> because buying stocks doesn't push interest rates down But it does. Either money can go into consumption goods, or it can go into investment goods. If it go

> because buying stocks doesn't push interest rates down But it does. Either money can go into consumption goods, or it can go into investment goods. If it goes to investment goods, it does not go to consumption goods(this statement seems wrong to me, someone sold the stock and now has money, which they could spend on consumption, and yet seems to be true. Where is all this money going? Why does the M2V fall? If anybody can bring feedback on this I would appreciate it.) The Fed has an inflation target of 2%, and their main path to doing so is by balancing the creation of new money by changing the interest rate. When money is invested, inflation as tracked by PCE stays low. Therefore the Fed needs to drop interest rates further to hit their target. Who can take out the new debt by lower rates? The people with the most creditworthiness. The rich. What do they do with that debt? Invest it. Who collectively creates the most debt? Companies creating bonds to buyback their own stock. The more wealth inequality there is, the more that money goes to investments, the less it effects consumption, the less of an effect changing interest rates has on inflation. But it's a trap, as money can at any time flip from investment goods to consumption goods. On a dime these savers can choose to spend and suddenly we get way to much inflation. So the Fed has to ensure that investment goods always provide more long-term utility than consumption goods. But by investment goods out-competing, this only makes the problem worse. Wealth inequality grows further. They have to be even more sure that the wealthy choose investments. The Fed becomes even less able to move the inflation rate higher. Vicious cycle. We've been going down this road for 50 years so far. Anytime the Effective Fed Rate has been above the 30 year[0], we get a yield curve inversion and soon run into a recession. I believe that's because anytime that the yield curve inverts, the wealthy work out that it is better for their money to be in consumption goods than investment goods, and thus they start DCA their funds out of the stock market, which causes a crash. But take a second look at that chart. The 30 year keeps dropping. Will the 30 year hit 0? Will it go negative? If it does go negative, thanks to the yield curve recession hat would follow, does the Fed Rate need to go negative to follow it? It seems we've got about 10 years to answer these questions before it reaches 0. And remember, 15% rate -> 7.5% is the same difference as 4% to 2%, which is the same as 0.5% to 0.25% and 0.0005% to 0.00025%. We've got so many M2 doublings still ahead of us. [0]: https://fred.stlouisfed.org/graph/?g=ENDs https://fred.stlouisfed.org/graph/?g=ENDs