Interest rates

[GDR]

So if the US keeps raising rates as they did today. Can BOC resist and hold the line if that's better for Canada? Can dollar would just keep droping which has good and bad points. But wouldn't all kinds of investment money leave the country? Bottom line is can we really have much of a discrepancy in rates with such close economic ties?

[macdon02]

Not if govt wants to sell debt.... past and new. Canada's rates will follow the US, along with every other country in the world. We have no choice in the matter as far as holding line. What we are entering in the next 5 years imo is gonna be half seventies and half 1985. Inflation, higher interest rates and higher USD as the safe haven of the bond market plummets. Equities haven't even started, they have the possibility of doubling. It's the end of a 34 year cycle from 85 when USD blew off. My best educated guess fwiw.

[GDR]

Why do you think equities will go up if interest rates do also, isn't their trend opposite of each other? Inflation is caused by periods of surplus money or lack or supply, do you believe either situation applies in today's world?

[sumdumguy]

This cheap money and easy credit has got the “average” consumer in deep sh——. These bank governors get their arses kicked.

[errolanderson]

How much longer can an artificially stimulated economy taped together by money printing, easy credit and astronomical gov’t and consumer debt hold? Now the Fed is attempting to unwind their mind-blowing $4.5 trillion balance sheet which will trigger massive bond sales.

Should the U.S. economy enter recession / bond markets fail, there will be no more talk about Fed rate hikes or inflation. Today’s Fed comments may just a distant memory when this economic realignment impacts markets en-mass.

Central bankers are losing control and now powerless to stop a correction in-my-view . . . .

[farmaholic]

Can you money market watching guys explain why what happened in the eighties happened. Stoopid high interest rates. I was kinda young or not interested. Can or will it happen again?

[tmyrfield]

Can you money market watching guys explain why what happened in the eighties happened. Stoopid high interest rates. I was kinda young or not interested. Can or will it happen again?

recesion
deficit financing to stimulate economy
inflation
high interest rates to battle inflation
more recesion
more deficits
more inflation
higher interest rates

[errolanderson]

Can you money market watching guys explain why what happened in the eighties happened. Stoopid high interest rates. I was kinda young or not interested. Can or will it happen again?

President Regan's public debt was less than 1% of today's U.S. debt accelerating above $21 trillion. In Regan era, money printing did work and could work an economy out of a recession. Keynesian economics worked in those days.

Today, this doesn't work anymore because of the massive government debt and service charges. Service charges today alone are well above the total public debt of the 1980's. A totally different world. Today's QE (IMO) has simply created unsustainable asset bubbles.

Inflation was rampant in the early 80's. Mortgage rates soared as high as 22% at its peak. But debt wasn't an issue. Inflation was the issue. Now public debt is massive and uncontrolled. Just a small rate hike can do serious damage to gov't /consumer balance sheets.

The Fed raising rates now is also accelerating their service charges on an already accelerating debt load. But they do need room to cut rates when the next financial crisis hits. When that happens, QE4 may be born . . .

[farmaholic]

Thanks guys....

So, what's the answer?

Crash?

The economy will fix itself(sound familiar)?

What type of medicine needs to be taken, or any?.....let it trod along?

If policy, interference and manipulation got us to this point, what's needed to correct it, if you think anything is wrong.

Inflation can go away, debt doesn't.

Maybe controlling debt early would have been less painful than "some" inflation.

What would things look like today if things would have been left to their own devices?

I hate the thought of "forcing" an economy.

Lots to comment on if anyone cares to, THANKS again guys.

A fool can ask more questions than a wise man can answer

[biglentil]

The dollar is doing really well! Average life span of fiat currency is 27 years this experiment is now on year 47. There has only been 3400 different failed fiat currencies in history maybe this one will last. Its different this time.