of money.
Only fools believe they know where interest rates should be.
Mike is losing so badly he’s now pinning comments trying to persuade his army of followers. Shame on you Mike, as I said, if you do not know you have no business questioning someone who does know. I know because I’m simply smarter than you, don’t be embarrassed, you help me to know cuz I use ya data.
Well what have we got here Mike says he doesn’t know and you claim to know ,amazing. What a dunce.
You have an overly generous but sadly unjustified estimation of your ‘abilities’. For someone so ‘smart’ your English is somewhat poor, forget about logic and economics….
I am jealous of u. I never got 27 reds, but there is still hope
It doesn’t surprise me that you envy someone that’s dumber than you.
Get you a paper bag and a can of gold spray paint, and get to huffin’. You can realize your dream in a matter of days.
Who’s posts are constantly top? I kick ya butt every time I’m here Mike…
Orange juice? I’m all for not setting any rates Mike, why you changing the thesis, I am saying in a free market the rate would be inflation plus 3% for a top rate borrower. Are you really trying so hard that you refuse to understand. I am not saying set that rate, I said the Fed should know the free floating rate without manipulation would be inflation + 3%. Ya argument is totally irrelevant. Orange juice lol, in a free market you’d be out of business.
Yeah Yeah, downvote me, hope it brings you loads of memories of ya childhood.
Fair play Mike, ya better than Wolfstreet, at least you don’t delete comments & block people. That idiot gets everything wrong, changes his views on a dime, always chilling for the gov, the Fed & contradicts himself all the time. Although one of my comment got deleted once which made me furious & told you at the time. So that to me shows your sincerity, you are not afraid of debate. That’s how it should be, it’s ok to be inferior sometimes 🙂
Wolf simply couldn’t handle me, blocked many emails & only posts ass kissing comments, that’s the real fool. I beat his ass every time I snuck on & most times my comments were deleted even before they got through. The guy is a proper wimp & his comment section is carefully curated.
Look Mike, I complemented you saying ya Better than Wolf idiot & got the most downvotes 🙂
Now disagree with me, Jesus……. Cheating doesn’t count Mike.. Next time go slower, that way you wont get busted 😉
Mish is better than Wolf.
u are not alone.
Gravity with Germany prevents 8%.
Well said, Mish. The post in general is an excellent assessment.
They know that when you buy a 4% treasury bond you lose at least 4% a year considering the hiden inflation.
This is the most important thing for them,that will allow to spend more and more to favor who deserves to be favored….
The Federal Reserve thinks that analyzing various economic indicators such as, specifically, inflation, unemployment, and GDP growth This they believe, will help them achieve their goals of setting the proper federal funds rate. They also believe this outcome will then also help achieve their goals of maximum employment and stable prices.
Go Figure…
The Fed should not listen to Trump, Jack or; anyone, excepting Federal Reserve, US Treasury and Global Banking Officials. After all, they run the remarkable banking system that affords the US it’s global dominance of financial transactions.
None of the sanctions on renegade nations like Iran, North Korea or Russia (enforced or non-enforced) would be possible without our global dominance of banking.
This is not to say it is without faults and/or criminal activity, it is. But being on the other side of our banking system makes economic independence difficult and puts our competitors at a disadvantage.
I have read the Creature From Jekyll Island and after that, Hamilton’s works. Hamilton was our true banking genius and quite frankly, I do not see the US banking system collapsing in my, or my grand children’s lifetimes. It is impeccably well designed!
Granted, Hamilton did not foresee the exact structure of the Federal Reserve as it exists today. My opinion is that it acts as an appropriately independent intermediary between the needs of the government, bankers and the public interest (that may not be the correct order).
I am constantly amazed that there was not a huge economic collapse after the massive Covid related injections of liquidity. It is/was a massive bubble! This Fed’s ability to manage the drawdown of that liquidity has been fantastic in my opinion ~ remarkable.
The Fed only has three tools:
Interest rates
Liquidity
Bully Pulpit
The Fed’s communication and management of expectations has been remarkable under Powell, unlike most readers on this blog, I have huge respect for his acumen.
