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n. Illinois | the Market is trying to let the new Fed Chair that they want more faux money by pushing up long term rates.
The market for all real rates is driven by the 10 year T-bill, IE all home mortgages, farm mortgages, Commercial Real Estate are priced off of the 10 year T-bill.
The Fed doesn't have direct control over long term rates. It can only affect the 10 year T-bill by becoming the dominate buyer of them like it did with QE programs where it was buying like 60% of all new T-bills being sold by the Treasury which lead to transient inflation of 9% plus. It also lead to 20% farm land inflation in 2021 and 17% in 2022. (great if your selling not so great if your trying to buy some with the current cash returns to corn and soybeans)
What will the new Fed Chair do? He knows what the President wants. so will he lower the discount rate (the only actual rate the Fed has direct control of and only impacts short term variable rate loans IE your annual operating loan if you have one) while letting the long term rates drift up and not buy a bunch of T-Bills and call the markets bluff? Or will he fold just like Powell and Bernanke or Yellen and print more faux money and blame the resulting inflation over to the Democrats or the Iranians?
I know I don't know; so it is worth keeping your eyes on the 10 year T-bill and statements about things like Quantitative Easing (they should call it for what it is printing money) Just as 2+2 always = 4, Inflation is always the result of creating money at a rate that the economy can not absorb due to #1 population growth and #2 productivity growth. in 2020 we grew the money supply over 2019 by 20% and then in 2021 it was over 17% growth over 2020. We have never done this rate of growth before. | |
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Hang on.
