Speed Of Fed Rate Hikes

Speed Of Fed Rate Hikes

The speed of Fed rate hikes this year, in 2022, is unprecedented in history. 

In just six months, the Fund rates have risen more than 2% at a time when the public deficit is also at an unprecedented level at over 31T USD.

The speed of Fed rate hikes is bleeding its livestock (citizenry) dry

Interest on the public debt is fast approaching 500B USD, the third largest budget item costing every adult farm animal 13,491 USD per year, according to the US debt clock.

We are in uncharted waters, as the current speed of Fed rate hikes and exponential public debt is unsustainable

State capitalism and financial markets make odd-bed partners. 

If investors do not start bidding for treasuries, and if we can believe the Fed is doing quantitative tightening, then the yield on the US 10 Year Treasury, currently 3.7%, could go higher.  

The speed of Fed rate hikes could have maxed out as the economy nose dives

In just a few years, monetary policy has transitioned from the most easing to the most tightening to combat inflation which it partly created. So, recessionary red flags are now everywhere the economy is in a nose-down.

The yield curve has never been so inverted, corporate layoffs are piling up, the cost of living crisis is drying up household discretionary spending, and the real estate market is falling off a cliff dragging mortgage-backed bonds with it. We are staring down a double barrel of a Great Depression, and from the Fed’s most recent notes, the Fed knows this.

So the 10-year treasury yield fell from its recent peak of 4.5% to 3.7%.

Rising 10-year treasury yields are a drag on the US and global economy. 10-year treasury yield is a yardstick for borrowing costs from mortgages and auto loans, and it also impacts a large chunk of global debt, estimated at 226T USD in 2020. 

The speed of Fed rate hikes is on the decline the great pivot to loosening and FOMO rally could come next

It doesn’t benefit the banking cabal, the Fed is a banking cartel, to blow up the world’s most lucrative gig, interest on a debt keyboarded into existence. The difference between FTX’s FTT and the Fed’s USD is that the latter is the world reserve currency defended by the world’s largest military underwriting US hegemony with hell fire. The USD is kept sweet with grift and grunt.

The speed of Fed rate hikes is slowing, making treasuries a treasure for risk-averse investors

Conservative investors, risk-averse pension funds, who desperately need yields to fund current liabilities, would come back in droves if Fed Chair Powell put a floor under the market and announced a new round of treasury buying, quantitative easing. Frankly, the two year treasury is less risky than cash on deposit in a private bank, bearing in mind the probability of US government default is less likely than a private bank becoming illiquid.