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> 2) Holders of federal debt instruments -the public- receive a raise every month That is not how raising the Federal Funds Rate works. Existing treasuries ac
by rubiquity 4y ago
> 2) Holders of federal debt instruments -the public- receive a raise every month
That is not how raising the Federal Funds Rate works. Existing treasuries actually decrease in face value and only newly issued treasuries have the higher interest rate. If you own 10, 20, or 30 treasuries right now you're deeply in the red.
- ladyattis 4y agoNot really, since the Treasury still honors the interest of the bond. Just because someone values the purchase value lower doesn't invalid the interest rate. You just lose money if you sell it.
- prottog 4y agoExactly. You're mark-to-market red on your bonds, since if you tried to sell your 2%-yielding bonds in a market where new bonds yield 4% obviously your bond will be worth less than what you bought it for; but you'll still continue to receive those coupons at 2% for the lifetime of the bond.
- rubiquity 4y agoYes you still receive your coupon. My point was that existing bonds coupons don't change.
- bubbleRefuge 4y agoshort term treasuries roll over every 3 months.
- rubiquity 4y agoYou think bonds yielding 2-4.5% APR over the past 12 months are causing 6%+ inflation?
- bubbleRefuge 4y agoI think they are contributing to aggregate demand in the economy at a time when the fed is trying to reduce aggregate demand in the economy. edit: this channel has increased 4X what it was.
- bubbleRefuge 4y agoPoint is that more cash is flowing from the Government to the private sector with every increase in interest rates by the fed. This is an indisputable fact. Since federal debt is at an all time high, this policy is pumping allot of money into the economy and stimulating it which is the opposite of what is intended.