A Quote by Sung Won Sohn
I think the concern over rising interest rates is ahead of itself because I think inflationary fears themselves might be premature.
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We live in a time of turmoil. Earthquakes and tsunamis wreak devastation, governments collapse, economic stresses are severe, the family is under attack,
and divorce rates are rising. We have great cause for concern. But we do not need to let our fears displace our faith. We can combat those fears by strengthening our faith.
According to the Bank of England the economy is growing too fast so interest rates must rise to counter the supposed inflationary threat.
I don't think it's possible for the Fed to end its easy-money policies in a trouble-free manner. Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different. I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves.
The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure.
Asset-heavy businesses generally earn low rates of return - rates that often barely provide enough capital to fund the inflationary needs of the existing business, with nothing left over for real growth, for distribution to owners, or for acquisition of new businesses
As a number of people have stressed over the years, I think it would be premature to assume science itself will explain everything.
It's a mistake to think that any increase in wages is inflationary and there is substantial room for non-inflationary wage growth, particularly at the bottom end of the scale.
If we were to underrun our inflation objective over a period of time that we tried to increase interest rates, I think that would be worrisome.
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.
The FOMC has considerable control over short-term interest rates. We have much less influence over long-term rates, which are set in the marketplace.
Rising interest rates are considered bad for stocks because they raise the cost of doing business and depress corporate earnings and because higher yields make bonds relatively more attractive than stocks to investors.
The supply-side effect of a restrictive monetary policy, moreover, is likely to be perverse. High interest rates enter into costs and thus exert inflationary pressure, as well as inhibiting the expansion of capacity or the introduction of cost -reducing capital improvements.
If you let interest rates be freed, be set by the free market, they would rise dramatically. There would be a lot of broken furniture on Wall Street. It needs to be broken. The back of the speculative bubble would be broken and we could slowly heal the financial system. That's what I think we need to do but it's never going to happen because there's trillions of asset values dependent on the Fed continuing to suppress, repress interest rates and shovel $85 billion a month of liquidity into the market.
It's one of the fundamental principles of the stock market: When interest rates go up, stocks go down. And along with financial companies and cyclicals, technology companies - with their sky-high price-to-earnings multiples - should be among the biggest losers in an environment of rising rates.
According to the Bank of England the economy is growing too fast so interest rates must rise to counter the supposed inflationary threat. In lay terms, I interpret this to mean that people are working much harder, causing economic growth, and they're in danger of spending their money, which is what the recession-hit shops want them to do. But the Bank and the City seem to think this is wrong, and that if people work harder they should be punished by having their mortgages increased.
It was an echo of Director Comey's testimony that Trump showed no curiosity, no interest, no concern over the Russia hack. The only element of it that concerned him was how it might impact him personally. That says, I think, a lot about where the president is coming from, but it was quite jarring given this was an attack on our democracy by a foreign power.
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