FYI: Confirming what markets everywhere had expected, Federal Reserve Chair Jerome Powell all but promised Congress Wednesday that the central bank will be lowering its federal-funds rate target, starting with a cut of one-quarter percentage point, most likely at the end of the month. He admitted that the economy already was “in a good place,” perhaps an understatement with the record-long expansion entering its 11th year, unemployment at a half-century low, the major stock market averages at record highs, and the biggest apparent problem being inflation falling short of the Fed’s 2% target. A cut would trim the bank’s key policy rate from the current 2.25%-2.50%, hardly an exalted level.
Regards,
Ted
https://www.barrons.com/articles/how-to-play-the-coming-rate-cut-51562943633?mod=hp_INTERESTS_funds&refsec=funds
Comments
All of the central banks of the world are owned, and mostly controlled, by the governments they represent. The Fed’s vaulted “Independence” is correct, and a tribute to the United States, but I can assure you that the European Central Bank, the Bank of Switzerland, the Bank of Japan and the People’s Bank of China have no such “Independence.” They are owned and “managed,” by the governments they serve.
Consequently, when you see “negative yielding bonds,” in these countries, you need the correct focus. It is the “Governments,” not the central banks, that are mandating yields lower than Zero, to protect their own interests. This is because, in my estimation, that the various governments cannot afford their budgets, their social programs, or any kind of increase in taxes, and so they have learned from the “Great Recession,” and found a very convenient way to “Rig the Game” for their own benefit. The central bank in the United States is one thing but the central banks in Europe, Switzerland and Japan are nothing but a shill for their governments.
Basically, if you are borrowing, it is “Manna from Heaven,” and if you are trying to get some yield, it is the “Wrath of God.” That is the cycle that I think we have entered. Then with the ECB making noises about another round of Quantitative Easing, and the Swiss central bank continuing on, and the Bank of Japan continuing on, the Fed is going to get “Forced” to follow suit. A quarter of a point cut here and a quarter of a point cut there and soon, very soon, the United States central bank will be forced to compete with the world’s other central banks because there will just be no choice, as America defends her position.
https://advisorhub.com/resources/out-of-the-box-the-game-is-rigged/?mod=article_inline