Hehe. Potential US default creating uncertainty about the global economy? Rush to the safety of the US dollar.Quote:
Originally Posted by Brock Landers
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Hehe. Potential US default creating uncertainty about the global economy? Rush to the safety of the US dollar.Quote:
Originally Posted by Brock Landers
So it's a feature? :DQuote:
Originally Posted by J. Barron DeJong
It is my understanding that despite printing a shit ton of money that we have yet to print money to directly service our debt.Quote:
Originally Posted by Brock Landers
Whay does that mean exactly? Like, what’s the difference in mechanisms between ‘printing money’ and ‘printing money to directly service the debt’?Quote:
Originally Posted by Kevo
My understanding, feel free to correct it I'm incorrect-
Printing money with QE- Fed prints money to buy treasury bonds. The Fed now owns treasury debt. The payments on the debt are made by collecting and remitting tax revenue.
Printing money in default to cover debt obligations- congress cannot come to an agreement to remit enough tax revenue to cover debt payments, so instead the fed prints money to pay bond holders. This scenario isn't directly caused by a lack of revenue, but the default will lead to lower credit ratings and increased rates for US national debt going forward. It is conceivable that interest rates on US government debt could get so high that it is impossible to raise taxes enough to cover debt obligations in the future.
Countries that have had some form of the latter (can't pay debt, so print more money) have often experienced hyperinflation and currency collapse.
^^^^
I’d argue higher rates are the first competition we’ve seen for bloated stocks in the last 20 yrs.
It would also help pull the rug out from under the mkt.
Helpful on difference between QE and debt monetization
https://economics.td.com/gbl-debt-monetization
Highlight: While QE programs over the past decade have led to an increase in the monetary base, they have done little to increase money supply. This was partially due to central banks paying interest on reserves at the central bank and a reluctance of banks to lend in the period right after the global financial crisis (GFC).
My take: since the larger Fed balance sheet causes a liability on bank balance sheets it is not inflationary in itself. It is better just to look at Fed intentions and prevailing interest rate. I.E. before they wanted higher inflation, now they want lower inflation.
People want to be confused by this and see some grand conspiracy. I don't.
.25bps hike today and I think market may go boom. ADP Payrolls higher than expected.
Anything more on rate increase and seems like shit gonna go cray.
Spineless Powell would rather put more banks out of business than stand aside and wait. QT is more important to continue vs more rate hikes. 10y yield going to dive either way. 3% on the way.
The way I see it is that a ‘default on the debt’ because the the debt ceiling isn’t raised by law (which I believe is the scenario your thinking about) is a very different thing than monetizing the debt.Quote:
Originally Posted by Kevo
Right now, and for decades, the US hasn’t had enough tax remittances to cover spending, and you could say that ‘printing money’ has been the way to make up the difference. (I don’t think printing money is the best terminology there, but good enough.) And I don’t think it’s right to say that payments on that debt are currently coming only from tax remittances, not from printing money; it’s all intertwined, so how do you say this dollar came from taxes, and that one was printed?
But there’s no reason that a continual tax revenue shortfall needs to lead to hyperinflation.
The hyperinflation happens when instead of collecting more tax revenue to cover the interest payments on ever increasing debt obligations, they decide to ‘print money’. That devalues the currency, market demands higher and higher interest rates to hold debt, etc. and you get the inflationary spiral.
The debt-ceiling issue is very different than that. There’s no doubt the US is capable of paying the interest on it’s current outstanding treasuries without ‘printing money’ in a way that would lead to hyperinflation - the monetary base has actually been shrinking over the past year, so the opposite of printing money.
The question is what happens if the US doesn’t make interest payments on it’s bonds, even when it has the capacity to, which to me is a very different scenario.
Lowering inflation is the Fed objective, not protecting banks which chose not to diversify deposit bases and or hedge rates. Tightening policy tightens conditions.Quote:
Originally Posted by 4matic
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It’s not full employment? Banks bought the Fed manipulated low rate bonds as a safe reserve and now the Fed manipulated short rate makes those same assets a liability. It’s quackery all around.Quote:
Originally Posted by kokomas
Remember, 15 months ago the Fed target rate for 2022 was like .50% so banks manage their assets using Fed guidance.
Does anyone benefit if this happens? Seems like even China wouldn't escape the fallout. Scary thing is if it happens sooner than the now moved up expected date and is a surprise. I'm guessing the big money behind the GQP will be making some phone calls if it gets too close and the showmanship will end.Quote:
Originally Posted by J. Barron DeJong
For the foreseeable future, economy is at or through full employment. Not the binding objective here. Objective is to slow output growth enough to raise the unemployment rate. Perhaps they have done enough at this point, perhaps they will have to do more. Not an easy job
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Im not an expert, and from the bit I’ve read, I don’t think the experts really know how it would play out.Quote:
Originally Posted by 406
I’d speculate that a default due to debt ceiling doesn’t actually benefit anyone, but the downsides aren’t felt evenly. Maybe China ends up less worse off than US, but still worse to some extent?
I’d hope that if there’s no successful vote to raise the debt ceiling, then it’s ignored, or one of the potential workarounds are implemented. There are a few options there, but legality of everything (including the debt-ceiling itself) is questionable.
e.g.
