patrick.net

AmericanKulakMaximumTrumper says

YAMS!!!

We all miss him ... Farewell AF

Interest rates are waaaaaaaaay too high based on historical precedent. The long bond is yielding 2.5% above the expected inflation rate, the 10 year 2% above the expected inflation rate, and the mortgage rates near a record high spread against the 10 year treasury. Yes. mortgage rates are more outtra kilter than they were during the Housing bust.

The Federal Reserve is supposed to not have interest rates this outta whack. The Federal Reserve is playing political games (they are 90% democrats). These super high rates are damaging the shit out of America from construction of houses to household formation rates.

Trump has gotta put an end to this Fed induced crap, and I think he will.

Misc says

Interest rates are waaaaaaaaay too high based on historical precedent.

Misc, does that mean you are in the "pro money printing camp"?

Misc says

Interest rates are waaaaaaaaay too high based on historical precedent. The long bond is yielding 2.5% above the expected inflation rate, the 10 year 2% above the expected inflation rate, and the mortgage rates near a record high spread against the 10 year treasury. Yes. mortgage rates are more outtra kilter than they were during the Housing bust.

The Federal Reserve is supposed to not have interest rates this outta whack. The Federal Reserve is playing political games (they are 90% democrats). These super high rates are damaging the shit out of America from construction of houses to household formation rates.

Trump has gotta put an end to this Fed induced crap, and I think he will.

This goes back to Andrew Jackson - the Fed will do what it can to wreck the economy and bring Trump under heel. We are actually in a depression that has been masked by 20 trillion dollars of spending in the last 4 years. All white collar high paying jobs are being destroyed. Blue collar is the future, especially if the rapefugees and illegals are thrown out to give our children a leg up in the job market.

I'm sure that at least 50% of white collar jobs are bullshit.

stereotomy says

We are actually in a depression

So you want more money printing too?

I really dont understand the 'End the Fed' people who want MORE money printing. Usually End the Fed means people want LESS money printing.

I think what you are actually saying is "End the independence of the fed and let the president print money when the president wants to?"

DeficitHawk says

stereotomy says

We are actually in a depression

So you want more money printing too?

I really dont understand the 'End the Fed' people who want MORE money printing. Usually End the Fed means people want LESS money printing.

I think what you are actually saying is "End the independence of the fed and let the president print money when the president wants to?"

I'm saying that the Triffin Dilemma will be resolved in our lifetimes. Money printing must end. Depressions are caused by banks who foreclose on loans that they injudiciously extended to borrowers. Money printing draws capital from the future to the present - it's like nuking a field with fertilizer for decades and getting bumper crops, only to have the field fail because the soil is exhausted.

Money printing is the crack/meth that gooses the "economy" and encourages completely unwholesome speculative economic activity.

Whatever happened to working, saving, building a life for your family, and creating things that last and can be passed down with pride?

stereotomy says

Money printing must end.

stereotomy says

the Fed will do what it can to wreck the economy and bring Trump under heel.

These two narratives are opposite to each other. I really dont understand what you want.

On the one hand, you are saying the Fed is wrecking the economy by not printing money and keeping interest rates high.
On the other hand, you are saying you want the money printing to end?

Which is it? I dont understand your position on this.

DeficitHawk says

stereotomy says

Money printing must end.

stereotomy says

the Fed will do what it can to wreck the economy and bring Trump under heel.

These two narratives are opposite to each other. I really dont understand what you want.

On the one hand, you are saying the Fed is wrecking the economy by not printing money and keeping interest rates high.
On the other hand, you are saying you want the money printing to end?

Which is it? I dont understand your position on this.

The growth of the money supply must be organic in nature; namely, to accommodate the financial needs of the natural persons living and breathing in this country so that they, through their collective industry, can acquire wealth and preserve that wealth with a stable currency or other store of value.

It's too bad you missed iTulip. There were some really deep economic discussions about how banks should function.

The banking system this country inherited from the English was a system based on short-term profits from sea trade. Banks would extend loans to finance the shipping trade and recoup their loans within a year. Later, in the US, the banks would extend credit to farmers to buy seed for spring, which would be paid back after harvest.

Now the banks speculate and drive up prices for commodities that squeeze the producers to the point of bankruptcy. This was illegal before the 1980's - only producers in a commodity area could trade futures in that commodity.

