Article

2019-03-31 Economy

Pres. Trump adviser Larry Kudlow calls on Fed to cut interest rates

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Posted by Besoeker 2019-03-31 01:11|| || Front Page|| [6 views ] Top

#1 The Fed gave Obama 8 years of low low interest rates to banks and institutions. Suddenly, now they need to choke the recovering economy. They certainly don't work for you or me.

Posted by Procopius2k 2019-03-31 08:19|| 2019-03-31 08:19|| Front Page Top

#2 Usually like Kudlow, but no. Interest rates are still too low.

Posted by no mo uro 2019-03-31 08:28|| 2019-03-31 08:28|| Front Page Top

#3 What we think is irrelevant. The banks and money institutions like being at the Fed's tit for cheap money. My gawd, if they had to pay depositors real interest to get their money, the big boys may have to shrink their profit margins. Where are the six figure salaries and generous year end bonuses going to come from? /rhet question

Posted by Procopius2k 2019-03-31 09:46|| 2019-03-31 09:46|| Front Page Top

#4 the Federal Funds rate is one thing

another, I think more important issue is the amount of debt the Fed is holding

As a response to the 2008 meltdown the Fed added a huge amount to its portfolio of bonds. Before 2008 it was holding about $1.5 Trillion, by 2012, this had reached about $4.4 Trillion. In the past year, they have reduced it to about $3.9 Trillion but they have a long way to go to get it where it needs to go.

Corporate debt is also very high (probably at least double the Federal Reserve debt holding) and needs to be reduced although that requires corporate governance.

Raising rates a bit higher would help a bit both of these issues.

As Kudlow would point out a slightly higher rate would inhibit business investment but in a healthy economy, business investment should be funded by profits and selling equity in companies.

was there something in my coffee today to make me verbose like this

Posted by lord garth 2019-03-31 10:20|| 2019-03-31 10:20|| Front Page Top

#5 How can the government keep borrowing money if the Fed raises rates?

Posted by Abu Uluque 2019-03-31 10:57|| 2019-03-31 10:57|| Front Page Top

#6 good point by Abu,

an increase in the yield of all T bills, notes and bonds across the board of 0.5% would increase govt borrowing costs by about $50B per year

however, the yield is determined by many factors, not just the fed fund rate since many, many foreigner buy US debt for the imputed safety, so an increase in the fed fund rate by 0.5% would likely mean a smaller, say 0.2% increase in the treasury instruments

Posted by lord garth 2019-03-31 14:13|| 2019-03-31 14:13|| Front Page Top

#7 The Fed's charter way back when was to buy CORPORATE debt when times were tough, not US T-bills, notes, bonds, etc.

Of course, that got corrupted to fund wars, etc.

Posted by Clem 2019-03-31 21:40|| 2019-03-31 21:40|| Front Page Top

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