My view also, Jim. There seems to be a lot of wishful thinking going on among investors about a steadily progressing US recovery, Europe bottoming out, and China avoiding a hard landing. As we know, central banks have a propensity to tighten too soon, plunging their sputtering economies back into recession, the most notable examples being the US in 1937 and Japan's tapering of its own QE program in 2006. Bernanke, who has studied these episodes carefully, has been making worried noises about a repeat of those experiences if the Fed does pull the trigger on its bond buying prematurely but is under heavy political pressure to do so. I'm surprised there is as much support as there is on Wall Street for a Fed pullback since the banks, as you say, have made out like thieves with all that Fed liquidity juicing the stock market.
Then again, our politics have a contrary propensity to prematurely forecast bubbles bursting and economies going over a cliff… :) On 2013-08-15, at 5:10 PM, Jim Devine wrote: > that makes sense, Marv. But if the "recovery" continues to be so anemic, the > FOMC may reverse its threat of "tapering." It's likely that the (financial) > investors are more optimistic about the US and world economies' prospects > than I am. After all, they say, the stock market is doing so well! > > Jurriaan Bendien wrote: > > >So why are rates rising? < > > me: > > I don't know. It's possible that lenders are switching strategies, from > > credit rationing to using interest rates. > > Marv: > Investors are speculating that the Fed will, in line with its "forward > guidance", begin tapering its purchases of MBS's and Treasuries, probably by > about $15 billion a month (from $80b) later this year, possibly as soon as > next month. This reduction in Fed demand is expected to push yields up and > prices down, reducing the worth of the current bond portfolios of the banks, > hedge funds, and other domestic and foreign investors. So they're selling on > the rumour, forcing rates up in anticipation. > > > > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > > > > -- > Jim Devine / "Reality is that which, when you stop believing in it, doesn't > go away." -- Philip K. Dick > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
