I think similar Roubini even if i think the crisis will be longer than he sais.The US toxic assets that are expected in the banks are 1 trillion more than CNN wrote today.
This growing of oil will be very short because has no legs to last more than six months.It’s only a hit to slah down share markets and US treasuries bonds.The real inflaction will be after the next absolute low of DJ30.
Economy will start again like stock markets but the TRUE INFLACTION will hit very strong US finacial system .We will have the 3rd final absolute low.
The true new start will be from there,but since now many main world actors are changed.In first position now and next decades there’ll be always EU.World has already changed.(oil follow € and not $,that’s why Opec will switch $ with €).
To: KJE Wheaton Il:
You say:” I hope rates stay low”. I ask, WHY? If rates continue to stay low (artificially low caused by government manipulation), then WHO will be willing to LOAN us the money to continue to fund our economic disaster spending? Your comment is nonsensical!
You say,”and we raise taxes to combat inflation”. Of course, raising taxes on already stresses working people is a sure cure for combatting inflation. Are you really this dumb? Working people (diminishing numbers by the months) are already under tremendous stress of paying taxes that are already too high to begin with, so I guess adding more taxes will make that stress easier to bear. Why don’t you just give ALL of YOUR income to the government and leave what little I currently have left (after the government has already picked my pocket through forced tax collection) ALONE.
The American citizen is FU–ed, no ifs and or buts about it, and people like you are simply too ignorant to understand what is happening.
Raise taxes, what a hoot. Tax revenues are plunging exactly because taxes are too high to begin with and companies are being forced OUT OF BUSINESS because of the already deadly tax burdens placed on them to begin with. No companies, no jobs, no incomes, no tax revenues. DUH!
I hope rates stay low and we raise taxes to combat inflation instead of raising rates. At least that way we can pay for all of the stimulus and other programs Obama is dreaming up. Hopefully, he shows some guts an starts cutting or modifying entitlements. If those types of policies are instituted the world will let the U.S. borrow on the cheap.
The Fed is trying to keep long rates down through Quantitavie Easing (QE) which just means they are buying Treasury debt with money created out of thin air. But, the QE is not sufficient to keep rates down becuase the supply of new Treasury debt is too large and because foreign CBs are selling their holdings of Treasury debt. The US may need to borrow up to $3Trillion this year and run a budget deficit of near, if not exceed, $2Trillion. Rates must rise to compensate for the risk of holding US Treasury debt. The US will not default on the debt, but they will pay it back with a cheaper US$. And once the current round of stimulus wers off and the economy again slows, watch both the Fed and the government add even more spending for bailouts, stimulus, and just plain liquidity. It may be counter productive the next time around as it forces the US$ lower and rates higher, putting more downward pressure on the economy.
The fed is playing with fire meddling in the bond market.
Get to know your neighbors & neighborhoods, staying informed by each other to better combat the media. This is about your livelihood, your standard of living & your quality of life that is being manipulated.
Support & join the Campaign for Liberty & be sure your congressional representative is supporting HR 1207 the Federal Reserve transparency act.
Government interventions create unintended consequences that lead to calls for further intervention, and so on into a destructive spiral of more and more government control.
Scheming ways to extort more taxes from the people to make up for failed, unconstitutional & morally offensive spending policies while maintaining a trillion dollar per year interventionist foreign policy overseas is not in our best interests.
this has nothing to do with the economy improving
its all about bama spending like a madman
oh by the way
last year at this time pauls headline article was
the fed is done cutting rates get over it
opps
The arguemnt that stocks will become more attractive as the economy improves, driving down the price of bonds may come true, but I hope not. That will lead to more of what happened over the last few years, when fund managers and others bought expensive stock even when it was over priced, driving the prices even higher, forming a bubble that was sure to pop.
Stocks are isky investments, but the risk increases dramatically as the price exceeds the unlying value of the company. If people truly belive that stocks will rise more than a little in the next few years they will be returning to the greater fool theory which says “I know I am a fool to buy at these prices, but I am sure to find a greater fool to sell them to a higher price.”
