Higher Rates Are Good?
Stockman posted "Six Years of Bull Market Bull" and Zonadlatoma comments: "Do you think that if interest rates were higher things would be better (higher employment and investment)?"
The Nattering One muses... Think of a higher rate level, what happens to zero risk level T-paper carry due to QEZIRP? If easy carry margin is squeezed out, with regard to return/risk, investing in capex and "animal spirits" might be on a more equal playing field. Rather than zombie like instant yield gratification, real thinking actually ensues as to which vehicle to park the money in.
Current artificial yield suppression and compression on UST's might unwind. Re-enabled "true price discovery" might restore the true "nature" of asset and capital markets, chasing currently perverted, diverted, inverted and misallocated capital into other more productive usage i.e. "animal spirits" and capex rather than idly parked in no risk low return treasuries and financial engineering i.e. stock buy back and dividends.
There may be some pain, but if nature is allowed to take its course as in no bail outs, the pain would justify the gain. Thus silencing the gently weeping guitar of "secular stagnation" and literally and figuratively raising Lazarus (the economy) from the dead, rather than furthering the zombie malaise we are, and will be mired in until market normalcy, price discovery and letting nature take its course is restored.
Related and Recommended Reading
The Nattering One muses... Think of a higher rate level, what happens to zero risk level T-paper carry due to QEZIRP? If easy carry margin is squeezed out, with regard to return/risk, investing in capex and "animal spirits" might be on a more equal playing field. Rather than zombie like instant yield gratification, real thinking actually ensues as to which vehicle to park the money in.
Current artificial yield suppression and compression on UST's might unwind. Re-enabled "true price discovery" might restore the true "nature" of asset and capital markets, chasing currently perverted, diverted, inverted and misallocated capital into other more productive usage i.e. "animal spirits" and capex rather than idly parked in no risk low return treasuries and financial engineering i.e. stock buy back and dividends.
There may be some pain, but if nature is allowed to take its course as in no bail outs, the pain would justify the gain. Thus silencing the gently weeping guitar of "secular stagnation" and literally and figuratively raising Lazarus (the economy) from the dead, rather than furthering the zombie malaise we are, and will be mired in until market normalcy, price discovery and letting nature take its course is restored.
Related and Recommended Reading
Comments
Not just that, but the Fed has itself cornered - all done by itself. What will they do when we fall into recession later this year? What to do if their Zombie creation, the stock market, falls 25 or 30 %? Oh yeah - more QE and call out the Plunge Protection committee.