A weekly thread to discuss financial matters - from personal all the way up to global.
Ground Rules
- Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
Jump in the discussion.
No email address required.
Notes -
A while ago, I predicted that we would see one modest federal rate increase before the end of the year.
Since then, I've seen evidence for and against that prediction. Evidence in favor of a rate increase is that there were three votes in favor of an increase at the last meeting. Evidence against it is the recent weak jobs report, which pushes on the other side of the Fed's dual mandate.
Overall, I'm starting to lean against even that one token rate increase. What are your predictions?
I'll be surprised if we don't see a 25 bp hike before the end of the year, but the FedWatch probabilities are what they are, and they're confident about a future decision until some report or another is released, and then fed fund futures traders have changed their minds. It's already happened for the September meeting.
This Warsh guy talks like he wants inflation to come down. His emphasis on "price stability," instead of pounding his fists about the 2% target, tells me he may be flexible on it despite knowing it's a terrible idea to ever suggest that in words. He wants the bond market to do the work for him, and it could be working!
Actions speak louder than words, though, and so far he hasn't...done anything. In fact at the press conference, the reporters were kind of confused about this, asking in effect, "Well what are you waiting for?"
To back up a second, I cannot see a way out of the US debt. The US can lower federal spending below tax revenues (lol, lmao even), raise taxes significantly, go into default, or inflate it away.
One of these is much easier than the others. Immense pressure will be put on the Fed to allow inflation to run just hot enough to reduce the burden of the debt in real terms. The interest rate will be kept below the inflation rate (so real rates will be below zero). The Fed's independence is on borrowed time, if it has not already been defeated.
If the Fed does not quietly drop the 2% target, it gets much less boring. I don't know if it will be next year, the year after, or in ten years. I do know that one day no one will be talking about the US debt crisis, and then the next day it will be acknowledged as such. The only way we avoid the inflation route is if the debt causes some other urgent crisis that I can't predict right now and suddenly there's political appetite to tell the elderly, "Sorry, but it was irresponsible of previous governments to promise you all these services, and you really should have prepared for your retirement, and also we sincerely hope you kept a good relationship with your kids."
More options
Context Copy link
Supposedly the bond market rates are rising, fed target rates be damned. I've seen predictions that the fed won't raise rates because the bond markets will have defacto raised rates for them anyways. So the question is actually, will the fed launch into more QE to take the edge off the bond market?
More options
Context Copy link
More options
Context Copy link