Yes, long term rates will continue to rise as the bond buyers will continue to demand higher rates of return to compensate for the higher rate of indebtedness of the borrower, until such time that the bond buyers finally say, NO MORE. Then the excrement really hits the fan.
There is very little chance of an economic recovery, because:
1) Jobs are plunging (job losses may be slowing, but that is a dubious statistic, manipulated by the government bean counters). The real rate of loss is actually much higher than is traditionally reported. I don’t believe any government statistic.
2) U.S. Housing starts are down 77.6%
3) Auto sales are down 44%
4) Consumer credit has suffered it’s biggest decline EVER
5) Big banks are in far WORSE shape than the silly stress tests reveal. The stress parameters were a joke and the banks were allowed to negotiate their grades before the results were released. What a bunch of hogwash, again government manipulation pulling the wool over the citizens eyes. Typical.
Folks, we are in for a coming world of economic hurt the likes we have never seen or felt before. Obama spending is only going to make things far worse and prolong the agony. Hang onto whatever cash you can accumulate cause this is not going to be pretty.
Rates are too low on two counts.
One is that bonds have traditionally represented a (near) zero risk investment. This is becoming less true by the day. There does come a time when the lender (bond buyers) actually do consider the ability of the borrower to pay back the loan. Given the high debt rate for the US this is becoming questionable. When bonds become risky, only a higher return will induce people to keep buying them. (keep loaning more money)
The second reason they are too high is because, IMO, it is a mistaken assumption that the solution to the economic situation is more borrowing. A lack of money for borrowing does constrain an economy but likewise excessive lending creates false wealth and reduces actual productivity.
A strong economy requires prudent lending/borrowing. Money should only be borrowed when it is productive to do so. To build a business, for long term purchase of required items (like housing and transportation, or for unexpected large expenses (like major health care). When people borrow for every day necessities (like food and toilet paper), or for entertainment, vacations, or other discretionary items, the only result is a drain on everyones wallet into the hands of non-productive bankers.
rates are not too high – in fact, considering the potential risk that bonds will no longer have seniority in event of bankruptcy, I’m frankly surprised that rates have not risen dramatically. The risk of owning a bond has increased, so the rate should as well. What I expect next is for someone who buys treasuries, that if there comes a time that repayment must be done pro-rata, anyone with income above a certain level will likely get shortchanged on both interest and principal.
and the more contract / bankruptcy law is overriden by politics, the more any sane investor will ask in return.
Rising interest rates are a good thing. It means economic activity is picking up, and money is moving out of bonds. Rates are still ridiculously low. The real issue is what will happen to the price of oil as the economy starts to ramp up.
Long term rates will slowly rise back to their normal range of 5% to 6% as inflation very slowly rises back to its normal rate of about 2% (we’re currently in deflation).
This should not affect the recovery. People and businesses are rapidly reducing their debts to combat deflation. There just isn’t much demand for new loans. Refinancings are reducing principal and interest on old loans, so the net borrowing caused by refinancing is still negative for total borrowing. But, this is good for the recovery: any money that is not spent on housing, interest, or principal is money that is available for productive uses in the economy. This is already happening, as more people pay cash.
The best cure for the problem of banks not wanting to lend is a higher interest rate with a steeper yield curve. The fact that the Fed wants people to get a mortgage with a 4.5% rate is all well and good, but if banks can’t make enough money on that rate to justify lending the money then there’s no help whatsoever for the mortgage market…
Right!!!
Give the people money and then take it away as higher taxes.
The people are over spending as it is. They are spending money they haven’t got. Make money more expensive to borrow and give the thrifty saver a fair go.
The whole world is upside down. People should not be encouraged to spend more on junk they don’t really want or need – what a joke – you’re broke so go out and spend money you haven’t got – and go bankrupt.
The interest rate should be going up instead of falling.