A Quote by Anthony Scaramucci
For people who grew up in the last four decades of the 20th century, it is hard to grasp the concept of negative interest rates. How is it even possible? If interest rates are the price of money, is the marketplace broadcasting that money is on sale? Are we just giving it away?
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The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it's a pro-Wall Street financial engineering gimmick.
How long can interest rates stay negative? Think about this. Not only are you lending your money to governments, but you're paying them interest for the privilege of doing so.
Stock price multiples are negatively correlated with real interest rates. As interest rates rise, the market multiple will fall.
If we did go into a recession, something that's always possible for the U.S. or Europe, we could lower interest rates and expand the money supply without worrying about the price of gold.
People 'demand' the opportunity to gamble away money they do not have, just like people 'demand' money from loan sharks at extortionate interest rates. This is a warped, empty type of freedom, in which the powerful are free to exploit the vulnerable.
The real challenge was to model all the interest rates simultaneously, so you could value something that depended not only on the three-month interest rate, but on other interest rates as well.
Let's have honest interest rates. Let's let the free market set interest rates in that zone where supply of savings is matched up with demand for real borrowing for capital projects.
There have been times when the Federal Reserve has restricted the money supply and raised interest rates to gain an end, which had much better been left to another Government agency or the Congress to attain. The country could have had lower interest rates without sacrificing anything else.
When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.
We live in a global market and money's fungible and hedge fund private equity is looking for momentum plays, and there ain't no momentum plays in bonds, right? When the interest rates were spiking up or down, well they never really spike down they do spike up though. Something's got to happen, there's got to be motion, the dice has to be rolling on the board, and if it's not then they're not going to play because they're not going to get the adrenaline rush from looking at... you know, money markets fund interest rates or bond interests or whatever. It's got to be sexy.
The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates.
And so Fannie Mae produces very strong results for investors in - when interest rates are high and when interest rates are low, in recession and during booms.
A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
In 1936, money had no important role. Interest rates were one-eighth of one-eighth of one per cent. I did some research, and I found that the interest on one million dollars of ninety-day Treasuries was $37. People didn't even bother to collect it. The Fed wasn't important.
If we are going to have a Fed, it should not fall into the tyranny of experts with the a fatal conceit that a few wise people can determine interest rates. Interest rates should be driven by the market, and people's time preference, and we see these boom-bust cycles.
The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates.
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