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Click to enlarge.
Observations:
1. 18 years of bad weather?
2. Real deposits per capita were falling in the 1970s.
3. Rising interest rate environment my @$$.
Old Yellen' was last seen holding a vigil for the bond vigilantes behind the woodshed. She doesn't need to "put down" short-term interest rates though. We're the ones doing it.
This is not investment advice. Just an ugly chart (for savers) and opinions again!
Source Data:
St. Louis Fed: Custom Chart
8 comments:
And yet how many Boomers have under-saved for retirement? How many are going straight from unemployment to social security to keep the lights on?
How many Gen Y'ers have zero saved for a down payment and owe as much as half a house in student loans?
How many Gen X'ers are upside down on their mortgage + HELOC?
Reminds me of the classic Soviet problem: it's not production, it's distribution.
AllanF,
Too many.
Too many.
Too many.
Too many.
Rhetorical questions? Sigh. :(
Reminds me of the classic Soviet problem: it's not production, it's distribution.
No joke.
Yes, distribution is a big part of that chart, I think.
FYI, EJ at iTulip predicts falling rates most of this year based on trailing effects of QE3, even though it is tapering right now. In fact, he thinks it might overshoot the Fed target to the down side, testing 1.6% again on the 10Y.
I have no prediction other than "Stuff is Messed Up".
Mr Slippery,
What's the 1.6% work out to in shadowstats hyperinflationary terms? Do we multiply by 20 or what?
Stuff might be messed up, but the sarcasm floodgates are wide open, lol. Sigh.
February 21, 2014
John Williams with shadowstats.com
John Williams has his latest real stats out. You pay for the detail, well worth the money, but here is the punch line:
The most amusing part is that shadowstats hasn't been able to raise its subscription fee in this "hyperinflationary" environment. It's the same $175 its been for many years.
January Annual Inflation: 1.6% (CPI-U), 1.7% (CPI-W), 9.2% (ShadowStats)
9.2% inflation? Yeah, right. And I am the Jester of the Pixies, world-renowned for entertaining the planet with mystical songs, music, storytelling, acrobatics, juggling and magic!
Jester
Much of the entertainment was performed in a comic style and many jesters made contemporary jokes in word or song about people or events well known to their audiences.
Okay, I probably could have chosen a better analogy. Hahaha! :)
Well, they weren't really meant to be rhetorical questions, but I don't have the answers to any of them either.
I was somewhere in the last day or two that had a pie chart of wealth by population decile. We've all seen them. 80% of the population doesn't own squat. 5% of the population owns half of everything.
So we get a chart like you show in this post and the self-proclaimed experts say if they just keep doing what they've been doing it will get fixed real soon now. Everyone is so frightened, they just go along, I reckon, figuring, "hey, it's not so bad, why rock the boat and risk slipping in with that 80% riff-raff." I don't know how else to explain it. Humans have repeatedly shown incredible resiliency when it comes to eating sh*t sandwiches handed out by authority.
AllanF,
So we get a chart like you show in this post and the self-proclaimed experts say if they just keep doing what they've been doing it will get fixed real soon now.
Or worse, point to it as proof that there is no problem and prosperity is increasing by leaps and bounds (even as a record 20% of households are participating in the food stamp program).
Hey Mark - regarding [" Old Yellen' was last seen holding a vigil for the bond vigilantes behind the woodshed. She doesn't need to "put down" short-term interest rates though. We're the ones doing it. "]
I think you might be misunderstanding the banking and credit system here. "We" don't have a choice about the deposit glut. Whether we spend a dollar, or put it in a bank account, we can't change the existence of that dollar. Someone has to be stuck with it, and thus the money will be on deposit somewhere by someone. Rates are low because there's a glut of credit all right, but the credit was created by a bank, which was led and/or supervised by the Feds. Bernanke and Yellen are directly responsible, because this is intentional policy. This is how ZIRP works.
Hussman has done some nice analysis showing that the Fed and/or the banks would have to tighten (remove credit) by many trillions of dollars before short-term interest rates moved by even a quarter point. Given that they're still ADDING credit, it'll be a while before they can withdraw even a little, and much longer still before they can withdraw enough to budge rates.
Out on the long end of the curve, it's a different story, but the short term bond vigilantes never existed except at the banks.
Sustainable Gains,
I wasn't trying to imply that we do have much of a choice.
That said, with short-term interest rates this low, people can simply choose to hoard physical cash. In theory, it does not have to be deposited. It's not like cash is growing much slower than MZM.
MZM Own Rate has fallen yet again.
In any event, my point was that Yellen doesn't have to do anything to keep short-term interest rates low. It's not like she's having sleepless nights trying to think up ways to keep them low.
I have used your reasoning in the past to show how hard it is for the world to flee US dollars in general. If you dump them on someone else, then they've got them. It's not like they go away.
And then there are bonds:
Mundell-Tobin Effect Epiphany!
So while it is true that bonds yields would rise as inflation rose, there would be some money that was once in cash that would move into bonds. It would therefore seem likely that nominal interest rates would not rise as fast as inflation rises.
This is one reason I am very comfortable holding long-term TIPS and I-Bonds (not that I'm predicting rising inflation these days).
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