We have a big, very big, debt problem in this country, which is increasingly weighing on the economy. And if you think the Federal Reserve controls interest rates on much of anything, the reaction to today’s meeting, at which the Federal Reserve Committee cut interest rates it charges by 1/4%, should dissuade you from that view. After the announcement, interest rates went up, and not by a small amount. Yesterday the aftermarket rate for the ten-year note was under 4%. This afternoon it is 4.06%, which is a very substantial move. Other maturities also experienced higher interest rate moves.
I keep saying this, at some point your debt pile gets so big that it doesn’t matter what the Fed does, buyers are going to insist on higher rates to account for repayment risk and inflation risk. And inflation is not tamed, the huge budget deficit and reckless federal government spending feeding that deficit are themselves inflationary, and we have no apparent plan to limit the deficit or the debt growth. Good luck.