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To reiterate on this related topic:
It’s a shot across the bow aimed at the rest of the human race (excepted the EU and the remnants of the British Empire which are ruled also by our (((rulers))).)
If they continue buying US Bonds and Treasuries and keep their reserves in dollars, then the Chinese, Russians, Arabs, and Indians will have acquiesced to being indentured slaves of the American Empire.
There is no other conclusion possible. Inflation is high and will get higher, meaning dollars will lose value ever faster. But (((we))) will create untold amounts of it to pay foreigners for their goods and services which we will use to wage war upon them.
So we’ll see now whether the rest of the human race consist of craven idiots. Or not.
Half of the Fed’s basic mandate is not determined by numerical data. The Fed’s entire dog and pony mandate boils down to: rates are set to what they feel.
In 2017 the Fed knew a large amount of their 10-year Treasuries, purchased to bailout the mortgage crisis, were due in 2019. So they used DEI as rational to delay their full employment mandate. The Fed could keep rates low, so they could repurchase maturing Bonds at lower rates of return. Hence, Neel Kashkari launched the Fed’s Opportunity and Inclusive Growth Institute in 2017.
At the Fed’s DEI Institute’s inauguration, Lael Brainard explained why the Fed’s low-rate policy should continue even though the number of jobs available were far greater than job seekers. “There are large disparities in opportunity based on geography or race or gender. This Institute could give us important insights on how far the overall economy is from full employment.” – In 2025, the resulting inflation, because of extended low rate policies is spiraling cost of living expenses that devastate these lower economic households. The Fed’s objective of running what Janet Yellen termed a “high pressure economy” has been in operation much earlier than what Powell referenced as his “prior monetary framework”.
To reiterate on this related topic:
It’s a shot across the bow aimed at the rest of the human race (excepted the EU and the remnants of the British Empire which are ruled also by our (((rulers))).)
If they continue buying US Bonds and Treasuries and keep their reserves in dollars, then the Chinese, Russians, Arabs, and Indians will have acquiesced to being indentured slaves of the American Empire.
There is no other conclusion possible. Inflation is high and will get higher, meaning dollars will lose value ever faster. But (((we))) will create untold amounts of it to pay foreigners for their goods and services which we will use to wage war upon them.
So we’ll see now whether the rest of the human race consist of craven idiots. Or not.
Of course the previous framework was flawed. It is old and has to be updated to be relevant to a quickly evolving financial and banking system.
IMO it grossly under reports inflation…
Change in how things are weighted in appropriate. If you hate the Fed, it is a pretty easy target!
Housing, medical and insurance costs are large parts of household costs. They should be more heavily weighted in all reporting agencies calculations of inflation.
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That’s not the “framework” they’re changing, alas.
They’re just announcing a different interest-rate-policy “response function”, not fixing the whole financial system, and especially not fixing the antiquated and error-prone economic data gathering and reporting system..
In 2008 Ben “shortfall” banks account. In 2020 JP “shortfall” bank accounts and saving accounts. RRP sucked liquidity first, a year before raising rates. The temp inflation to 9% “shortfall” negative rates from the world: Japan and the ECB. When DXY will rise the US dollar will “shortfall”: stocks, gold, RE…crypto.
When pigs fly Mish
the real mandate of the fed is to keep the NYC banks solvent and profitable. the NYFED is privately owned by those banks. the rest of the arguments like inflation and employent is poppycock for naive folks. i think you should read, “creature of jekyll island” as a primer in the true nature of our 3rd central bank in this empire of debt and war mongering.
Ben Strong NYFED finance GB. The flyover Fed banks divorce NYFED.
The Fed civil war led to 1932.
Before we start deciding to wind down the Fed, there ought to be a healthy discussion of what lead to the creation of the Fed in the first place. The Fed attempts to solve a very critical negative issue caused by banking that effects far more people negatively than does 2% inflation. You can’t just say you want to make the world worse and not expect politicians to get involved.
