Jump to content
House Price Crash Forum
hi5lo5

fed hikes rate by .25%

Recommended Posts

I think pushing in that direction; to start to wring debt out of the system, is going to be both painful, but also necessary to prevent a hyperinflation later on. I'm glad she has the courage to try it.

Share this post


Link to post
Share on other sites

So given how closely uk rates have historically followed u.s. rates, is it really going to be different this time and they will diverge?

Share this post


Link to post
Share on other sites
2 minutes ago, nome said:

So given how closely uk rates have historically followed u.s. rates, is it really going to be different this time and they will diverge?

They already have done :)

Share this post


Link to post
Share on other sites

I think she will be forced to roll it back fairly soon, when a recession starts to bite. I don't think the FED have a free hand when it comes to interest rates: just a channel that they can move in, set by other market forces. However, JY's commitment to move towards one bank rather than the other of that river of money is important: it makes the pedlars of debt, and those adicted to it, uncomfortable; and that might eventually force the system to right itself.

Probably irrationally, I had a good feeling about Yellen as the choice forthe chair of the Federal Reserve, and I'm impressed so far: I think she has swum against the current to achieve what she has to date. Good luck to her.

Share this post


Link to post
Share on other sites
1 minute ago, Diver Dan said:

Is 0.25% not more like a stroll than a hike?

Yes, it's a small step, and it might not last, but given the amount of leverage that's present, it might have surprisingly large effects.

From what I've read about Yellen, I don't think she is much beholden to the exaggerated profits of the financial sector, so might not shy away from causing them pain. However, if this turns into a recession where many ordinary jobs disappear, I think she will lose her nerve quickly and lower rates (and perhaps print) to alleviate the effects. We shall see, but she has held a very different course to Greenspan and Bernanke so far, which speaks of her judgement and courage.

Share this post


Link to post
Share on other sites
3 minutes ago, Toast said:

 

Probably irrationally, I had a good feeling about Yellen as the choice forthe chair of the Federal Reserve, and I'm impressed so far: I think she has swum against the current to achieve what she has to date. Good luck to her.

I'm impressed with her obvious political manoeuvring.

No coincidence that a left field candidate gets the presidency then all of a sudden rate hikes occur into peak markets and recessionary data..... Data upon which the Fed claim to be dependent for their decisions.

It stinks. But, at the same time, interest rates do need to go up.

Share this post


Link to post
Share on other sites
1 minute ago, Noallegiance said:

But, at the same time, interest rates do need to go up.

That's the key point. Also, she started the "taper" long before Trump was on the presidential scene. In that sense, I think she has been rather consistent, irrespective of the POTUS.

Share this post


Link to post
Share on other sites
37 minutes ago, Toast said:

Yes, it's a small step, and it might not last, but given the amount of leverage that's present, it might have surprisingly large effects.

From what I've read about Yellen, I don't think she is much beholden to the exaggerated profits of the financial sector, so might not shy away from causing them pain. However, if this turns into a recession where many ordinary jobs disappear, I think she will lose her nerve quickly and lower rates (and perhaps print) to alleviate the effects. We shall see, but she has held a very different course to Greenspan and Bernanke so far, which speaks of her judgement and courage.

If you borrowed at 0.5% and then suffered a 0.25% interest rate rise you would have effectively seen the cost of your borrowing increase by 50%. If you have a lot of leverage that is a potentially big rate rise.

Share this post


Link to post
Share on other sites
2 minutes ago, stormymonday_2011 said:

If you borrowed at 0.5% and then suffered a 0.25% interest rate rise you would have effectively seen the cost of your borrowing increase by 50%. If you have a lot of leverage that is a potentially big rate rise.

Every 0.25% rise by the Fed, filters through to the end recipient equates to a 1% increase... so US banks are recapitalised, lending criteria's are changing.... looks like a good investment possibility.... As for this country commodities are priced in dollars, and hence imports by the UK will be hit by further inflation (CPI)

Share this post


Link to post
Share on other sites
2 hours ago, stormymonday_2011 said:

If you borrowed at 0.5% and then suffered a 0.25% interest rate rise you would have effectively seen the cost of your borrowing increase by 50%. If you have a lot of leverage that is a potentially big rate rise.

I'd better get out my smallest violin...

