FED Cuts Interest Rates for the 3rd Time This Year

[Chung Tran]

https://www.msn.com/en-us/money/mark...cid=spartanntp

ok.. I would have dissented, like the Boston and Kansas City Fed Presidents did, on all 3 cut decisions. growth came in at 1.9%, despite the China tariffs.. Obama would have embraced that, even with massive deficits to spur growth.

there is much chatter about negative interest rates on the near horizon.. why? super low unemployment, modest, but real wage growth. Trump himself (I know he is given to hyperbole) says we have the best economy in memory, yet he begs for rate cuts?

from my POV, the FED believes the tariffs are lasting, or the economy we have now, is structurally inefficient, and higher rates will cause an implosion of what we think is real. the FED has not indicated a belief in either theory, so... what gives?

[dilbert firestorm]

shouldn't this go to politics instead of sandbox?

[Fizley]

For the record I am a republican and voted for Trump. However, I have been suspicious of this economy for a long while.

Low unemployment, no wage growth, record deficit spending, record stock market highs, no inflation. Feels good, but is it good.

[bojulay]

Politicians use spending to get elected
No politician is going to run on spending cuts
The Democrats whole platform is about more spending

The deficit goes higher
Question is not if there will be a breaking point but when

Meanwhile there is super important news about a mean tweet
that Donald Trump made

Madness

With the Republicans we will last longer
With the Democrats it will be much sooner

With Elizabeth Warren (probably the Democrat Candidate)
you would see a 30% tax increase on the middle class
just to pay for her healthcare plan

[bambino]

Originally Posted by Fizley

For the record I am a republican and voted for Trump. However, I have been suspicious of this economy for a long while.

Low unemployment, no wage growth, record deficit spending, record stock market highs, no inflation. Feels good, but is it good.

Actually wages are growing.


https://www.cnbc.com/amp/2019/05/11/...tell-cnbc.html

The economy is in much better shape than it’s been in years. Probably since the Clinton years.

[Chung Tran]

Originally Posted by dilbert firestorm

shouldn't this go to politics instead of sandbox?

no.. in fact, Captain Midnight suggested that former members of his "Conference Room" post germane topics in this section, now that the CR has folded. the "politics" section is basically insults and memes, little real discussion, and besides, this is not really a political subject.

Originally Posted by Fizley

For the record I am a republican and voted for Trump. However, I have been suspicious of this economy for a long while.

Low unemployment, no wage growth, record deficit spending, record stock market highs, no inflation. Feels good, but is it good.

that is the crux of the thread.. we have several indicators that suggest the Economy is outstanding, but when you consider the enormous debt service, student debt that even Retirees are paying, looming negative interest rates, anemic wage growth, plus trade wars and stagnant European and Japan economies that influence ours, it looks to me like we are pumping up today's economy as best we can, with no positive directional moves for what we face tomorrow. the stock market is at an all-time high, but bond yields are at historical lows, basically forcing investors to choose riskier assets, while freezing the savings of non-risk investors and Retirees.

[Texas Contrarian]

Originally Posted by Chung Tran

https://www.msn.com/en-us/money/mark...cid=spartanntp

ok.. I would have dissented, like the Boston and Kansas City Fed Presidents did, on all 3 cut decisions. growth came in at 1.9%, despite the China tariffs.. Obama would have embraced that, even with massive deficits to spur growth.

there is much chatter about negative interest rates on the near horizon.. why? super low unemployment, modest, but real wage growth. Trump himself (I know he is given to hyperbole) says we have the best economy in memory, yet he begs for rate cuts?

from my POV, the FED believes the tariffs are lasting, or the economy we have now, is structurally inefficient, and higher rates will cause an implosion of what we think is real. the FED has not indicated a belief in either theory, so... what gives?

Fed policy is arguably the most widely discussed topic in the financial world today. (And for good reason!)


First, to the question of negative interest rates: That ugly can of worms was opened several years ago in Europe and Japan and increasingly looks like not only an abject failure, but a trap from which it's difficult to escape. In fact, the global quantity of negative-yielding sovereign debt recently reached the $17 trillion mark.


Yet some economists in the U.S. still think policymakers should keep the idea in the toolbox, just in case.


I don't know of anyone who even thought this was possible before the aftermath of the 2008-2009 financial crisis.



It seems to me that a lot of the discussions of future rate cuts relate to the perceived necessity of not allowing too much policy space between the Fed and foreign central banks such as the ECB and the BOJ, lest the dollar strengthen too much vs. other major currencies and hurt U.S. multinationals.

Originally Posted by Fizley

For the record I am a republican and voted for Trump. However, I have been suspicious of this economy for a long while.

Low unemployment, no wage growth, record deficit spending, record stock market highs, no inflation. Feels good, but is it good.

Originally Posted by Chung Tran

that is the crux of the thread.. we have several indicators that suggest the Economy is outstanding, but when you consider the enormous debt service, student debt that even Retirees are paying, looming negative interest rates, anemic wage growth, plus trade wars and stagnant European and Japan economies that influence ours, it looks to me like we are pumping up today's economy as best we can, with no positive directional moves for what we face tomorrow. the stock market is at an all-time high, but bond yields are at historical lows, basically forcing investors to choose riskier assets, while freezing the savings of non-risk investors and Retirees.

Today, the economy seems "okay" -- but only okay. I'm not in the camp that considers everything hunky-dory.


For starters, just consider the spending blowouts of the last few years. Now we have a "headline" deficit of about $1 trillion, but that doesn't even count a couple of hundred billion dollars of "off-the-books" outlays, so the real debt accumulation run rate is somewhere between 5.5% and 6% of GDP. Given that the trend growth rate of NGDP now seems to be around 3.5% (4% tops), federal debt is growing at a pretty good clip. Only time will tell whether this turns out to be sustainable over a relatively long term without serious adverse consequences.


In any event, it seems that we are purchasing a relatively modest amount of incremental growth at a very high price.


Then there's the question of what to make of the meeting attended by Trump, Powell, and Mnuchin. (No one other than those present knows what was said, of course. (But I think most of us can make a pretty good guess!)


Needless to say, there's a long history of Fed chairmen responding to presidential pressure. (For starters, see LBJ v. Bill Martin and Nixon v. Arthur Burns.)

Originally Posted by dilbert firestorm

shouldn't this go to politics instead of sandbox?

Yeah, great idea!


Then watch the thread devolve into the usual Political Forum cesspool when about a half-dozen people fire an endless fusillade of 4th-grade-style insults and other childish shit.


.

[Chung Tran]

Originally Posted by CaptainMidnight

Then watch the thread devolve into the usual Political Forum cesspool when about a half-dozen people fire an endless fusillade of 4th-grade-style insults and other childish shit.

Ha! exactly right.

looks like Politicians around the Globe are trying to tweak ways to continue deficit spending. the Republicans were aghast at Jimmy Carter's budget deficit in the late 1970's.. "this is not sustainable, our grandchildren will suffer this debt payback"..

well, they haven't, because debt is no longer a 4-letter word. Business is on board, too, unfunded mandates in many corners. then you have Warren and Sanders proposing free child care, tuition, and canceling student debt. sounds absurd, but it's not as ridiculous as it seems, at first glance.. many other things have been paid for without REAL money, why not these items?

negative interest rates tops everything. you have to pay others to utilize your money? huh? yes, the Government wants to force you to spend, makes the growth numbers look better. if you "refuse", you better pay up. don't try to stow cash under your mattress, we're coming after that next.