The focus on interest rates is a bit overdone IMO.
Money supply is at least as important. The Fed is softening but continuing its QT actions and the balance sheet is down to $6.6 trillion. However the increase in the price of stocks has been tremendous and that is increasing the perceived money supply. The market is shouting “inflation”.
The “wealth effect” is real and that is part of why Trump likes to goose the stock market. It feels good when your portfolio goes up! Then we spend based on the appreciation of our stocks.
fed monetary base has decreased to 6.6trillion, but M1 increased substantially to 18.8 trillion. us bucks are like lira now.
M1 to a lower high.
The Fed’s mistake is to have this dual mandate. The Fed should stick to financial stability, not to the employment/inflation nonsense. Inflation happened mostly for supply shocks and corporate greedflation. There is nothing central banks could have done effectively, other than causing a massive financial crisis by rising rates to absurd levels. This is all that Volker managed to do as well, by the way. Back then it was globalization that brought inflation down, not Volker. But the SNL crisis was Volker’s doing.
Imagine USA eliminates the Federal Reserve System and sells bonds directly to anyone. In that system, when investors’ inflation expectations rise, wouldn’t they demand higher nominal yields? Sounds about the same as a Fed with a single mandate but without an opaque money cartel that skims off everything.
Surprisingly for anyone who reads Mish regularly, I haven’t thought much about the world without a Fed. So, I could be missing something.
Truthfully they need another Bretton Wiods style reform that bans derivatives trading in markets in order to keep the commodity complex from hampering actual productivity.. since the deregulation of derivatives of all kinds it has been one bubble after another. Eventually the whole thing ia going to blow sky high and Americans will be left penniless.
2% inflation is price stability.
Inflation is too low.
Inflation is transitory.
Holy chit, higher for longer.
Back to ZIRP with love (or what else to do with mountain of debt of own creation).
Jack, I agree with most of what you’re saying, especially your points about bonds, the Fed’s balance sheet, YCC, etc.
Unfortunately, we stand here today with $37.2T in debt which is forecast by the Treasury to rise to ~ $38.6T by the end of CY 2025. It’s rising by a $1T every 150 days or so. With $9T in short-term debt rolling over, the Fed is going to lower rates, in part, attempting to lower short-term borrowing costs for the Treasury. This does back the Fed into a corner.
Personally, I think we’re witnessing the Fed / Treasury panic just before they realize that they’re about to lose their grip on US financial markets. It’s a perfect storm.
I hope we can get our act together soon. Try to ease up on Mish. It’s okay to have different opinions. He runs a good site & tries to present lots of ideas for us to debate.
Cheers!
“…because the maximum level of employment is not directly measurable and changes over time for reasons unrelated to monetary policy….”
I think the real reason why Trump suspended employment reporting was the better employment reports were used by the Federal Reserve to keep interest rates high than Trump wanted them.
Unfortunately, there is no validation of what you read today, especially “numbers” that have been “adjusted.”
Heads up everyone, Mish is loaded, he has zero idea what the inflation rate is 🙂
Everyone should have expected that Powell would find some way to justify capitulating to the forces demanding lower interest rates.
It wont make a difference, either higher rates or higher inflation will collapse the economy. The whole point of accurate statistics & good policy is to stop bubble, stop inflation, stop a huge build up of bad debt. If your statistics are a sham & ya policy is corrupt nature will correct the corruption with a collapse equal to the corruption.
When you have such a pile of debt,should you raise rates to fight inflation?You cant!
Only one solution,bring down the rates and lie on inflation:you can say inflation is 2% for example,this is a number that will please the markets!
If Trump had been alive when the British attacked the airport on Bunker Hill, would the General have been forced to admit waiting to fire until his riflemen could see the whites of their eyes was a mistake.
Could I argue that the rate of inflation is simply the rate by which our money supply is expanding? The real rate of interest is whatever a non-political body is willing to pay in interest? Oddly enough talking heads in media refuse to understand these concepts.
