And it would have worked if the feds had cut spending, too. This would have released real resources that the feds were wasting on assorted boondoggles to be put to work shoring up businesses and improving output. Alas, that part of the message wouldn’t fit into a tweet. Instead, the feds increased spending and increased the debt. And as we’ve mentioned before, if you could get rich by borrowing and spending – or by simply “printing” money – there would be a lot more rich people on God’s green ball. And so it came to pass that in 2018, the Fed continued to lend money at below the rate of consumer price inflation (effectively giving it away)... and Washington continued to spend money it didn’t have on things it didn’t need. The rich lost money on Wall Street. The poor lost money as the Main Street economy stumbled. The year came to a close and we were all collectively older and poorer. But no wiser. What’s ahead for 2019? As we will see, the past casts its shadow over the future. Bloomberg is on the case: Key Fed Yield Gauge Points to Rate Cuts for First Time Since 2008 Some of the most accurate gauges of economic health are pricing in lower Fed rates for the first time in more than a decade.
between the forward rate implied by Treasury bills six quarters from now and the current three-month yield, fell into negative territory on Wednesday for the first time since March 2008. Two-year yields dipped below those on one-year paper in December. “This is a crystal ball, it’s telling you about the future and what the market thinks of the Fed and what it will do with its policy rate,” Tony Crescenzi, market strategist and portfolio manager at Pimco, said in an interview with Bloomberg TV. “The market is predicting a rate cut at the beginning part of next year.”
The year came to a close and we were all collectively older and poorer. But no wiser.
RANG THE BELL A crystal ball? Probably not. The credit markets are warning of an approaching recession. And the stock market rang its bell last year when the S&P 500 peaked at around 2,900 in September – warning of a bear market. But there are no crystal balls in the financial markets. Markets provide information. It has to be new, surprising information or it’s not information at all. “Tell me something I don’t know,” says the investor. That’s why the Fed’s price fixing of short-term
The little-known near-term forward spread, which reflects the difference
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