How much longer can the Government keep interest rates artificially low?
Bear
Posts: 18,953 ✭✭✭
Three months, 6 months, a year? What happens when the dam breaks?
I truly don't know, other then the fact that I would not care to be carrying
debt such as credit cards, unsecured loans, variable mortgages , car loans.
When this happens, what happens to rhe value of PMs? Will folks be forced
to sell under duress, to meet increasing debt payments?
"YOU WILL SOON OWE YOUR SOUL, TO THE COMPANY STORE"
I truly don't know, other then the fact that I would not care to be carrying
debt such as credit cards, unsecured loans, variable mortgages , car loans.
When this happens, what happens to rhe value of PMs? Will folks be forced
to sell under duress, to meet increasing debt payments?
"YOU WILL SOON OWE YOUR SOUL, TO THE COMPANY STORE"
There once was a place called
Camelot
Camelot
0
Comments
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
on fixed incomes, like retirees, they are in deep trouble. No matter
what happens, folks will be hurt.
Camelot
<< <i>For most people I hope that you are right. However for folks
on fixed incomes, like retirees, they are in deep trouble. No matter
what happens, folks will be hurt. >>
I fear you are correct. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
In honor of the memory of Cpl. Michael E. Thompson
If they allow rates to start rising, it will not be pretty in terms of the employment numbers or the fledgling "economic recovery".
The question is as much about when the government will throw in the towel on outstanding debt obligations as it is about interest rates.
There are really no more bullets other than inflating the supply of currency.
Some people think in terms of inflation hedges, others in terms of sovereign debt default insurance.
I knew it would happen.
massive malinvestment has occured. That's only what's reported to the OOC. There are also all the IR derivatives owned by other banks around the world. That probably more than
doubles the number. And if you consider that the BIS changed their derivatives model to one of marked to maturity back in 2008, the number would again double. So all in all probably
around $950 TRILL in world-wide interest rate derivatives out there. Even with a guesstimated 30 to 50:1 leverage, that's $20-$30 TRILL in cash value.
They are still adding to the pile at the rate of about $10 TRILL per year. That should be enough to keep things under wraps until it's time to unwind the mess.
roadrunner
I knew it would happen.
<< <i>roadrunner, are these the same financial instruments that the FASB was protecting when they changed their standards? Those were for other types of derivatives, weren't they? OMG. I'm still trying to wrap my head around the whole interest rate swap concept. There's just soooo many ways that they've screwed normal valuations up.
While the initial fires to put out were for the mortgage backed derivatives and credit default swaps, the FASB knew that 85% of all derivatives were IR swaps and had to be addressed
as well. All derivatives benefited from the change in rules to mark them back to model. The BIS in June 2008 reported world wide otc derivatives at $1.14 QUAD (approx 80-85%
would be IR swaps). By December, due to the BIS changing their reportable model to a "marked to maturity" view (and not to befuddle the world with a number in the QUADs or clouds....lol), the number magically dropped to around $600 TRILL in the Dec. 2008 report. That was of course the time frame of the deleveraging crisis and when things came to a head.
Reporting a number in the Quads again just couldn't be allowed. So they tinkered with the model. The number is still >$1.1 QUAD but not reported as such. FASB had to well aware
that the real planet killer of all the derivatives were the IR swaps. And they still have yet to be addressed at all. The financial system could have muddled around or through the mortgage and CD swaps. But with IR swaps at 5X the size of both of those combined, there was just no way to deal with them in 2008-2010. On top of that the IR swaps are apparently still needed to ensure rates stay low while the banksters and politicians look for solutions or at least allow time to pack their golden parachutes and bail out.
I would assume as those IR swaps near maturity they can be renewed and put back in the closet for another 1-5 yrs depending on their terms. Sinclair keeps on harping that there is no solution to this mess. Others think they can just unwind or cancel them out by decree. If it was that easy to do why hasn't it been done yet? And if any of the biggest banks are money winners in those bets they aren't about to let the counterparty get away free. During the 2008 crisis it was noted the "on-paper" value of current otc derivatives actually increased in value by $7 TRILLION. That meant some banks made out very well on paper as the markets crashed and lost TRILLIONs in value. It's one clue as to where some of the slush money went.