By my definition, that is the proper way to measure inflation (an increase in money supply”. However, the increase in values of equities and real property also creates “inflation” of the money supply in a secondary manner.
When asset values are rising, it adds to inflation. When asset values are falling, it is deflationary by nature.
The stock market being at record levels is certainly “inflationary”.
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Inflation is NOT the increase in the money supply. It is the increase in the velocity of money over productive capacity. Interest rates effect velocity and investment decisions effect productive capacity.
Basically, the Fed doesn’t really know what the hell to do. They’ve got bad data coming in from the BLS, and their quants are using old methods that don’t take into account how bad inflation is in the real world.
Like you’ve said a lot lately, Mish, it’s absolutely insane that home prices along with taxes & insurance don’t feed directly in the BLS’ determination of CPI.
Great post!
What a super post, only thing to add is another offer to debate inflation/deflation with some well-known inflation supporting talking head, but you already have enough on your plate.
Thanks for your blog Mish, I really appreciate it
How does the Fed not know where interest rates should be? I know where they should be, it’s simple Inflation + 3%. If inflation is running at 3% then the rate should be 6%. There shouldn’t be QE, there shouldn’t be 7 trillion on the balance sheet, down from 9+ trillion. The bond market is a simple concept, gov borrows money at a rate equal to inflation plus 3% premium. When you abuse your lenders & reward the gamblers on the stock market your days are numbered. All these statistic & models are a sham, economics is simple, logical, you don’t lower rates when gold, silver, food & everything society needs is rising, you do not manipulate the numbers to hide your incompetence.
Inflation to most citizens is in the range of 10% right now, buying bonds is a mugs game, eventually they’ll rebel & already are spiking yields.
I look forward to watching these idiots run for their lives when it all collapses & citizens want blood.
Where is inflation? How do you measure it? It it getting higher? Falling?
So you don’t know do you?
This is why we should let the market decide.
Don’t be so foolish Mike, my God you can be smart sometimes & then so daft. If you used their measure of inflation from 2 decades ago it’s 10%. I measure inflation or in reality the debasement by buying goods & services. Everything I buy is around 10% higher now than a year ago, so yes I do know. I am floored by your inept comment.
If inflation is 10 percent then where should interest rates be?
Please note the Fed only controls the short end in the absence of QE manipulations and it’s QT now.
I am floored by your inept perception of inflation, what the Fed controls, what it doesn’t, and where rates should be.
If inflation was 10 percent then I assure you the 10-year treasury would not be 4.25 percent.
And why does what “YOU” buy determine rates. Is “your” CPI basket the one that matters.
So no, you don’t know jack doogie. You are foolish enough to think you do.
The Fed only controls the short end with the FFR but controls the long rates with 7 trillion on their balance sheet, which they reinvest every month continually pushing rates down on every re purchase, that’s the point, I said my inflation is 10%. Lets see Mike, vegetables 38%, electricity 15%, car insurance 20%, property taxes 10%, etc. You say things Mike which make it sound crazy when it’s not so crazy. Perhaps not 10%, certainly 8%. The Fed measure include things no one buys every month, airline tickets, phones, cars, who buys these every month. Ya just never gonna admit that inflation is way understated & yield are suppressed by QE & then say ya a free market gut. A free market guy would be honest about the damage it’s doing. I’m not foolish, you lost the debate the moment you started calling me names & trying to belittle what I say. What I buy has zero to do with it, but I buy what 90% of society buy, food, energy, entertainment, you talk semantics.
Inflation reached 9% Mike did the ten year go above 6%, no, it didn’t hit much over 5%. So I don’t understand why ya so ignorant. Have it your way, we disagree. You downplay the QE effect. At least debate without talking like ya word is gospel.
