Hussman on interest rates
ranshdow
Posts: 1,441 ✭✭✭✭
By way of John Maudlin
This measure of the amount of currency in an economy makes sense to me- monetary base per dollar of GDP. The link between this measure, interest rates, and price-inflationary potential also makes sense.
If the following is true, that the Fed balance sheet has to shrink by $700Bn in order to raise the short-term interest rate to 0.25% without causing price inflation, then we are in deep kimchee indeed.
0.03%: $2.60 trillion
0.25%: $1.92 trillion
So if the Fed tries to raise rates, bye-bye QE...
This measure of the amount of currency in an economy makes sense to me- monetary base per dollar of GDP. The link between this measure, interest rates, and price-inflationary potential also makes sense.
If the following is true, that the Fed balance sheet has to shrink by $700Bn in order to raise the short-term interest rate to 0.25% without causing price inflation, then we are in deep kimchee indeed.
0.03%: $2.60 trillion
0.25%: $1.92 trillion
So if the Fed tries to raise rates, bye-bye QE...
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