I'm pretty ignorant, but I'm learning - I suggest you do the same.

I am in the camp of "prices must make sense". Right now the young Americans are fucked because house/financing costs are too high. This is affecting household formation, thus the future of the country.

Historically mortgage rates would be about 4% given todays inflation expectations. There is a reason for the Federal Reserve. That is to be the buyer of last resort (ie when the markets are not functioning). Todays Fed is playing politics instead of buying long term treasuries and mortgage backed securities to bring them into line.

It doesn't matter whether money is being created as long as the amount of goods/services rise in proportion. We need more housing built. Interest rates are too high to support the increase in housing we need.

stereotomy says

The growth of the money supply must be organic in nature;

I still dont understand what you are advocating for. I will explain why I care:

I see President Trump attacking Jerome Powell and the Fed for holding interest rates too high. (i.e. Trump wants Powell to print more money so that we can have lower interest rates). Powell is resisting this, saying he does not want to cause inflation. This has caused a bunch of hatred towards Powell and the Fed for not supporting Trumps political initiative, which is to devalue the dollar by inflation.

Meanwhile, Patrick, and other sound money purists want to "End the Fed" because they dont want any entity to have the ability to print money, and they'd rather let the recessions/depressions happen with silver standard or some other fixed/deflationary money.

On the face of it, the two sides would seem to agree with each other that "The Fed Is BAD".. but actually these two sides are diametrically opposed in their objectives. One side wants to stop the politically-driven creation of new money and maintain a fixed (or slowly growing) sound money supply. The other side wants to remove the restrictions of political independence and allow the Executive unrestricted access to the money printing presses to meet political objectives and devalue the dollar.

So, I am frustrated that both sides are trying to scapegoat the fed and act like the fed is the villain, but actually you should be having the debate about whether to print more or less money. I want the fed's critics to be clear what they want. You seem to argue both sides but wont be clear which you are on. (Print, or don't print?)

I agree with the Fed's current policy, which is to target a fixed, low, inflation rate of ~2%. (I'd be fine with 1% too... but not 3+%.) I know we may be headed towards a recession, but I think recessions are sometimes needed to clear out the questionable business models and allow more robust models to grow. I don't want money printing to be used to prevent that economic rejuvenation process. I don't agree with Trump on this. I don't want the dollar devalued to avoid recession. I agree with Powell that keeping inflation down is important.

If you are going to scapegoat the Fed as a villain, you need to at least say what you want them to do... which side of this debate are you on?

Misc says

Right now the young Americans are fucked because house/financing costs are too high

The fed cant really fix all the problems in our economy. It has a VERY limited tool box. It can either buy bonds with cash it prints (lowering short term interest rates), or it can sell the bonds back to the market (raising short term interest rates).

That's pretty much all it can do. It cant control housing supply. It cant control economic output. It cant control long term interest rates or mortgage rates, these are set by the market expectations of future growth and inflation. Lowering near term rates too much will trigger long term inflation, and raise long term rates, and vice versa.

So, given the limited tool set.. it can either lower short term rates by printing money or raise them by not printing money... Which do you want them to do?

I want them to hold near term rates steady for now. IF inflation goes up, raise rates. If unemployment goes up, lower rates. If both go up (stagflation), well that sucks and they just have to hold steady.

DeficitHawk says

So, given the limited tool set.. it can either lower short term rates by printing money or raise them by not printing money... Which do you want them to do?

It sure can buy long term bonds and mortgage backed securities, thus reducing long term rates. It has in the past in situations where interest rates were less outta line than today. This would increase the buying power of young Americans with respect to houses.

Misc says

DeficitHawk says

So, given the limited tool set.. it can either lower short term rates by printing money or raise them by not printing money... Which do you want them to do?

It sure can buy long term bonds and mortgage backed securities, thus reducing long term rates. It has in the past in situations where interest rates were less outta line than today. This would increase the buying power of young Americans with respect to houses.

It can but its crazy inflationary, and would send asset/house prices sky high. It can only suppress rates while it is actively buying, and the inflationary bounce back would be a sight to behold. They did it 2008 when the baseline expectation was deflation... Today we have inflation above target....

Its called quantitative easing. Is this what you are advocating the FED to do?

DeficitHawk says

Its called quantitative easing. Is this what you are advocating the FED to do?