You can’t assure me of nothing Mike, that’s my point, you place your bet on the system you know is corrupt, you know is not a free market. You say this yourself, you believe it yourself, how can you assure me the 10yr would not be 4.25% when you yourself hate the Fed & want it gone which I agree with. I think you blindly dived in rearranged the meaning of everything I said to compete & lost the plot. I’m saying the system is corrupt, the yields should be higher cuz inflation is high. it seems you abandoned all you believe in to try beat me. Get it, you can’t argue that the yields would be higher but they are not but then sa the Fed shouldn’t exist, the QE is having no effect. You can disagree with the numbers but can’t disagree that the yield are phoney. So how can you argue that the 10yr should be higher. It’s not higher cuz of the corrupt Fed & QE. Rates are not free floating, the FED reinvests probably 80-100 billion now a month, remember the 80 billion from 2010 -2020 then 2020 till 2023 maybe of 100 billion. That’s me done, I should respect ya site & comment no more on this.
I technically agree with you
What market Mike? It’s all manipulated, I am happy to have a free market, but the market isn’t free is it, when you got 7 trillion of bonds on your balance sheet bought using newly printed money your suppressing yields, when you allow 1000 to 1 leverage & 37 trillion debt it’s not a free market, when you got 2 trillion deficits, it’s not a free market. How dare you be so silly saying we do not know the level of debasement (inflation) we endure. You wanna be Fed chairman & end the Fed, why? Cuz they killed the free market that’s why.
To your point, “what’s the difference between an MRI costing $600 cash vs. an MRI costing $4000 with insurance?” $3400.
The big healthcare – health insurance industry is a racketeering operation. As you said, what market?
Mish’ point is that there is no free market but that there should be one. You argue that there should not be a free market for money, but a manipulated one that follows “interest rate = inflation + 3 percentage points”. I believe a free market set rate would be better and agree with Mish on that matter. Funnily enough all your other retoric seems to argue against a manipulated market, but you propose one as the solution
Bingo
He is lost in his own twisted logic
How many bitcoins does it take today, to buy your house compared to 5 years ago or 2 years ago…. The market has all ready decided!
Bitcoin is worthless garbage, if you had said Gold or something of real value I’d agree. Bitcoin is nothing but a measure of the stupidity & available leverage in the markets today. In fact Bitcoin & all coins are a perfect example of the corruption & decay of the free market. In a free market Bitcoin wouldn’t even exist.
gold can be mined for more, not a finite supply.
governments around world print more money, stocks can be added,
the bond market is in trouble due to debt
Bitcoin is a speculative asset that tends to rise and fall with the S&P 500.
I’s a measure of speculation, nothing else.
So in 2022 when you making fun of Mr. Laser Eyes, CEO of Micro Strategy, what percentage has that stock gone up, Sorry Mish you were wrong then and wrong now.
Not only;it does also help to bring down inflation by absorbing excess liquidity(with all the other cryptos)
One last thing. The markets will decide, inflation will rise until it bankrupts enough citizens it’ll cause mass defaults, then a financial crises, then a massive deflationary collapse, then inflation will cease. So obviously I do know, obviously I’m smarter than you.
Society needs gold and silver?
Society needs food, shelter, clothing, energy, not gold or silver… All these needs are becoming beyond reach. Soon enough there will be chaos, only so many will tolerate hunger & homelessness then it will be riots & chaos.
Gold and silver are two of the three best conductors of electricity. And gold doesn’t tarnish like the other two. That’s why it is used to make the most critical connections and coat the face shields of our astronauts.
Where do you get the +3% from? Why not +2 or +4 or some other number?
Anytime someone pulls out a magic number like 2% inflation or +3% over inflation we should all question it.
If the market is setting rates there should be no interest rate at all. You simply apply for a loan and whomever is loaning money gives you terms (based on their perceived risk and need for yield) and you either accept or reject.
Look back at history, what worked & what did not. before QE we had 5.5% rates with 2% inflation & it was steady, when debt was not given to just any fool. When the safety of banks was a serious thing until gov & corrupt CEO’s changed the rules. It’s also common sense, as I explained, a 3% return is the minimum one should expect from loaning money, it’s a fair price & low. So once you include the debasement & premium of 3% you have a steady anchor on inflation.
I’m fine you question it, I explained my reasoning & why. Hope it answers you question. Like I said, this is not difficult, they just muddy the waters & make it look like they are brilliant, they’re all just grifters lining their own pockets.