There's no doubt in my mind that the largest distortion to US markets over the past 12 years was caused by interest rate derivatives. Everything starts with controlling the rates. In the 1970-1981 era rates rose accordingly to deal with inflation. But there was effectively no otc derivatives lever back then to fool the system, and certainly nothing in the size we have today. Economists preach that rates will naturally rise and fall in a free market. But it's not so easy in a market with $200 TRILL in lead weights sitting on it. Another advantage in
owning the world's reserve currency.
roadrunner
Another guy sold everything and took the money and put it into baseball cards. Then started selling a lot of those cards in 2000 and started buying early gold
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Rates will stay low until their fake measure of inflation shows a large upward spike. I say fake, because the calculation doesn't include the cost of energy or food. >>
They say it does.
They release CPI (incl. food & energy) and "core CPI" (excluding food & energy)
It has become kind of an urban legend that they don't include food & energy. The FED likes to look at the core CPI to find the trend since "food and energy prices are volatile," as they say. (which is nonsense these days since they've been mostly moving upward only.)
However, both figures are published and if the number doesn't say "core" in front, then it allegedly accounts for food and energy. (how well it accounts for them, I don't know.)
When/if the derivatives of which Roadrunner speaks, blow up, rates will go even lower.
Knowledge is the enemy of fear
The commodity indicies have a fairly high weighting for fuel and food. It's far higher than what you'll find in the CPI. The CPI is about 40% housing and 10% durable goods. That makes 50% of the index almost flat. At least that's been the case for the past 10-15 yrs. The other 50% has to include all the other stuff we spend our money on (food, energy, taxes, education, entertainment, medical, insurance, communications, electronics, recreation, travel, clothing, personal care, etc.). With substitution effects for food, you can exchange most anything for something cheaper thereby lowering your actual quality of living, something the CPI doesn't take fully into effect. Food is about 15% of the CPI and fuel/electricity about 10%.
When/if derivatives blow up, the rates will go up as there will nothing keeping them artificially low. Since permanently low rates is exactly what the Fed/Treasury want, then they would already be unwinding all $200 TRILL of those US bank IR swaps in order to ensure low rates. Since they aren't, they obviously prefer them where they are: in the closet and marked to model. If those $200 TRILL in IR swaps blow up, so will the banking/financial system, at least for some period of time (weeks, months?).
****Way to go Connecticut Huskies taking out SD State tonight! Now if only Arizona can keep blowing out Duke, that could make a trip to the final four more likely.
roadrunner
Exactly, and thats why rates, IMO, would actually turn negative. Rates went negative with the mere prospect of banking system collapse in 2008. They probably would go way negative if it actually happened.
Knowledge is the enemy of fear
stick dividends by an aggregate of 67 billion dollars. This was funded by us sheeple who receive zilch
on our deposits. If the banks go under again, tax dollars will be given then but the 67 billion dollars
will be gone. The Fed was forced to talk up the dollar to keep it from sinking below 75 even though they
would rather have a cheaper dollar because of debt. We as a Nation have not solved our debt problems
we have only put Bandaids on the deep wounds that are festering underneath. One sign of the problem
as an example it corporate federal relief. GE made tens of billions of dollars in profit and yet they not only
paid NO TAXES, they received several billion dollars from UNCLE SAM. Thus, I those companies are allowed
to escape the bulk of the taxes they owe, just cutting programs will only impact the sheeple. As for low money rates
I do not believe the the Government is able to do what is necessary to solve are problems and so I am dubious
about everything I hear, see and smell.
Camelot
<< <i>How much longer? Until the wealth is transferred from the old to the young. >>
Rather until the wealth is transferred to the mega corporations and financial institutions.
Their demand for wealth and power is insatiable and unending. They have no loyalty to any Nation
except the worship of the almighty dollar, pound, and any other negotiable sign of wealth. I am really trying
to transfer my and Mrs Bears assets to our cubs, but it is getting more difficult with each passing day.
Camelot
Liberty: Parent of Science & Industry
the road. The grandchildren will have to depend on their own parents for relief. Sometimes
it is necessary to pay some taxes, to prevent a more serious impact on ones children. You
pays your money and yous take your chances.
Camelot
<< <i>. I say fake, because the calculation doesn't include the cost of energy or food. >>
Where do people come up with these ideas?
From bls.gov
What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
<< <i>
<< <i>. I say fake, because the calculation doesn't include the cost of energy or food. >>
Where do people come up with these ideas?
From bls.gov
What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses). >>
It's often the "core CPI" that is trotted out to show that there is negligible price inflation. And that does indeed not include Food or Energy. One could say that core CPI
should exclude everything else but Food and Energy since it's those 2 things that affect the biggest variable portion of our purchasing basket.
