Fed Follows… As Usual

Friday, January 27th, 2012 | Filed under Money | Podcast Guest:

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Market, not government, keeps rates low

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2 Comments for “Fed Follows… As Usual”

  1. KP
    Jan 30th - 6:19 am
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    “Market, not government, keeps rates low…” So,if a central bank prints money and buys government debt in order to keep bond prices up, and thereby affecting the interest rates,is that the market?
    I am confused…

    Reply
    • aenar
      Feb 1st - 1:33 pm
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      They are trying to keep rates low-their own borrowing costs(hahaha). They also want to have some inflation in money supply(yields) to make investment attractive. As one can see in Japan, the fight between keeping the cost of your borrowing low and making the economy safe for investment is losing. Rates are low, deflation is stuck and money supply is decreasing because private money creation in the form of debt and asset speculation cannot restart. The FED does not want to see negative rates-but it has no control. Short rates are near zero and dipped below 0 last Spring.
      What Bob is saying is that the interest rate change precedes the FED intervention. Rates were already heading to permanent ZIRP-so the wiseacres at the FED say we are driving rates to ZIRP to appear “in control.” Rates were not going up before that statement-therefore the FED was hitching on for the ride

      Reply

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