The belief in the Fed and soviet-style planning is amazing isn’t it?
Jack thinks he knows the correct measure of inflation and so does Trump!
Who is the Fed supposed to listen to? Jack or Trump?
I am not foolish enough to believe I know. But I do know the Fed is essentially clueless and so is Trump.
Only fools believe they know where rates should be.
Stop Mike, your trying to win a debate with no answer but I don’t know. If ya clueless about rates you have no answers, how can you not know how much you are paying every month? Do not compare me to your Grifter in Chief, I am not American. I know how much my money loses value, you have no idea or you too rich to notice maybe. We can debate till the end of time, lets just say I believe in myself & you have no idea. I know rates shouldn’t be coming down but going up. Mike is not as smart as I thought, the free market that you believe in will go the way I said, wait and see. Mike go no answers but wants to debate with no chips on the table.
You love the free market Mike? Tell me if the the Fed sold off all thier QE bonds & MBS where would rates be, higher or lower? That’s closer to a free market. I would say yields would spike to the level of inflation + 3%. that’s lets say 9% on a 10yr. Get real Mike, not knowing isn’t better than someone willing to put their head on the block.
Your the fool, no answers beats a thesis, what university did you go too, you won’t beat me Mike, you days of beating down sheeple ended when I arrived cuz I am not ya average guy.
“If the market is setting rates there should be no interest rate at all. You simply apply for a loan and whomever is loaning money gives you terms (based on their perceived risk and need for yield) and you either accept or reject.”
So what ya saying is there will be interest but the person loaning the money decides the rate? If so why say there wont be interest. Look, whoever has money will decide the rate & compete with others in a free market determined rate. That’s what I am saying, you obviously do not understand, I am talking about gov debt not individual debt, there is a difference here.
I am talking the basic minimum based on a country with the highest rating in a situation where the rick is close to zero. If ya gonna apply this to just anybody obviously that’s wrong. but the 3% is the very minimum. If ya wanna be picky I wouldn’t give the US anything close to a top rating.
In surveys of people, 3 percent real interest is the number one answer to what interest should be for the best borrower.
Well done Colorado, tell Mike, I had no idea about the survey but Mike wants to play games. It’s just logic if ya the lowest risk a 3% rate is the most productive, fairest rate. Mike believes in a radical free market, that’s impossible cuz most of society are not fair. You need regulation, you need a road map, you need systems. If I’m tougher than Mike can I beat him down for being ignorant? That’s a free market.
You have way too much time on your hands.
That “admission” and $5 will get you a cup of coffee.
(Yes, that is a clever play on an old saying, highliting the devaluation of the U.S. dollar since the fed’s inception.)
https://en.m.wiktionary.org/wiki/that_and_a_nickel_will_buy_you_a_cup_of_coffee
AND The FED STILL Doesn’t get it as they Signal Rates cuts again.
Can someone Tell Transitory Powell that if inflation is rising fast with Treasury 10yr yields at 4.5% & financial conditions are at record easy the rates are way to low. The clown only cares about keeping the stock market pumped up & sacrificing the bond market, this is the opposite of what it should be, the bond market is supposed to be risk free not the stock market.
Powell can cut the FFR all he wants just like the Bank Of England has & yields rose, today’s falls in yield were obviously a Fed intervention as the always do when Powell speaks, like clockwork this happens. The market is just one massive fraud which will collapse just like Japan & never recover. Inflation will spike, yields will spike & Powell will be loathed for being a corrupt banker who handed the independence of the Fed to The Grifter in Chief.
It matters not how you bankrupt society, either by inflation or rising interest rates after getting everyone so indebted that they can’t afford to repay. Either way it leads to collapse, they could have stopped a decade ago, stopped QE & raised rates, they preferred fake growth, fuelled by debt. A historic lesson is coming & there ain’t anything they can do to stop it!
Gold skyrocketing, Silver skyrocketing, food skyrocketing……. Go Figure!