While the CPI-U does contain 200+ categories, the key thing is how they are calculated and massaged. Just because an item is factored in there somewhere doesn't mean
it affects Joe Consumer in the exact same way (ie substituton effects, hedonics/quality factors, geometric weighting, etc.).
Why is it that each month the "core CPI" is usually presented as the "proper" gauge of price inflation. The CPI-U is often reported as an afterthought because the govt decided
that food and energy are "speculative" and should not be as much of a concern (ie eventually they'll return to normal). From my viewpoint, food and energy hit right in the wallet and it's "core CPI" that should not be reported. It has no business being included in monthly reports. The sheeple have somehow been brainwashed by this "core CPI" crap (CCC) just like they believe that a "nominal" 2-3% inflation per year is a "requirement" for a vibrant, growing, and healthy economy. That "nominal" price inflation transferred a lot of wealth over the past 98 yrs.
roadrunner
The megas are OK regardless when policy buys votes from the old or the young.
Heckova lot longer than that!
What happens when the dam breaks?
Liberty: Parent of Science & Industry
Who says the dam didn't break already? Were you expecting a wall of water that hits all at once? My toes are feeling wet .
Maybe certain areas of the economy are not really solvent anymore but they are doing a good job of faking it.
Hint........ insurance which has already been destroyed by ZIRP .
The stock market doubles.
Knowledge is the enemy of fear
<< <i>Three months, 6 months, a year?
Heckova lot longer than that!
What happens when the dam breaks?
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i>
<< <i>Three months, 6 months, a year?
Heckova lot longer than that!
What happens when the dam breaks?
After my cancer surgery three years ago this is how my stream is now. I can knock a can off the fence from 15 paces
Mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I realize it's still tough for a lot of people in the US, even much more so around the world, but if you were to really believed all of the doom and gloom that is so pervasive in our current society, you'd believe this might be one of the worst times in the US ever...which is an absolute embarrassment and a huge disservice to people who survived the War of independence, the War of 1812, the Civil War( No Christmas party from what I understand), the depression, the dust bowl, WW1 and II, Assassinations, the Vietnam war and so on....plus that's just "modern" history.
The worst thing bout this period in my mind, is that with all of the edumacation and volumes of readily available information on past history, so many people have absolutely ZERO perspective.
Boggles the mind, maybe it's just me..
<< <i>The worst thing bout this period in my mind, is that with all of the edumacation and volumes of readily available information on past history, so many people have absolutely ZERO perspective. Boggles the mind, maybe it's just me.. >>
How terrible things were 50 or 100 years ago is of little relevance to a guy who can't feed his kids tonight. Perspective means nothing to a family living in their car. For too many Americans it is the worst of times. This is what I find unacceptable.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i>
<< <i>The worst thing bout this period in my mind, is that with all of the edumacation and volumes of readily available information on past history, so many people have absolutely ZERO perspective. Boggles the mind, maybe it's just me.. >>
How terrible things were 50 or 100 years ago is of little relevance to a guy who can't feed his kids tonight. Perspective means nothing to a family living in their car. >>
Well, you're sure right about that derryb, nothing more to say on that subject except you're sure right on with that comment, those particular people are not well off, great point you make there.
However, it appears that bluelobster's point was a bit more germane to the discussion, which is that apparently, the perspective of many of our prolific posters seems to be about a 20 mile radius around their house for the specific, and the whole damned country or even planet for their most astute observations, including such brilliant insights as "the new world order are your masters" yeah that's useful.
Liberty: Parent of Science & Industry
<< <i>
<< <i>
<< <i>The worst thing bout this period in my mind, is that with all of the edumacation and volumes of readily available information on past history, so many people have absolutely ZERO perspective. Boggles the mind, maybe it's just me.. >>
How terrible things were 50 or 100 years ago is of little relevance to a guy who can't feed his kids tonight. Perspective means nothing to a family living in their car. >>
Well, you're sure right about that derryb, nothing more to say on that subject except you're sure right on with that comment, those particular people are not well off, great point you make there.
However, it appears that bluelobster's point was a bit more germane to the discussion, which is that apparently, the perspective of many of our prolific posters seems to be about a 20 mile radius around their house for the specific, and the whole damned country or even planet for their most astute observations, including such brilliant insights as "the new world order are your masters" yeah that's useful. >>
Comment was made in reference to his "all of the doom and gloom that is so pervasive in our current society, you'd believe this might be one of the worst times in the US ever..."
