Economics Corner: So are we done with rate hikes?

[JohnS]

So, Credit Suisse were in trouble this week because their Saudi Investors refused to continue to finance them. The Swiss Central Bank then did so to avoid a potential 'panic'. I've never seen this before in regard to a Swiss Financial Institution. After all, during the Global Financial Crisis (GFC) Switzerland was the "King" of negative interest rates. Oh, how the mighty have fallen, as @Fuzz would say! 😂

Anyway, the first thing I heard on the breakfast radio news this morning was the the European Central Bank raised interest rates by 0.5% last night. Yes, @BoliDan, they're all sticking to traditional, fundamental models.

[Fuzz AI]

1 hour ago, JohnS said:

So, Credit Suisse were in trouble this week because their Saudi Investors refused to continue to finance them. The Swiss Central Bank then did so to avoid a potential 'panic'. I've never seen this before in regard to a Swiss Financial Institution. After all, during the Global Financial Crisis (GFC) Switzerland was the "King" of negative interest rates. Oh, how the mighty have fallen, as @Fuzz would say! 😂

Anyway, the first thing I heard on the breakfast radio news this morning was the the European Central Bank raised interest rates by 0.5% last night. Yes, @BoliDan, they're all sticking to traditional, fundamental models.

Nearly fell of my chair last night when I heard the news about Credit Suisse. Oh, how the might have fallen indeed!

[rcarlson]

8 hours ago, Corylax18 said:

That "fear" is a huge part of what got us here. As @GoodStix says "weak men create hard times" Weak men have been bowing to the Bank's and Hedge Fund's Tantrums for a decade now. Every time they mention a hike, everybody "panics" and says they go bankrupt. Maybe they should. We've been fine without Bear Stearns, and Lehman Bro's. We'll be fine without SVB, Credit Suisse and Silver gate. 

Its time for the Fed to stop listening to the lobbyists, bankers and traders and start doing the right thing. 

 

Agreed.  But I would say, first and foremost, they need to stop listening to the politicians.  The Fed is very politicized.  An immediate banking/liquidity crisis is toxic to the political class whereas long term inflation and the devastation that it wreaks is something that occurs slowly and mercilessly over time. In other words, the "we had to pause to avoid financial Armageddon" is a politically convenient hidey-hole to avoid a reckoning with the failed policies that brought us here to begin with.  And that is all the political class really cares about --  avoidance of blame.  This is a shitshow of epic proportions managed by a confederacy of dunces.          

[El Presidente]

4 hours ago, rcarlson said:

Agreed.  But I would say, first and foremost, they need to stop listening to the politicians.  The Fed is very politicized.  An immediate banking/liquidity crisis is toxic to the political class whereas long term inflation and the devastation that it wreaks is something that occurs slowly and mercilessly over time. In other words, the "we had to pause to avoid financial Armageddon" is a politically convenient hidey-hole to avoid a reckoning with the failed policies that brought us here to begin with.  And that is all the political class really cares about --  avoidance of blame.  This is a shitshow of epic proportions managed by a confederacy of dunces.          

We are seeing domestically the "pile on" by the government and the elite class on the traditionally enshrined independent Reserve Bank.  This isn't going to end well in Oz. 

I think you summed it up beautifully Rob. 

[Cigar Surgeon]

[MrBirdman]

On 3/16/2023 at 11:46 AM, Namisgr11 said:

Personally, I expect the Federal Reserve to continue course with a 0.25% rate hike.

Eventually they may, but the jitteriness of the market will probably forestall one at the next meeting. I think they are probably still reassessing the financial sector’s vulnerability to this problem. They can’t give every bank a 100% bailout (although as @Corylax18 pointed out SVB’s deposit base was somewhat unusual and unsavory). 

Finance has for years gorged itself like a wolf on the blood of low rates. Until laws are created that criminalize irresponsible behavior and allow for considerable claw backs, the executives have little but reputation to lose by taking outsized risks or taking short term gains for long term instability. In the end, they know the cost of any major reckoning will be socialized, and they’ll keep their bonuses. 

I don’t really care about interest rates. What I care about is the obscenity of people paying themselves tens of millions of dollars for mistakes we all end up paying for. 

Same as in 2008 - heads I win, tails you lose. 

[Kaptain Karl]

anyone here follow Peter Zeihan? 
 

It seems like we’re in a fundamental shift that most are missing because…we haven't had to think truly in a global sense since the collapse of the Soviet Union and the introduction of the eastern block, Brazil, etc into the globalized system, and all the vast qualities of materials injected into the globalized system that came with it. 
 

We are in the beginning stages of the breakdown of the post-Soviet, Pax Americana world where all major parties play their part in the globalized system. We’ve moved back into a bipolar world, which is moving us into deglobalization which will push inflation higher for the next 5-10 years. 
 

Not to mention, awful demographics in western and far eastern countries is beginning to rear its ugly head. 
 

This is probably just the beginning of some massive global shifts where there will certainly be winners and losers.