Who else is dead slow lately?

[Joe Flacco]

QE was by its very definition designed to lower interest rates. Rates were at 50+ Year lows, and you can literally see on the chart where the the Fed started buying treasuries in 2008-2020
View attachment 97880

If you take the chart back 40 more years, it looks like this.

What happened then was the Federal Reserve pegged short-term treasuries at 3/8% and capped long-term bonds at 2.5% to finance WWII. This was the policy in place between 1942 and 1951.

QE did keep the rate low, but what should have they done? Because of QE we got a great recession and 10 years of slow 2% gdp growth rate instead of great depression 2.0.

I think I kind of understand why you would say it was artificially low. I guess what I am saying is that it was not a mistake and the rate was where it was supposed to be.

 

[Fernando]

View attachment 97680

What is really wierd is 2018-2019 and 2023-2024 are the only times since the 60's that the median home price shows a decline year-over-year without a recession.

Nothing was as bad as 2008-2010. Prior prices went too fast. Prices went to high in 2021 and stabilized afterwards.
Notice during Trump first term, not much price increase. Those were not good years for appraisers.

 

[Gobears81]

If you take the chart back 40 more years, it looks like this.

What happened then was the Federal Reserve pegged short-term treasuries at 3/8% and capped long-term bonds at 2.5% to finance WWII. This was the policy in place between 1942 and 1951.

QE did keep the rate low, but what should have they done? Because of QE we got a great recession and 10 years of slow 2% gdp growth rate instead of great depression 2.0.

I think I kind of understand why you would say it was artificially low. I guess what I am saying is that it was not a mistake and the rate was where it was supposed to be.

I don't know enough about that time period, but it sounds like the 1945 rate was manipulated also.
If rates should have been low in 2008, then the market would have reached that point on its own. Now, the government/Fed is between a rock and a hard place - we can no longer employ stimulus or QE to improve a downturn, as it would cause another inflation flare-up. I've long thought that the best thing that can be done in the next downturn is absolutely nothing, though that probably won't happen.

 

[Joe Flacco]

I think QE kept the system functioning more than anything else. When they ended QE3 in 2014 rates moved down to the low end of the financial crisis range. And then between 2016-2018 it moved higher to the top of the financial crisis range. Then the economy started teetering and then rates moved all the way back to the low end of the range in 2019 without QE or even rate cuts.

 

[Fernando]

During Great Recession, there were no buyers for Treasuries. Less demand, higher interest rates.
And with more government spending, rates would have gone even higher.
FED was the savior and last hope in buying up Treasuries and keeping rates low.
As long as it worked and people believe in US, we came out of it until breaking point few years ago.

 

[Joe Flacco]

I don't know enough about that time period, but it sounds like the 1945 rate was manipulated also.
If rates should have been low in 2008, then the market would have reached that point on its own. Now, the government/Fed is between a rock and a hard place - we can no longer employ stimulus or QE to improve a downturn, as it would cause another inflation flare-up. I've long thought that the best thing that can be done in the next downturn is absolutely nothing, though that probably won't happen.

The financial system was imploding. QE stabilized the system and then when they stopped QE in 2014, the market kept the rates in the range all by itself for the next 5 years, hitting the top and low end of the range twice without help.

That's the way I see it.

 

[Joe Flacco]

I don't really know what would have happened without QE. No demand for treasuries means rates go up but if the financial system is collapsing and the economy is going into depression where do investors put their money?

 

[Fernando]

I don't really know what would have happened without QE. No demand for treasuries means rates go up but if the financial system is collapsing and the economy is going into depression where do investors put their money?

Only time in my life, I was worried about the financial system and took money out of smaller banks despite FDIC though it was good it was raised to $250,000 max guarantee.
Put it in cash in too big to fail big banks and wait til bottom and buy real estate, a physical asset.

 

[Joe Flacco]

Only time in my life, I was worried about the financial system and took money out of smaller banks despite FDIC though it was good it was raised to $250,000 max guarantee.
Put it in cash in too big to fail big banks and wait til bottom and buy real estate, a physical asset.

No demand for treasuries is almost signaling the end of the dollar. You would be ****ed no matter what you have.

 

[glenn walker]

I don't know enough about that time period, but it sounds like the 1945 rate was manipulated also.
If rates should have been low in 2008, then the market would have reached that point on its own. Now, the government/Fed is between a rock and a hard place - we can no longer employ stimulus or QE to improve a downturn, as it would cause another inflation flare-up. I've long thought that the best thing that can be done in the next downturn is absolutely nothing, though that probably won't happen.

1945 we were in WW11 until ended in about June. So money supply by printing was on a tear for almost five year and there was no mortgage backed securities to speak of until about 1947 and mortgages were carried by sellers or short term bank loans. The 30 year fixed rate was introduced to mostly veterans which created the 1950s housing boom across the Nation.