A Game-Changing Crash . . . .

[fjlip]

Or the CLIMATE jumping up a few degrees and destroying the planet...any dooms day is welcomed by the left

[Austrian Economics]

The broad markets did not care for the Fed's emergency rate cut; thus the rally petered out. It's not that the markets are saying that the Fed should not have cut rates, but rather that the rate cuts are not sufficient to give relief to the debtors. The 10 year treasury yield has been falling since November, long before Coronavirus. While the central bank controls the very short end of the yield curve, the rest is determined by arbitrage in the credit markets. The reason that yields are falling is because business demand for capital is also falling. When your margins are being crushed, there's no room for borrowing. All the Fed can do is keep cutting until the yield curve gets back to a normal slope. It will take negative rates on at least the short end to do it.

[jazz]

There is a rumour floating on the interwebs that the US will attempt a return to a partial gold standard, part fiat and perhaps some sort of crypto blockchain backing.

Supposedly Fort Knox has 250,000 tons of gold which is 10 times more than the next country. They are the only ones that could attempt it.

But when they do, whats in your wallet will be virtually worthless.

There has to be a plan in the works. The end of fiat cant be dystopia.

[shtferbrains]

Emergency rate cuts are rarely good news. Here's a track record . . . .

March 2001 Tech Bubble . . . 1/2% cut
August 2007 Subprime Mortgage Fiasco . . . 1/2% cut
January 2008 Stock Market Crash . . . 3/4% cut
October 2008 Lehman Bros Collapse . . . 1/2% cut

Gives the savvy high rollers an exit opportunity?

If you know the pump is coming your golden.

[errolanderson]

The broad markets did not care for the Fed's emergency rate cut; thus the rally petered out. It's not that the markets are saying that the Fed should not have cut rates, but rather that the rate cuts are not sufficient to give relief to the debtors. The 10 year treasury yield has been falling since November, long before Coronavirus. While the central bank controls the very short end of the yield curve, the rest is determined by arbitrage in the credit markets. The reason that yields are falling is because business demand for capital is also falling. When your margins are being crushed, there's no room for borrowing. All the Fed can do is keep cutting until the yield curve gets back to a normal slope. It will take negative rates on at least the short end to do it.

Not sure how the yield curve will get back to normal. Ten-year treasuries now all-time low below 1 percent. Fed making emergency cut just panicked market. There’s just not a good ending as the financial ghost of 2008 Lehman Bros are again haunting financials.

[Austrian Economics]

"Not sure how the yield curve will get back to normal. Ten-year treasuries now all-time low below 1 percent. Fed making emergency cut just panicked market. There’s just not a good ending as the financial ghost of 2008 Lehman Bros are again haunting financials."

I don't mean normal in terms of the rate but rather the slope of the yield curve. Right now it looks like a soggy paper towel with support only at both ends and which is threatening to tear in the middle.

What we used to think of as "normal" interest rates are long gone. I anticipate some sort of Lehman moment in the near future. There are a lot of marginal borrowers out there who are having difficulty servicing their debt.

What does not help is that financial institutions routinely borrow short to lend long. That works as long as the yield curve is in a nice upward slope. When they roll a loan and see that the short term rate is above what they can lend for, they wind up with a money losing loan portfolio.

[errolanderson]

Bank of Canada cut rates 1/2% to 1.25% this morning . . . .

[jazz]

Bank of Canada cut rates 1/2% to 1.25% this morning . . . .

Sweet refi.....what else can you do. The bubble is in everything, even farmland now.

The only 2 things I can think of unaffected by the bubble is raw commodities and gold.

[bucket]

Lower bank rate means farmland just got more affordable with a return to boot....bubble won't burst on farmland...

Investors will be able to rent it out and make a return....let someone else do the hard work of farming it...

[HITTGrapevine]

Re; Game changing crash…
Could always be wrong, but I'm not so sure we're going to see a game changing crash any time soon.
Too many crooked referees officiating … if ya know what i mean

[Austrian Economics]

Lower bank rate means farmland just got more affordable with a return to boot....bubble won't burst on farmland...

Investors will be able to rent it out and make a return....let someone else do the hard work of farming it...

The lower bank rate will eventually be converted into a bid on the asset. Because of this mechanism, falling interest rates mean that farmland prices will continue their upward trend. Farmland will actually become less affordable. This is true of any other asset as well. I don't think we are done with interest rate cuts just yet, so the effects will take some time to show up.

[helmsdale]

The lower bank rate will eventually be converted into a bid on the asset. Because of this mechanism, falling interest rates mean that farmland prices will continue their upward trend. Farmland will actually become less affordable. This is true of any other asset as well. I don't think we are done with interest rate cuts just yet, so the effects will take some time to show up.

I'm no Austrian school economist, although I've read a few... but imho, we wont be done with interest rate cuts until we finally realize central banks cant solve all economic problems.

There is only so much future consumption that can be made current before the aggregate demand curve cant realistically be nudged any further, let alone maintained out front as it is!

[errolanderson]

The lower bank rate will eventually be converted into a bid on the asset. Because of this mechanism, falling interest rates mean that farmland prices will continue their upward trend. Farmland will actually become less affordable. This is true of any other asset as well. I don't think we are done with interest rate cuts just yet, so the effects will take some time to show up.

Valid point, but global economics are changing rapidly . . . .

Buying the dip mentality that investors were conditioned and trained by the Fed has now become high risk. These are now high risk ‘failing knife’ markets. Fed manipulation power is blown. Commodity prices are at-risk of deepening deflationary pressures. Not a good environment for land prices . . . no matter how low interest go [IMO).

[Austrian Economics]

I'm no Austrian school economist, although I've read a few... but imho, we wont be done with interest rate cuts until we finally realize central banks cant solve all economic problems.

There is only so much future consumption that can be made current before the aggregate demand curve cant realistically be nudged any further, let alone maintained out front as it is!

Many of us on this forum are in agreement that central banks cannot solve any economic problems. What's worse is that they are creating problems by sending false signals to investors and entrepreneurs. Capital does not self-replicate, contrary to what the Keynesians and the Marxists believe. The only reason the economy grows at all in this environment is because we are consuming more capital than we are producing. The party ends when the seed corn stock goes to zero.

[errolanderson]

European bank stocks are now down 25% in the past 13 days.

That's a crash . . . .