A bond market basically appeared in the last few months where there was none - municipals are well over 5% and giving plausible yields, assuming we still have a US Dollar in 10 years.
(It is unlikely for inflation to remain anywhere near this high for 10 years - typical conservative long term stock market yield is 6% and that beats inflation somewhat handily)
Inflation number is a cooked up number. So, if that is the standard to invest by, some major surprises are well under way.
The thing to comprehend about the relationship between T-bills and Gold is that Gold is now a first tier asset class investment for banks since 1-1-2023.
The price suppression of gold in relation to fiat currency no longer is viable as cheap gold can now be obtained and moved outside the casino with a tremendous upside in relation to fiat.
The thing about the bond market is that bonds are typically a mesh of several durations and prices.
If a bank obtains bonds at 1%, it is of course nice. The money invested yields 1%. But if the interest percentage goes to say 5%, that investing bank now looses 4% Return on investment.
Not only that, it may be on the hook by having to pay its account holders a higher percentage.
When a bank has to liquidate its bond holdings to satisfy recuperation attempts of account-holders, well, that's were the trouble starts. It needs to sell these 1% yielding bonds in a market where 5% is now mandatory. It means it can only liquidate against a "premium" or rather: a discount.
So, a 1 million 1% bond may at a liquidation point only yield 950.000. But, if you have to satisfy 10 billion in account withdrawals ..... that bank is on the hook for 500 million, and that in turn may exceed the banks own equity. .....
However, in this climate, where Gold is easily exchanged for fiat, as there are many takers, and, there is no discount and long term there is a huge uptick in price to be expected.
SO, with all these contingencies in place, what is the FED to do. Depress the price of Gold. But the Casino no longer works as it once did, thanks to the backdoor installed to get delivery in physical instead in paper within the Casino.
So, what to do? Decrease the risk on T-bills by decreasing the interest rate.
The current money creation: 20T -> 33T and counting only puts pressure on the dollar. But if the other currencies are in lockstep (Yen, Euro, Pound) then there is not a lot to worry about. Until ... one of the Central banks starts revaluing it's gold holdings expressed in fiat ....... that is .....
Then the only hope is that the wrong side of the the price bet i.e. price decrease, is put squarely on the lightning rods of the banking system = speculators like BofA.
The vast majority of the financial world is ignoring Powell. The continually steepening inversion of the Treasury yield curve and insatiable demand for long term Treasuries over short term ones proves that. Everyone expects rates to come down. They are trying to lock in today's high rates for the next decade. If they thought they could get the currently higher yielding short term bonds, and still get the 10 year bonds later when those expire, they wouldn't be taking a big haircut now to get the 10 year.
Interest rates are going to come down, Powell's jawboning not withstanding. Remains to be seen what gold will do when that happens.
Lower interest rates are needed to keep Gold from competing with t-bills ....as an increasing interest rate is causing quite a lot of havoc.
Meaning: lowering interest rates is a last ditch effort to keep the price of Gold under wraps and capped <2000 $ and, keep the US .gov funded.
The Casino must go on.
Mind inflation. It will turn down a bit, only to progress to higher levels. ....
A bond market basically appeared in the last few months where there was none - municipals are well over 5% and giving plausible yields, assuming we still have a US Dollar in 10 years.
(It is unlikely for inflation to remain anywhere near this high for 10 years - typical conservative long term stock market yield is 6% and that beats inflation somewhat handily)
Inflation number is a cooked up number. So, if that is the standard to invest by, some major surprises are well under way.
The thing to comprehend about the relationship between T-bills and Gold is that Gold is now a first tier asset class investment for banks since 1-1-2023.
The price suppression of gold in relation to fiat currency no longer is viable as cheap gold can now be obtained and moved outside the casino with a tremendous upside in relation to fiat.
The thing about the bond market is that bonds are typically a mesh of several durations and prices.
If a bank obtains bonds at 1%, it is of course nice. The money invested yields 1%. But if the interest percentage goes to say 5%, that investing bank now looses 4% Return on investment.
Not only that, it may be on the hook by having to pay its account holders a higher percentage.
When a bank has to liquidate its bond holdings to satisfy recuperation attempts of account-holders, well, that's were the trouble starts. It needs to sell these 1% yielding bonds in a market where 5% is now mandatory. It means it can only liquidate against a "premium" or rather: a discount.
So, a 1 million 1% bond may at a liquidation point only yield 950.000. But, if you have to satisfy 10 billion in account withdrawals ..... that bank is on the hook for 500 million, and that in turn may exceed the banks own equity. .....
However, in this climate, where Gold is easily exchanged for fiat, as there are many takers, and, there is no discount and long term there is a huge uptick in price to be expected.
SO, with all these contingencies in place, what is the FED to do. Depress the price of Gold. But the Casino no longer works as it once did, thanks to the backdoor installed to get delivery in physical instead in paper within the Casino.
So, what to do? Decrease the risk on T-bills by decreasing the interest rate.
The current money creation: 20T -> 33T and counting only puts pressure on the dollar. But if the other currencies are in lockstep (Yen, Euro, Pound) then there is not a lot to worry about. Until ... one of the Central banks starts revaluing it's gold holdings expressed in fiat ....... that is .....
Then the only hope is that the wrong side of the the price bet i.e. price decrease, is put squarely on the lightning rods of the banking system = speculators like BofA.
...rates will go down, they got to make Biden look like he is on top of the economic situation...
The vast majority of the financial world is ignoring Powell. The continually steepening inversion of the Treasury yield curve and insatiable demand for long term Treasuries over short term ones proves that. Everyone expects rates to come down. They are trying to lock in today's high rates for the next decade. If they thought they could get the currently higher yielding short term bonds, and still get the 10 year bonds later when those expire, they wouldn't be taking a big haircut now to get the 10 year.
Interest rates are going to come down, Powell's jawboning not withstanding. Remains to be seen what gold will do when that happens.
Gas will be 1.50 by next fall
lol
When did raising rates become the solution to inflation, specifically targeting ‘inflation’.
Just curious - has that been well known publicly communicated tactic against inflation for decades (J. Carter era)?
Or, is it new-ish tactic against ‘inflation’?