Yes. Long term bonds are trading a full percentage point above where they have historically been given today's inflation expectations, and mortgages are trading a a record high premium over the 10 year note. The market is not functioning properly, so the government must intervene.

Misc says

Long term bonds are trading a full percentage point

Long term bonds are set by market expectations for inflation. What do you think will happen if there is a massive QE influx?

Sure they can lower bond prices for a little while while they actively buy, but asset/house prices would moon, and as soon as the QE faucet is turned off, we'd have to live with the inflationary aftermath, including even higher bond rates, as well as higher prices! How does this help anyone?

DeficitHawk says

Misc says

Long term bonds are trading a full percentage point

Long term bonds are set by market expectations for inflation. What do you think will happen if there is a massive QE influx?

Sure they can lower bond prices for a little while while they actively buy, but asset/house prices would moon, and as soon as the QE faucet is turned off, we'd have to live with the inflationary aftermath, including even higher bond rates, as well as higher prices! How does this help anyone?

Here's a quick look at the current bond yields/

https://www.bloomberg.com/markets/rates-bonds/government-bonds/us

The "TIPS" yields are what the market expects to get paid after inflation. Historically for the 10 and 30 year bond it has been about 1%. Today it is 2% for the ten and 2,5% for the 30 year bond. The spread between the 10 year note and the 30 year mortgage rate has been about 1.5%. Today it is about 2.3%. The market is not functioning properly, mortgage rates are waaay too high and this has huge negative effects on the country.

All the bond traders know this, but I guess some are short a few trillion dollars worth of long term bonds. The Fed is complacent in this, so Trump is gonna have to fix that crap.

Ok so Misc is clearly on the "Print, baby, print!" Side.

Is that where everyone is at?

Misc says

Interest rates are too high to support the increase in housing we need.

Disagree. Lowering interest just increases prices of homes. Mortgages should be at 7-8% as they typically were before the easy money of the early 2000s (except the Carter years where mortgages hit 16% and up).

DeficitHawk says

I don't agree with Trump on this. I don't want the dollar devalued to avoid recession. I agree with Powell that keeping inflation down is important.

I also agree with Powell here. Trump has a different approach as he feels that the best way to fight inflation is to lower the deficit. Trump sees the FED lowering rates as an easy way to lower the government debt burden. Cutting spending is politically difficult, but I think Trump's future plan is to keep spending constant while growing the economy and thus tax revenues.

DeficitHawk says

I still dont understand what you are advocating for. I will explain why I care:

I see President Trump attacking Jerome Powell and the Fed for holding interest rates too high. (i.e. Trump wants Powell to print more money so that we can have lower interest rates). Powell is resisting this, saying he does not want to cause inflation. This has caused a bunch of hatred towards Powell and the Fed for not supporting Trumps political initiative, which is to devalue the dollar by inflation.

Interest rates are the diversion. It's all about the growth of the money supply. Please take the time to watch this video - "Princes of the Yen." It explains a lot about what central banks are really doing:

https://www.youtube.com/watch?v=p5Ac7ap_MAY

Misc says

Interest rates are waaaaaaaaay too high based on historical precedent.

What historical precedent would that be?

My parents had double digit mortgage rates for their first house they bought in 1974.

HeadSet says

but I think Trump's future plan is to keep spending constant while growing the economy and thus tax revenues

Reagan tried that. Revenues doubled during his eight years. But Congress spent like drunken sailors and he never put his foot down.

MolotovCocktail says

Misc says

Interest rates are waaaaaaaaay too high based on historical precedent.

What historical precedent would that be?

My parents had double digit mortgage rates for their first house they bought in 1974.

The difference between the mortgage rates and the expected inflation rates over a 10 year period.

DeficitHawk says

Ok so Misc is clearly on the "Print, baby, print!" Side.

Is that where everyone is at?

No, while I want to abolish the FED I'm on Powells side here although it-s ironic and hypocritical for the FED to suddenly care about inflation, while they handed the previous administration ZIRP for a decade, and growing the money supply like no tomorrow.

The money supply never recovered from 2008.

The sheer amount of debt that is backstopped from this base money is waaaaaaaaaay beyond belief. Try by a multiple of about 20. Ever try to pay 120 trillion in debt with only 6 trillion in base money, You simply cannot do that. Everyone in banking knows the system is bankrupt. It is just a matter of musical chairs until more printing bails out the rich.