Charles Payne: Fed Chairman Jerome Powell Crushed The Market...
- Thread starter Altavest_Erik
- Start date
It's a lot more nuanced than that. Rampant inflation makes debt dissappear as well, so by that logic it's in the government's best interest to keep rates at zero and encourage inflation! Thankfully we still have a few adults in government who can think more than a few days into the future.
I never understood the obsession with data dependent, I know the fed isn't stressing it like Yellen but of course they care about data. If the economy was to crash they wont raise rates but the thing people need to realize is a 10% drop in stocks to flat YTD after the biggest bull market in history does not remotely imply the economy is crashing. Also if after 10 years and huge stimulus along with a last batch of fiscal stimulus doesn't mean people can handle normalized interest rates then clearly the Feds policies arent helping except for pushing up the stock market which isn't what they should be focused on.
I also find it ridiculous how none of these people are stating fundamentals or actual business reasons why stocks are undervalued. Instead they immediately just complain that the fed isnt pushing up prices and this type of thinking represents a dangerous shift for the public markets as a whole since actual business fundamentals and plans don't matter to people.
This chart explains why the Fed must Normalize the Fed lending rate.
Notice that prior to the 2008 Financial Crisis, the Fed Balance Sheet was carrying less than
1 trillion dollars of debt obligations.
Since the 2008 Crisis, the Balance Sheet debt obligations gradually picked up 4.5 trillion dollars. Raising the Fed funds rate helps reduce the balance sheet, but they also need to sell off the current obligations on the Balance Sheet because this amount of debt is unprecedented.
To illustrate how large of an amount that is, when everyone in the US pays their taxes the Federal Government collects about 3.7 trillion dollars (This is less than the total amount of tax revenue prior to the Crisis because the current administration lowered Federal taxes).
Notice that prior to the 2008 Financial Crisis, the Fed Balance Sheet was carrying less than
1 trillion dollars of debt obligations.
Since the 2008 Crisis, the Balance Sheet debt obligations gradually picked up 4.5 trillion dollars. Raising the Fed funds rate helps reduce the balance sheet, but they also need to sell off the current obligations on the Balance Sheet because this amount of debt is unprecedented.
To illustrate how large of an amount that is, when everyone in the US pays their taxes the Federal Government collects about 3.7 trillion dollars (This is less than the total amount of tax revenue prior to the Crisis because the current administration lowered Federal taxes).
Of course, I was simply pointing out the absurdity on several levels of the fed keeping interest rates artificially low to to keep debt service low.