{"id":40385,"date":"2018-11-10T10:15:54","date_gmt":"2018-11-10T15:15:54","guid":{"rendered":"http:\/\/olduvai.ca\/?p=40385"},"modified":"2018-11-10T10:15:54","modified_gmt":"2018-11-10T15:15:54","slug":"as-short-term-rates-hit-levels-not-seen-since-2008-trillions-are-at-risk","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=40385","title":{"rendered":"As Short-Term Rates Hit Levels Not Seen Since 2008 \u2013 Trillions Are At Risk"},"content":{"rendered":"
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As Short-Term Rates Hit Levels Not Seen Since 2008 \u2013 Trillions Are At Risk<\/a><\/h3>\n

Readers know that I haven\u2019t shied away from stressing over the Federal Reserve\u2019s tightening.<\/p>\n

As a firm believer in the Austrian Business Cycle Theory<\/em><\/a> \u2013 first drafted by Ludwig Von Mises in early 1900\u2019s \u2013 I believe that artificially moving interest rates away from the markets natural rate is opening Pandora\u2019s box.<\/p>\n

Sure \u2013 lowering rates across the yield curve is good<\/em> for stimulating the economy.\u00a0 And like John Maynard Keynes explained, it\u2019s a good tool for \u2018papering over\u2019 <\/em>a slowdown \u2013 a quick fix.<\/p>\n

But like Mises said \u2013 it\u2019s not the boom that matters (from lowering rates). It\u2019s the bust that will follow (from raising rates).<\/em><\/p>\n

Suddenly and artificially raising short-term rates \u2013 which the Fed does when they hike<\/em> \u2013 disrupts the current equilibrium.<\/p>\n

Think about it this way: all those borrowers \u2013 whether having mortgages, student loans, car loans, credit cards, and even corporations \u2013 now must pay more<\/em> in interest.<\/p>\n

Business projects that were barely economic at a 3% interest rate are completely<\/em> uneconomic<\/em>at 5%.<\/p>\n

And mom and dad barely affording their mortgages at 5% won\u2019t be able to at 7%.<\/p>\n

Of course these are just a couple of examples. There are many<\/em> things throughout the economy that will be negatively affected by suddenly raising rates \u2013 which will all trigger their own unintended consequences. <\/em><\/p>\n

That\u2019s the problem with complex systems like the U.S. economy and financial system. Everything\u2019s interconnected<\/em>.<\/p>\n

But there\u2019s one thing from the Fed\u2019s tightening that\u2019s worth mentioning yet again. . .<\/p>\n

And that\u2019s rising short-term dollar funding costs<\/em> \u2013 which is slowly popping this worldwide debt bubble.<\/p>\n

First and foremost, the global dollar shortage<\/em> \u2013 which I\u2019ve written about many times (read here<\/a>and here<\/a>) \u2013 is a huge threat to the global economy. In fact \u2013 I believe it\u2019s the number one<\/em>overlooked threat out there today.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

As Short-Term Rates Hit Levels Not Seen Since 2008 \u2013 Trillions Are At Risk Readers know that I haven\u2019t shied away from stressing over the Federal Reserve\u2019s tightening. As a firm believer in the Austrian Business Cycle Theory \u2013 first drafted by Ludwig Von Mises in early 1900\u2019s \u2013 I believe that artificially moving interest […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[19913,22904,303,431,966,19915,22903,3650],"class_list":["post-40385","post","type-post","status-publish","format-standard","hentry","category-economics","tag-adem-tumerkan","tag-austrina-business-cycle-theory","tag-fed","tag-interest-rates","tag-ludwig-von-mises","tag-palisade-research","tag-short-term-interest-rates","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/40385","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=40385"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/40385\/revisions"}],"predecessor-version":[{"id":40386,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/40385\/revisions\/40386"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=40385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=40385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=40385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}