My point is that previous bad times are only relevant to the historians. Those living with and experiencing the bad times are rightfully concerned with current times. It is no consolation to them that other people might have had it worse. The only reason you don't see 1930's soup lines today is that the soup now gets delivered to the door electronically on an EBT card.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
that's right. And instead of taking the soup back to their tin shack with no power or water, our "poor" heat it in their microwave and adjust their air conditioning before sitting down on their lay z boy and tuning their flat screen TV to one of 300 cable channels.
Liberty: Parent of Science & Industry
<< <i> The only reason you don't see 1930's soup lines today is that the soup now gets delivered to the door electronically on an EBT card.
that's right. And instead of taking the soup back to their tin shack with no power or water, our "poor" heat it in their microwave and adjust their air conditioning before sitting down on their lay z boy and tuning their flat screen TV to one of 300 cable channels.
An excellent testament to the sad state of US economic affairs and to the failed welfare state. Many do not see this rot. Good job.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
seems like more of a testament to the excellent state of US economic affairs and the success of the welfare state, wouldn't you say?
Liberty: Parent of Science & Industry
<< <i>An excellent testament to the sad state of US economic affairs and to the failed welfare state. Many do not see this rot. Good job.
seems like more of a testament to the excellent state of US economic affairs and the success of the welfare state, wouldn't you say? >>
No, I don't watch CNBC.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i>
<< <i>The worst thing bout this period in my mind, is that with all of the edumacation and volumes of readily available information on past history, so many people have absolutely ZERO perspective. Boggles the mind, maybe it's just me.. >>
How terrible things were 50 or 100 years ago is of little relevance to a guy who can't feed his kids tonight. Perspective means nothing to a family living in their car. For too many Americans it is the worst of times. This is what I find unacceptable. >>
It's the worst of times, it's the best of times ...
Lol, you find unacceptable ??? Hilarious, once again what are you doing about it in your community ?? Free lectures or trainings? Giving underprivledged youth scholarship money? Paying for health issues for needy people in your community? Giving all your money to a worthy cause or taking all your money and starting your own cause??? funding any other entrepreneurial endeavors for the needy???
Edit to add... Oh I bet nothing... Or the infamous "I'm trying" but actually doing nothing...
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i> The only reason you don't see 1930's soup lines today is that the soup now gets delivered to the door electronically on an EBT card.
that's right. And instead of taking the soup back to their tin shack with no power or water, our "poor" heat it in their microwave and adjust their air conditioning before sitting down on their lay z boy and tuning their flat screen TV to one of 300 cable channels.
Hey! Wait just a gosh darn minute here. That's 200 cable channels where I come from buster!
<< <i>
<< <i> The only reason you don't see 1930's soup lines today is that the soup now gets delivered to the door electronically on an EBT card.
that's right. And instead of taking the soup back to their tin shack with no power or water, our "poor" heat it in their microwave and adjust their air conditioning before sitting down on their lay z boy and tuning their flat screen TV to one of 300 cable channels.
Hey! Wait just a gosh darn minute here. That's 200 cable channels where I come from buster!
Ooof, sorry, thought I had reduced the number enough.
We get over a thousand channels, including one (not CNBC apparently) that holds the viewpoint, shared on here by some, that the country would somehow be "better" if our poor had it worse?
Liberty: Parent of Science & Industry
only a lunatic would laugh at his own lunacy...
<< <i>An excellent testament to the sad state of US economic affairs and to the failed welfare state. Many do not see this rot. Good job.
seems like more of a testament to the excellent state of US economic affairs and the success of the welfare state, wouldn't you say? >>
Good point. We'll find out soon enough how long the U.S Government and 10% of its citizens can support 90% of the economy. I was just watching some of our welfare state fruit looting a CVS in Baltimore. Fruit of the Loot!
<< <i>
<< <i>An excellent testament to the sad state of US economic affairs and to the failed welfare state. Many do not see this rot. Good job.
seems like more of a testament to the excellent state of US economic affairs and the success of the welfare state, wouldn't you say? >>
No, I don't watch CNBC. >>
And make a 10 % tithe and give cheerfully too !
Then their is the wife tax , household upkeep tax, kidde tax and college savings well.....I still have enough thank God !
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>I dunno what's going to happen out there but after federal tax, state tax, medicare tax, social security tax, personal property tax, real estate tax, and sales tax, .....
And make a 10 % tithe and give cheerfully too !
Then their is the wife tax , household upkeep tax, kidde tax and college savings well.....I still have enough thank God ! >>
Send extra to Chucky.
All in favor, say Aye.
Aye.
Motion approved.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
correct level based on supply and demand. Interest rates in the World's other
major economies are similarly low. Germany and Japan are lower than the US.