The federal funds rate currently sits at 4.25%-4.50%, but President Donald Trump has said it should go down to just 1%.
Such a rate would enable more economic growth. The stock market would take off. Housing sales would increase. And financing the US national debt would be cheaper. And the building of more industrial base could be more cheaply financed too.
ALL great.
The tab for the short term boost would be massive inflation. I suppose that problem would be for the person that follows the current president.
The president is already reviewing & removing regulation imposed after 2008.
Clouds are forming over the future of the USA.
What if, in arm’s length transaction, no-one will buy Treasuries at a 1% yield? It’s not like Treasuries are sold in a vacuum, where entities have zero alternatives, regardless of price.
Then the rate at the auctions go up until buyers appear. Of course, the Fed doesn’t set auction rates, only the overnight rates for banks. This would maintain/steepen the yield curve and banks would make more money and more loans.
1% rates are basically zirp. Personally, I never purchased any bonds or cd’s back when we were in zirp. 1% would push money into stocks, so Wall St and the speculators would be thrilled. We all remember how that turned out.
It’s pretty remarkable that the Country is going to follow the economic ideas of a guy who managed to bankrupt 3 casinos. Truly remarkable that a track record like that entices people to think " yup, that’s the guy I want us to hitch our wagon to".
In this climate that is not true. We wont get massive inflation. We are edging over time into deflation. Trump is front running the FED to blame them for his results.
You guys are thinking about this the wrong way. Trump is outcome based. Instead of creating the economic conditions necessary for low interest rates, Trump simply wants to fire the people in charge of interest rates. Same result, one is a lot easier.
Same with employment. Trump wants higher job numbers, so instead of creating economic growth and driving jobs that way, it is much easier to simply fire anyone who doesn’t give him high job numbers.
This is how his man-crush Putin operates Russia. Works out really well.
If stagflation breaks out under an authoritarian regime, but officials aren’t allowed to report the numbers, did it make a sound?
Over the past six months we’ve watched institution after institution corrupted by the Trump administration. Institutions that might produce inconvenient information, from those tracking climate change to those tracking infectious disease, have been special targets.
I think we can all breath a sigh of relief. Kids learn letters and numbers from Sesame Street, and pretty soon they are reading books and going to college, where they become libtoads and vote for Medicare.
