It shows the real Fed Funds rate, ie Fed Funds minus CPI inflation. It is at the most negative since at least 60 years ago...
Fed Funds Minus CPI Inflation
How high can/should interest rates go? Let's do a "back of the envelope" calculation: last time inflation was this high was in the early 1980s and Fed Funds were as high as 500-1,000 basis points over inflation. By this measure today's rates should be 13-18% !!
But, let's not be so extreme: let's assume that inflation will ease back to "just" 5% and that Fed Funds should "only" be 250 basis points over that. This gives a reading of 7.50% for Fed Funds versus 2.50% today and expectations that it will go up to, say, 3.50%
What do you think?
What I think is this: there are very few of us dinosaurs left active in markets who remember and understand what high inflation really means for the economy and its ultimate impact in markets. Instead, we have millions of younger people who have never experienced a bear market and thus firmly believe that a bull market by rights a foregone conclusion and buy the dips, plus hundreds of thousands of meme chasers.
In sum, the social anthropology of markets is problematic: myopic, emotional, uneducated in history.
I agree with Hell on this.... for the U.S. dollar, this is the last chance.... if they don't rise rates now, the dollar is finished.... finished in the sense that nothing anyone can do will ever bring back its status as a reserve currency... it looks peaceful now... but we are hurtling towards a cliff... better hit the brakes and raise those rates...
ReplyDeleteA few days ago Biden had a private meeting with a team of historians. Their warnings were grim, indeed. I am an amateur historian myself and I totally agree with them. The parallels with Imperial Rome are just amazing...
DeleteAh... that meeting on the death of democracy.... talk to university professors? ... that guy must be more senile than he appears... =)
ReplyDeleteMy two cents yeah... =)
Remember that Churchill saying?... "The best argument against democracy is a five-minute conversation with the average voter"..... That was always the problem with democracy... the electorate tended to be ill-informed.... Now what happens if you add a huge number of voters who know nothing about larger national issues, do not want to learn, and think it is not important?...
Yup, that is what happened when the U.S. extended voting rights to woman... sure, some women are well informed and care about national issues... but most are not... its even a cultural meme... don't bore a woman with politics... I would say that Western democracy died the day voting rights were extended to woman... in fact, I know of no historical example of a functioning democracy in which woman voted...
Just a perspective.... I have no horse in this race... we have different kinds of problems eh.. =)
I strongly disagree with Churchill and the women vote position. Here's why: we all need to understand that democracy represents ALL people (theoretically), not just the intelligent, well informed, male,... whatever... ALL. Representation of ALL comes with its own set or rules and requirements, that's the game. If you, me, the other guy/gal don't like it they can choose another game.
DeleteBut, as someone else said, representative democracy is a bad system - but all other systems are much worse.
I am home to many disturbing thoughts... =)
DeleteI dun feel very strongly about this... but out of respect, I will answer the implied questions.
a) Democracy should represent all people... I agree with the ideal... but fundamentally, democracy must work... otherwise everyone is worse off... Same as communism eh... to each what he needs, from each what he can give... nice ideal... but it also needs to work in practice...
b) Does universal suffrage (including woman) work? Truth is we don't know.. the fact that it is so rare in the historical record suggests it does not work. Btw,... even the greeks had reservations on democracy and universal suffrage.
c) The media feeds us a narrative that we are so enlightened and therefore we are the first civilization to treat woman is equals (in 4000 years of history) and give them the vote... feels like hubris to me... I suspect it has been tried many times... the reason its not in the historical record is because the civilization collapsed shortly after.
d) I remember this passage from the godfather... paraphrasing a lot.. " I love my wife,... she is my heart and my soul... but I don't let her tell me how to run my business"...