Revisiting a 2014 Fed Funds Rate Prediction for 2020

September 25, 2014
Illusion of Prosperity: Fed Funds Rate Prediction for 2020 (Musical Tribute)

I'd be tempted to predict a rate between 1.0% and 3.3% based on the "Cone of Decaying Monetary Policy" channel (and using the inverses of the natural logs to predict the rate in the future). However, that would assume we can even get back into that channel and stay there for any appreciable length of time. Can you say exponential trend channel failure?

I therefore predict that the Fed Funds Rate at some point in 2020 will be a mere 0.25%. Think ZIRP + Japan. It just feels right (and oh so wrong). Can it go higher between now and then? Maybe, maybe not. The higher it goes the more likely a monster will be unleashed though. I have few doubts about that.

Dare I double down with the exact same rate prediction for 2030? I do dare! 0.25% at most.

When milk sours over time, more time just means more sour. At no point does the milk start becoming fresh again. Interest rates have been exponentially decaying for 40 years. Old money won’t soon be turning fresh again.

I might sound like a broken record, but this economy can’t afford to reward savers with vast riches any longer. If you are a saver, don’t panic though. This economy also can’t afford stagflation or hyperinflation. The only temporary safe harbor is to keep following Japan’s lead. Won’t work forever, but it may delay the inevitable for far longer than most think possible, in theory.

My opinion and a dollar could pay off the total credit market debt outstanding, if repeated 83,523,750,000,000 times. Unfortunately, I'll run out of dollars long before I run out of opinions!