Share this post


Link to post
Share on other sites
3 hours ago, Toast said:

So, Yellen did it. She has been pretty consistent in moving towards tighter policy.

The mouth-breathing mugwump is still years behind the curve.

Share this post


Link to post
Share on other sites
2 minutes ago, TheCountOfNowhere said:

I'm going out on a limb and say the boe will raise rates before Christmas.

Which Christmas?

Share this post


Link to post
Share on other sites
2 minutes ago, TheCountOfNowhere said:

I'm going out on a limb and say the boe will raise rates before Christmas.

yeah back to 0.5% i wont get excited just yet. 

at least my 50k worth of premium bonds gives me some hope in life. 

Share this post


Link to post
Share on other sites
5 hours ago, Diver Dan said:

Is 0.25% not more like a stroll than a hike?

I am hazy about possible effects of two 0.25% raises, but I look at it from what is implied in these market views.... where it could have quite some meaning.

Especially against those who have leveraged up hard into the foreverHPI globe awash with money money money (debt debt debt).

My general point being 0.25% doesn't sound much, but it's off a low base, with so many doubled-downers and debt out there....

Quote

 

Fortune Magazine

June 3, 2013

Most of the big banks say they will make money from rising rates.

[.........] "Something like 20 of the 25 biggest banks in the nation will tell you they will make money when interest rates rise," says Glenn Schorr, a top bank analyst at Nomura. "But when you listen to regulators you still hear fear."

For the time being, bank investors seem to be siding with the CEOs. Shares of the big four banks, Bank of America (BAC), Citigroup ©, JPMorgan Chase (JPM), and Wells Fargo (WFC), have all been rising lately despite the recent rise in rates.

The problem is that's not the way things have played out before. Rising interest rates, particularly sharp increases, have generally been bad news for banks' bottom lines. That's what happened in 1994 when the rates jumped 3%.

But bank analysts say it could be different this time around. We are starting at a much lower point on interest rates than we did nearly two decades ago. Recently, the extreme low interest rates have been a negative for banks, pushing down their net interest margins, which is the difference between what a bank pays for funding and what it gets back in interest when it makes a loan. The analysts say rising rates will significantly improve the banks' lending profits, especially since the big banks have vastly more deposits, on which the banks pay close to nothing to savers, than they did two decades ago.

 

 

And remember what Paul Hodges said in 2015...

Quote

 

22/01/2015

That was why we made the call in the middle of August, we said, “The oil price is now going to collapse, and the obvious logical corollary of that is the dollar is going to go very high indeed,” and we’ve seen that – the oil price down 50%, the dollar up over 10%.

The dollar going up 10% may not immediately, if you’re thinking in pounds and so on, become very important, but it’s absolutely critical because you’ve got $6trn or $7trn of debt in the emerging economies all tied to the dollar, all thinking, “We borrowed at 1%. Aren’t we clever?”

It was 1% then, but now it’s 1% plus 12% increased value of the dollar, so you’re going to see bankruptcies all over the emerging economies – and, of course, you’re going to see bankruptcies all over the States because people have spent $1trn. It’s terrible, this word ‘trillion’. Before 2009 I didn’t know what the word ‘trillion’ was.

http://moneyweek.com/paul-hodges-interview-the-great-unwinding/

 

I transcribed this part from the video interview in link above, before realising the entire transcript was below the video.

Still great.  Even if it doesn't happen, it's still great that others confirm the stupidity and extremes of positions in housing financilisation... with so many housing-haves and housing-have-moars, vs position of young (many others) trying to make their own way with housing their families from incomes against BTLers/HPIers etc, to extremes.

Quote

 

I think UK house prices are already falling. I just wish they had never got to these levels. I think you're going to see.. the top end prices have begun to fall 15-20%. We've seen price falls in the early 90s fall 50%; I think we're at the start if that kind of decline. I'm not depressed about this; it's something we have to go through to get to reality. Cash is actually going to be a very good investment, because under deflation, the value of cash goes up every day. It's already happening, we're going through deflation shock.

The cost of a house is relative to earnings. The thing that Minsky highlighted was that you have to be able to repay the capital. My sons have been priced out of the market. It's all well and good to say they could afford the interest, they could, but they can't afford the capital repayment. So for their good, for the good of younger generations, I'm afraid us old generation have to say, "We did pretty well out of this, we have to hand something back."

 

 

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   94 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.