Banksters are predatory individuals, an apparently innate trait that, with any amount of historical research, is virtually impossible to dispute.There a Definition of Insanity that is bandied about and attributed to Albert Einstein, even though he insisted he never said it. If your country set interest rates higher than others, people would move their money to that country, as they’d get a better return (and speculators could always redeem their currency in American gold).
From 1922 or so, things had been more-or-less normalized.What we today call the “Fed funds rate” is actually the overnight lending rate between financial institutions, in New York. The discount rate was primarily for commercial banks, not brokers. This was remedied in the 1919-1921 period. The first World War has stripped Britain of much of its gold reserves. In practice, this was often rolled over into multiple days, but the lending bank could ask for its money back at any time.
US treasury bonds are perceived as a safe haven in times of turmoil. The Treasury stopped telling the Fed what to do after the war, but by then the Fed had become accustomed to being regularly involved. 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 20 Year U.S. Treasury Bond vs. Consumer Price Index (CPI) 20-Yr. U.S. Treasury Bonds Consumer Price Index: Inflation (CPI) These Fed loans would increase the monetary base, thus “adding liquidity” and resolving the liquidity shortage.However, by the early 1920s, the Fed had already gotten into the habit of being involved in the lending market on a day-to-day basis. However, this was not the case. Looking at the ten year treasuries chart below, it looks to me that rates are going lower.So rather than watching the Federal Reserve and interest rates, it makes much more sense to watch the TNX chart below and you’ll have a much better idea of what’s going to happen at any of the coming Federal Reserve meetings.The two day chart shows a corrective wave in three subwaves. However, the Bank of England’s example included regular activity in the lending market via the discount rate. There are actually a number of functions that the Bank of England was serving: as an issuer of currency, as a “lender of last resort” to resolve short-term liquidity needs, as a central clearinghouse for interbank payments, and as a regular, profit-making commercial bank. (It was a little higher pre-1922.)
The British government themselves tried to sort this out in 1844 by separating the Bank of England’s activities into an Issue Department (to take care of the currency) and a Banking Department that would operate as a regular commercial bank. But at the same time, money in the country with low interest rates is “cheap” to borrow just as it is today in most countries (in fact, we’re involved in “currency wars,” with countries attempting to inflate their currencies to their own government’s advantage—not to the advantage of their citizens). Note how the volatility of the overnight broker lending rate is completely absent from the long-term (over ten years) Treasury bond yield, which is quite flat around 3.50%-4.00%. This of course required daily action. Since home construction is a component of gross domestic product, then lower home prices slow economic growth.On the other hand, in an economy that is faltering (that is already experiencing deflation—or the latest buzzword, like “disinflation”—anything to obfuscate the truth), money tends to seek safe havens. The Federal Reserve was not intended to be this active, but rather an institution that was mostly dormant — thus resolving the conflict and complications that had been an issue with the Bank of England since its inception. The Depression kept interest rates low in the 1930s and during the war years of the 1940s, interest rates were pegged. So, that time is … Compilations of Interest Rate on Call Loans at New York Stock Exchange, ... an interest rate should not be considered long-term unless it has a sufficiently long term to maturity, say 15 years—and better 20, if … We're all on a long-term roller-coast ride—on the third rock from the sun.
Also, these overnight loans might have had different conditions, such as being uncollateralized, while the Fed’s lending was apparently collateralized.The Fed’s discount rate was kept at a level that made the Fed competitive with other potential lenders in the market. That is why yields always move in the opposite direction of Treasury prices.When there’s not much demand, then bond prices drop. You’ll be ahead of the market.Y´ll have to wait till short term bond yields reach long term yields before we have down turn in economy.Drop your email address here and we’ll send you notifications of new posts.Trader’s Gold is a daily premium market analysis subscription service that combines the Elliott Wave Principle with Cycles analysis to provide high probability predictions.
(Commercial paper is a short-term corporate bond.) This didn’t work out quite as well as hoped, because the Issue Department only handled the paper banknotes themselves, not the deposits at the central bank (“bank reserves”) which are also a component of base money, and which was handled by the Banking Department. Also, we have commercial paper (could include banks) for a 4-6 month maturity, and Bankers’ Acceptances for 90 days. This is a scary situation.
In fact, the fibonacci measurement from the A wave (an extension of 2.618, which is a typical C wave extension) predicts that the rate will fall to 7.28 (.728) before it will rebound.