FYI - Fox in the Hen House: Why Interest Rates Are Rising

a reply to: CB328

Trump thought he could raise the fed rate?

I'm not surprised. He was, after all, surprised that a judge could stop an EO.

a reply to: Ameilia


Hyperinflation is what happens , you still get the pension amount that was agreed , but don't count on it going as far as it would in the good old days. But be contrite in the knowledge that at some stage the beneficiaries of the strong dollars turned it into gold long ago so will not suffer the same consequences, when they decide to end the PM manipulation .

originally posted by: Phage
a reply to: FyreByrd

Raising the basic rates will raise the prices of everything we use, it will effect the cost of any government service as the government relies on money borrowed from PRIVATE BANKS to provide those services.

No. Government debt is in the form of bonds which means they are borrowing from those who buy those bonds (you, me, and yes, banks). So guess where the interest on those bonds goes? To the bond holders (you, me, and yes, banks). But bond rates are not tied to the fed's rate so the point is moot.

Business debt is usually acquired in order to expand operations (if it is a well run business, or to meet short term cash flow requirements) so, if interest from that debt is being passed on to the consumer it is going to be quite insignificant in comparison to the capital cost. But doing so (passing interest and capital costs on to the consumer) would put a business at a competitive disadvantage. Normally it would just show as a loss in net revenue (it is also tax deductible). A business that is in good enough shape to get the loan can absorb the cost of that loan.

There. Ideas. Happy?

Sources would be helpful.

And you may be a bit out of step with the times....

Before the global financial crisis, the Fed would raise the federal funds rate by selling U.S. Treasury securities in open market operations. Banks would pay for these securities by reducing their reserves, and reducing the supply of reserves would push up the price – the federal funds rate — that banks had to pay to borrow reserves. When the Fed wanted to lower rates, it would buy U.S. Treasury securities.

By law, only banks can earn the IOER on deposits at the Fed. But other financial institutions – Fannie Mae, Freddie Mac, hedge funds, money market funds – can and do make short-term loans to domestic banks and U.S. branches of foreign banks, and they’re often willing to lend at an interest rate below the IOER. Without some additional steps by the Fed, this would make it hard for the Fed to control the federal funds rate and thus, influence, short-term rates throughout the economy.

www.brookings.edu...

I don't claim to be an economist nor really understand macro economics.

In my experience, I've only known one person who personally bought Treasury Bonds. He was an eccentric millionaire. I have known several.

Most people, yourself excluded of course, have their money in funds that 'invest' in various securities as do cities, states, pension funds, etc. Some of which may be Federal Bonds, State, County and City Bonds, Corporate Bonds, Stocks and who know what else.

Each intervening 'financial organization' (between interest made) takes their 'cut' of the interest - from the FED down - and by the time it 'trickles-down' (also know as voo-doo) to an individual investor the 'interest earned' is negligible.

So again - I'm happy you understand it all. I'm happy you have large chunks of money to lend the US government over time for a small return. Actually I applaud you for doing so and cutting out all the middle men.

The value of funds rise and fall mostly on individual stock values - not interest or dividends accrued to the fund.

a reply to: FyreByrd

And you may be a bit out of step with the times....

Maybe. But I thought you were talking about the government taking loans from banks, not about banks buying Treasury bonds or taking out loans themselves. That's what those two external quotes are talking about so I'm not sure what point you're try to make with them.

In my experience, I've only known one person who personally bought Treasury Bonds.

That is a logical fallacy known as an argument from ignorance but treasury bonds are not the only bonds issued by the government.

Each intervening 'financial organization' (between interest made) takes their 'cut' of the interest - from the FED down - and by the time it 'trickles-down' (also know as voo-doo) to an individual investor the 'interest earned' is negligible.

So bond investments are stupid. Got it. My brother might disagree with that assessment.

The value of funds rise and fall mostly on individual stock values - not interest or dividends accrued to the fund.

Yes, as I said, bond returns are not tied to the fed rate. Again, I'm not sure of your point.


As a reminder, here is what you said which prompted my raising the idea of bonds.

Raising the basic rates will raise the prices of everything we use, it will effect the cost of any government service as the government relies on money borrowed from PRIVATE BANKS to provide those services.

The points that I was making about that statement were:

1) The government does not borrow from PRIVATE BANKS except by selling bonds to them
2) Bond yields are not based on the fed rate.

The result being that a rising fed rate is not tied to increased government interest liability, contrary to your claim.