Attachment 457983
https://twitter.com/paulkrugman/stat...sR_NcRK2VkCfkg
Kevo, this might be relevant to your initial question as well:
Attachment 457984
https://twitter.com/paulkrugman/stat...sR_NcRK2VkCfkg
Powell stuttering gibberish press conference. No vision.
As someone that watched almost 6k go up in smoke via FRC, WAL is looking familiar…
Oil prices going down all week and locally here gas prices going up all week, crested $4.00 today. I’d like to see $50 WTI but I don’t think that will happen.
https://oilprice.com/Energy/Oil-Pric...ventories.html
I’m still holding a lot of energy, thankfully it’s been doing steady and helping offset the FRC asskicking.
Can’t blame the Fed for the couple banks that completely butchered their balance sheets and ALM. Interest rate and yield curve risk is like day 1 shit. Oh rates can change? Well fuck then.Quote:
Originally Posted by 4matic
Question for y’all, say I’ve got a bit of money in a college fund, that’s tied to stock performance, distributed into 4-5 funds in Vanguard. I can pull money into “cash” and keep it safe from market fluctuations under the account without penalty so it’s no longer tied to the market. If this makes any sense to you, would I be smart to move some of it into that safe area called “cash”?
At any time I can always roll it back into the funds tied to market performance.
^ this guy just wants to protect his daughter’s education money to the best of his ability.
Well. You can maybe blame the fed a little. Oh if you move fast shit breaks? Well fuck then.Quote:
Originally Posted by Brock Landers
Could turn into 50 banks. Maybe 100.Quote:
Originally Posted by Brock Landers
Too drunk when I wrote this, sorry 4matic. I hope 50 banks don't go under. Dealing with the highest inflation since 1981 is going to break some things. It is unfortunate the Fed didn't start tackling it a bit sooner, all that transitory stuff was wishful thinking. But here we are
So you are an immaculate tightening guy? Pull in the reins and nothing ever breaks? Kind of like an immaculate poop. I've done it. But not all the timeQuote:
Originally Posted by 4matic
Of course Fed could have started tightening and especially QT earlier. When they didn’t a surprise sledge hammer hike of a full point out of the blue without all the messaging. They can’t fine tune and shouldn’t try. Also, the markets are saying inflation is transitory. Who is right? The fed forecast record is not good.
We’ve had low unemployment for years prior with no inflation. The inflation in service wages is a good thing for the long term
Ouch. My FRC loss was only about $800 after the little profit I made by bailing on WAL, and even that sucked.Quote:
Originally Posted by BobMc
Sent from my SM-S901U using TGR Forums mobile app
Every stock in the KRE is down on the day. “Secure and resilient”
How many years until college starts? At the very least, find a money market or short bond fund offering 4+%, not cash.Quote:
Originally Posted by Buzzworthy
When do you need the money and what % are you up as of now? In general I would suggest just be in a position to hold but buy if there is a big market slump. But I also would plan to not be in position to be forced to sell stocks because need the funds. But if your kid starts school next fall, might be a good time to sell stocks and buy 6 month t-billQuote:
Originally Posted by Buzzworthy
Yep she starts next fall. I did sell a few thousand recently to put into cash reserves as deposits have and are happening now so I can use as needed.
The rest of the chunk is tied to stocks I’m getting dividends on. It’s been an 18 year build up as we started this account the year she was born. Now I just don’t want to lose some as the market gets weird again. So I’m thinking of pulling another 5-10k out of stock funds into the “cash reserves” fund so it’s safe from market fluctuation. I won’t make any dividend money on it but I also won’t lose it.
Buzz- VUSXX is a vanguard treasury money market fund that will yield 4.95% after yesterday's rate hikes.
It has never lost value in it's history, but I don't think anyone knows what will happen to treasury money market funds if the government defaults.
(Glass half full)Quote:
Originally Posted by Buzzworthy
Money market fund. Depending on your broker, vanguard has one if you’re in Vgrd now just move it there. They’re paying 4-5%. That’ll go down over the next 6 months as Fed pauses and eventually cuts but great spot for it.
(Glass half empty)
Of course inflation is still over 5% and college related inflation WELL over that, so you’re fucked anyway!
If you have enough for tuition now, and dont NEED the account to continue to grow, you just need it to not lose value, AND you are able to keep contributing... i would suggest chucking a whole bunch into laddered CDs.Quote:
Originally Posted by Buzzworthy
(Awesomist)Quote:
Originally Posted by Brock Landers
HOOKERS AND BLOW!!
Attachment 458048
Starting next fall, and given today's good safe rates, I'd be 100% in short bonds/MM funds. Unless maybe you think you have more in the account than she will use for school, then consider investing the remainder in stocks.
Always good to learn more here, thanks for this info.Quote:
Originally Posted by Kevo
I’ve got money in VDIGX, VMVAX, VQNPX, VTSAX and VMRXX (cash reserves). My dad had these set up previously as he’s been contributing as well.
Admittedly I’m new to these funds and how they work.
If you’re not getting at least 4.5% in whatever short term/money market fund, check if there’s something slightly different.
FYI CD’s aren’t paying what MM are
Yeah looks like I need to put in more time to research exactly what I’m getting vs what may be better. Appreciate the collective as always!
Had damodaran speak at a conference earlier and he took a giant shit on the entire ESG market. It was beautiful.