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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: sixty2nds who wrote (23775)	10/1/2013 11:22:17 AM
From: ahhaha	Respond to of 24758

You misunderstand. George is a relative hawk, relative to the set of myths swirling around FED. Actually, she's no hawk at all. There are no hawks because FED is no longer in strict control of monetary policy. Monetary policy can't be applied during periods of synthetically constrained private sector fiscal policy. It isn't clear that if FED sold securities, rates would rise, or if they rose briefly, they'd only fall back to previous levels. Monetary policy can only work where borrowing is an important part of commerce. Not only is George not a hawk in the traditional sense of the word, but also she's a pumper. When she implied that FED shouldn't be controlled by the markets, she confirmed her true stripe. She's a relative pumper who looks "hawkish" relative to the others on FOMC because she doesn't want to pump as much. It is axiomatic that the market, and only the market, can determine the equilibrium rate of interest. If and when FED interferes with that determination, the markets gradually are destabilized, and another financial crisis occurs. To the contrary George believes that FED solely determines rate equilibrium by calculation, a calculation based on yesterday's data. Once that calculation is made the only task left for FED is to add some quantity of reserves to the system, never subtract. Unfortunately for little kiddies like George the real world could care less about her quaint myths. It does not matter what FED does or thinks as long as private sector fiscal policy is restrictive. Therefore, interest rates of any variety will randomly fluctuate as though they didn't matter. Thus, no trend, and no cap gains objective can be expected in any series. Let's say one starts with the a priori assumption that short rates will rise. What effect does that have on the long rate? Depends on macro conditions. There never is a valid argument for investing in rates. Why? It represents a return of principal, rather than on a return plus a return of principal. Can't get something for nothing, in any universe.