Kevin Warsh has just been sworn in as the new Fed Chair. He is quite the fan of Paul Volker the Fed Chair that reduced inflation during the Reagan years. Inflation peaked at 14.2% in March 1980, at about the time Volker was appointer Chair and he reduced inflation to a little below 3%. And his method? He raised rates from 11.2% to 20% giving rise to a recession and much dissent from many sectors of the economy.
I don't know if Trump will be happy with his pick in the long term, given his feud with Powell for not wanting to lower rates, which while encouraging growth but give inflation a real boost.
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@kmax87
Interest rates should be much, much higher but if they are raised as Volker did in the 1980s there will be a stock market crash (which is coming anyway).
Basically, I fear that the lesson our age will have to learn is you don't get rich by printing money.
I expect rates to be cut (despite inflation being way over the Fed's 'target' of 2 percent) a move that will only compound an issue that has been decades in the making.
@beardmusic saidInterest rates are low historically but as here in Australia, because houses particularly are so expensive, and everything else for that matter, a small rise of say 25 basis points really impacts people's budgets. Inflation is 'only' at 3.8% with core inflation at 2.8% which would be brilliant numbers if it was 1980.
@kmax87
Interest rates should be much, much higher but if they are raised as Volker did in the 1980s there will be a stock market crash (which is coming anyway).
Basically, I fear that the lesson our age will have to learn is you don't get rich by printing money.
I expect rates to be cut (despite inflation being way over the Fed's 'target' of 2 percent) a move that will only compound an issue that has been decades in the making.
I listened to an interview the new Chair had with Peter Robinson on the Heritage platform. He was Reagan's speech writer so its all Uncle Milty this and Keynes was that bad man.......Anyhow Kev says that growth is at 1. ..%, all the economy needs to do is add another 1% and America can thread the needle back to health without rising inflation and leaving rates alone. He said all this about 12 months ago.
Interestingly Kev the Chair managed the Dookayne Family Trust (I can only spell phonetically) as well as working for the usual suspects on Wall St, and while he thought the bail out was good, he thought that QE was overused and resigned from the Fed Board when it was clear that Bernanke was going to keep feeding money into the economy. Through all that he also managed one of George Soros' major funds, so that would be an interesting bit of cognitive dissonance for the rabid MAGA noughts who claim Soros is the very embodiment of leftist evil.