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by 0x8BADF00D 2462 days ago
> The Fed has been maintaining emergency interest rates for a decade now. When do we expect the emergency to end and rates to go back to the good old 3-5% band from prior to 2008?

The emergency will never end until the US defaults. When the Fed started quantitative tightening, by something like 25 bps, it caused the markets to tank. The Fed is no longer an independent institution; just like Yellen made Obama look good, Powell is making Trump look good. The right thing to do is raise interest rates to 10-15%; I suspect the real rate is somewhere there, possibly even higher. It will be very painful in the short-term, but recovery/rehabilitation always is.
2 comments
StanislavPetrov 2462 days ago
They can't raise rates because that debt servicing would bankrupt every county, city, state, municipality and everyone else with a lot of outstanding debt. They also want ~0% (or negative) rates so that people are forced to spend all of their money to "stimulate" the lagging economy rather than sock it away. If they raise rates and make it worthwhile for people to start saving again spending and growth will very quickly turn negative. The bottom line is that our byzantine debt structure has been cobbled together because we have been borrowing against the future, making economic promises that were impossible to keep. Once you pull one brick out of the illusory pyramid it all comes tumbling down.
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coliveira 2462 days ago
The game of infinite growth has to stop at some point. The idea of extremely low interest rates is to make the scam go further. However, the problem is spilling over to other markets, like the stock market, real estate, and other assets.
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StanislavPetrov 2462 days ago
>The game of infinite growth has to stop at some point.

I couldn't agree more, but I don't think that anyone in a position to stop it will ever do so given the dire consequences that are sure to follow. Unfortunately our entire economic and political system is based on kicking the can down the road and hoping that it doesn't fall apart until someone else is in charge.

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coliveira 2462 days ago
My best illustration for the world economy is a group of people owning pieces of a balloon. As the balloon expands, everybody is happy to see that their property is growing and expanding as well. The only problem is that they don't seem to realize that blowing the ballon forever will certainly cause it to pop, reducing their property to nothing.
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rossdavidh 2462 days ago
Recovery/rehabilitation always is painful, but that doesn't mean painful = the right thing for recovery.

I respectfully disagree that interest rates of 10-15% would be good for the economy, in either the short or long term.

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