No. of Recommendations: 2
<<As for rate cuts, I don't get the discussion at all. Why would the Fed do that? The economy has been doing fine>>>
Because the present Fed policy is stimulative.
Imo this isn’t your grandpa’s economic cycle lol. Americans have become CREDITORS who make MORE money from higher rates. The Fed is indirectly pumping $Trillions into savings accounts and money markets..balances compounding at 5.25 risk free no duration. Meanwhile the BORROWER, Uncle Sam—PAYS MORE which raises its deficit—for what purpose? To grow the $6.2 Trillion sitting in money market/passbook savings? While freezing out a generation of new potential owners who can’t buy a home because inventory is frozen by unwilling to part sub 4% locked in fixed rate owners?
These are not new dynamics,obviously, but the effect is somewhat unique due to the Pandemic which put $Trillions in emergency “aid” in people’s pockets—folks largely fully employed and void of large expenses like transportation, day care etc. So we have this sort of unprecedented liquidity bubble that created millions of debt creditors being paid triple the “normal” 2010s rate to be short term lenders to Uncle Sam. All that cash is bankrolling huge spending levels in a nearly 6% nominal GDP environment: I think the top THREE travel days all time are this month…
Uncle Sam is unnecessarily raised its debt, freezing out young homeowners, AND stimulating the economy by fattening checking accounts.
