A weekly thread to discuss financial matters - from personal all the way up to global.
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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?
To back up a second, I cannot see a way out of the US debt spiral. 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.
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 boring 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 our grandfathers 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."
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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?
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