Negative Bond Yields

[errolanderson]

U.S. Fed are meeting right now. Also, suspect no rate hike for Sept and possibly for Dec as well. Too much contagion risk both within and outside U.S. borders (IMO).

Bond yields have turned negative and global interest rates continue to decline.

[Rareearth]

Just thinking out loud.
Errol you mention the currency war, that's exactly what's happening. If the usa raises interest rates what happens to the usa economy vs other economies?
- usa exports go down
- imports and merger acquisition activities increase. Usa buys strategic assets at a lower cost
- other countries economies faulter, can't keep up to usa. The loose or mobile money cones into safe haven usa for the extra 1/2% interest rate



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[errolanderson]

Rareearth . . . if rates are hiked this year, the U.S. dollar continues to rally, crude oil, Cdn dollar, gold drop further. But . . . U.S. exports and manufacturing are being punished. U.S. GDP is stalling (IMO).

An ill-timed Fed rate hike could stall the U.S. economy and then what??
The Fed has what tool to re-start the economy? That's the risk (IMO).

This is very high-stakes global poker game . . . .

[Rareearth]

No question high risk.

There will be winners and losers, there always is with government policy. I think what's the most important is why, and not all the cause and effects.

I agree it seems suicidal, they want and need inflation to grow the economy so they raise interest rates to slow it down... There has to be other motives.

You didn't mention the billions it would cost the fed to fund the delicate with higher rates, it's also suicidal. And again what's the motive or end game then? I've heard very little on this. As the great one once said " go to where the puck is going to be"
Once we know or understand why they want higher rates then every one can adjust accordingly.
I doubt they will raise rates anytime soon.

[errolanderson]

Rareearth . . . my personal belief why the Fed wants to hike rates is because of the heightened stock market risk. To me, Yellen wants a controlled correction in U.S. equities, not an out-of-control crash. By hiking rates just a bit, the top may be put into equities, but not an outright sell-off. An opinion . . . .

The Fed has built their own nest . . .

[Rareearth]

Yes that is likely part of the motivation.
Not sure, even if rates were 2% higher that it would have much impact on the stock markets?

Maybe they should buy land 😅

[errolanderson]

Believe a 2% rate hike would knock-the-socks-off the U.S. economy and slam average American net worth. Consumer debt a way too high . . . .

U.S. economy is battling stagflation and this suggests they will remain in a low growth environment for several years.

[Rareearth]

We keep hearing what the rise in rates will do to the economy. They are talking about 10 to 25 basis point moves. If reducing rates,have little impact on the economy, will raising them have any impact? Just a question, no shooting please. If rates go up I just don't think the markets will crash, where will that money go? Probably not all into land. It is money flow, maybe commodities for another run?
The global population 9 billion by 2025 is hard to relate to, but if that equals 25,000 (or is it a 100,000 I can't remember now)people per day that's both economic growth and unemployment both.

How's that for all over the map

[errolanderson]

Rareearth . . . good comments.

Believe the U.S. rate decision is such a hair-trigger due to the excessive government and consumer debt level. Also, if it doesn't work, will the Fed be forced enter the world of negative rates like Europe?

Also, a U.S. rate hike presents contagion risk outside of U.S. borders. Countries like Brazil can ill-afford a U.S. rate hike on their debt and deepening recession.

Fed released a rate statement this aft. Basically, they are just poker-faced with no rate hike mentioned . . .. suggesting to me, September hike is now off-the-table.

[Rareearth]

I wonder if the usa wants to hurt the other economies if they can, they are the only country talking rate hikes. it's a tough place to be number 1, defender of good and battle master against evil. So long as others hurt more than they do economically or other wise, a win is a win