intuitive point. I just urge people to differentiate raising and lowering the overnight interest rate, meaning the rate people get on money markets, versus changing the long-term rate, which the Fed doesn't control the market does, unless they're pursuing QE, and then they have an influence. The point being, we already saw the reaction in long-term interest rates, which rose 80 to 100 basis points since the Fed cut 50 basis points. I'm suggesting that if they keep doing that, cutting more than the market needs, long-term interest rates will go up even more, which will be a aggressive tightening in financial conditions and threaten the real economy, which is actually borrowing at the long-term rate. Yeah. This, I think, is a really important concept, and I hope that people got it. It's another way of saying that you think that the bond vengelantes are not dead, and that the market still has a say in terms of what the price of credit should or could be, and that financial conditions can (20/40)
You are viewing a single comment's thread from: