The yield on the ten-year treasury has already risen to 0.90%. This means that, in spite of trillions of dollars in money-printing so far, the Fed still can't keep interest-rates down. They now have two choices:
1) Let interest-rates continue rise. This is impossible. If the Fed lets them get to even 5%, the stock market collapses, owing to the size of the debt. Even raising rates to 1 or 2% crashed the markets last year, forcing the Fed to lower than again.
2) Impose a formal cap on rates and print the currency into oblivion to keep them down.
The Fed is going to take the second choice, imminently. Once that happens, the bond market will crash, because investors will know that real yields on bonds are going to be something like -10%. There will be a max exodus into gold and silver, and junior mining stocks will go up twenty-fold.
Remember, the coronavirus hoax is the excuse, not the reason, for the crashing economy. The economy was already crashing long before. The dichotomy which I present, to inflate or to default, is the reason why gold had already risen from $1200 to $1500 before the lockdowns started. Investors know what is coming.
Either the Fed lets rates continue to rise, and everything tumbles down into a new Dark Age, or they impose a formal cap on rates and print ten of trillions to suppress them. Then we go into hyperinflation, and an even greater Dark Age. There is no alternative. It is one or the other.
>thinking the fed doesn’t have a jewish trick up their sleeve ohhh no no no I hope you didn’t trade based on your “””analysis”””
Tyler Long
why do you think the interest rates will raise further? if printing 6 trillions doesnt do anything, printing one more trillions to buy even more of this doesnt matter neither
Owen Perry
The Fed can’t print faster than every single other country can print. America hyperinflates last.
It’s your currency and it’s your problem
Elijah Howard
yes I was hoping for somebody with some expertise in this area. As I understand it, low interest rates incentivize borrowing which allows to purchase equities and bonds. Bonds prices has inverse correlation with its yield. So friday's pop in the yield meant investors were selling their bonds (to go into equities).
My question is how does fed printing trillions of dollars supposed to affect yields usually? Does more printing equate to more cheap money for investors to borrow to then invest in bonds? This means it drives up its prices and lowers its yields?
for number 2, you're talking about formal caps on treasury yield rates or the federal interest rates? Still learning here, would appreciate the input
Evan Roberts
Brainlet here:
What determines bond yields? Interest rates or inflation rate?
Brayden Anderson
I just used all my money to buy stocks friday, am I fucked?
Xavier Lewis
Who cares about a x20 in a crashing cuerency ? I own mining stocks myself but I haven't solved this yet.
Ian Baker
There going to start printing 10s of or 100s of triilions
Luke Young
it's fine to just print money, the MMT guys are absolutely right
Blake Johnson
The fed buys bonds with printed money which increases the principal price of the bonds which in turn lowers the yield. Without the fed buying bonds interest rates would've hit 10% or 20% years ago.
Cooper Adams
Would it be wise to purchase some munis just as a hedge? In case rates do go up?
Oliver Thompson
Why not just let it crash then? There is supposed to be a bust to the cycle...there cannot be perpetual boom.
Samuel Scott
>how does fed printing trillions of dollars supposed to affect yields usually
See >you're talking about formal caps on treasury yield rates
Yes, a formal cap on the yields on treasuries, or long-term interest-rates. National interest-rates have already been capped at 0%. A cap on long-term interest-rates can only be achieved at the cost of unfathomable amounts of money-printing, sometimes called Q. E. If even the trillions which the Fed has already printed could not suppress yields, just think what is in store for us. It could be ten trillion, twenty trillion--who knows. The second the Fed announces a formal nominal cap on yields, investors will know that hyperinflation is coming, that real yields are going to plummet, and that gold is their only safe harbour.
Investor demand, strictly speaking, determines bond-yields. Low demand means that yields go higher. But central banks manipulate these yields down by printing money and buying bonds themselves--this is creating artificial demand. They have to do this, in order to service our enormous deficits, and prop up our colossal asset-bubbles. The problem is that, despite the trillions in money-printing, yields are still going up. The Fed can't keep them down. Nobody wants their bonds. If yields go up any more, the stock market will crash, just as it did in 2018. The Fed is now forced to make an impossible choice.
Gabriel Myers
We are in so much debt, and houses and stocks are in such a bubble, that to let it all crash would give rise to a new Dark Age. All social programmes would disappear. All banks would collapse. There would be riots in the streets all over the world. The unsettling thing is that to default like this would be better than hyperinflating the currency--which means that, not only does the system collapse, but the currency gets wiped out too. But inflating the currency is the politically expedient option, because that delays the catastrophe a little longer, so that is what our political class will do.
Ian Bennett
if yields are plummeting that means investors are buying up bonds (b/c they're inversely correlated)? along with gold like you said.
So according to what you've been saying, to avoid catastrophe, fed will prob inc their rates marginally instead of capping? or is there a third option?
Sebastian Sullivan
So what is the most sensible investment option? Say that an user has an extra 2000 USD a month to invest...what should that user invest in with the money?
Jack Rogers
Then buy gold
Mason Peterson
>what should that user invest in with the money?
Silver, buy silver.
Lincoln Lee
Besides PMs...is there anything else to invest in?
Adam Ward
In order of corresponding risk and reward: Gold, silver, gold miners, gold junior miners, silver miners, silver junior miners. Either buy physical metals, or hold them overseas in a vault via BullionVault or GoldMoney. With respect to mining stocks, buy the GDX and GDXJ for gold, and the SIL and SILJ for silver; these are index funds of the best miners, and will hedge your risk. Do not buy paper ETFs like GLD and SLV; these are ponzi schemes without the metals which are said to back them.
The Fed cannot allow rates to raise without incurring a stock market crash. Even a 2% rate would cause it at this point. They must either let them rise and crash the economy, or suppress them by money-printing and keep the ponzi scheme going. There is no third option.
Bitcoin. Or gold. But bitcoin is just a better designed gold.
I don't care what treasuries are at. It would be retarded to buy treasuries at any rate under 10% which is what real inflation it at (chapwood index). Fake, manipulated CPI will inevitably tick up as well now that not even computer ghz and pixels are increasing. Fed's mandate is stable prices, officially, they should care about nothing else. So if CPI goes above 2% then rate increases will come. Look at 1980s when rates went well north of 10%. Imagine 10% interest rates, stocks would probably drop 90%, while inflation occurs just the same.
You have a few months to get the fuck out of stocks, bonds, and any fixed return. Because the dollar will be worthless and the massive generational stock market ponzi scheme bubble is on its last legs.
Liam Gray
>Besides PMs...is there anything else to invest in? Ammo, Guns, and seeds
Luis Powell
You a september bro?
Parker Bennett
I have been purchasing Chainlink tokens.
Gabriel Walker
>Imagine 10% interest rates This would be good for bond holders though would it not?
Isaac Butler
OP, thank you for this useful post about business and finance, a rarity on this board.
Anthony Sullivan
says the increasingly nervous user for the 1938th time
Blake Ross
No, interest rates going up means existing bonds go down in face value.
Aaron Rogers
The principal value may go down but the coupon yield would go up right?
Jonathan Ramirez
but then wouldn't investors pick that up for the nice interest rate? or are they not buying even with the high yield b/c they're sensing that hyperinflation is around the corner?
