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Politicians want to control the Fed so they can drop interest rates and cause a short-term economic and stock market boom, followed by really bad things in the

Politicians want to control the Fed so they can drop interest rates and cause a short-term economic and stock market boom, followed by really bad things in the long-term. How are markets supposed to react to that? If markets are going to go up, and then down, do you buy or sell? If Trump is going to take over the Fed, the smart move is to buy. If there's going to be a huge party before the world ends, you go to the party.

dizlexic 1y ago
Audit the fed?
- akkartik 1y ago
  The point of GP is that market-external mechanisms like that will only affect the price when they seem likely to happen.
- Buttons840 1y ago
  I don't know what you mean. What would an audit check for? What would be the goals of an audit?
  - dizlexic 1y ago
    The downvote because you don't understand is a bit silly. https://en.wikipedia.org/wiki/Federal_Reserve_Transparency_Act https://en.wikipedia.org/wiki/Federal_Reserve_Transparency_A...
    - deleted 1y ago
      [deleted]
MattPalmer1086 1y ago
But the cost of borrowing will go through the roof because the market knows the bad stuff will happen. So nobody is going to buy treasuries without a significant increase in return.
- Buttons840 1y ago
  Yes, the cost of borrowing for the government will go through the roof. The Fed will drop interest rates, this will make borrowing easy, people in the economy can get easy money. Inflation will rise, which makes borrowing even easier, because any debt is just inflated away. People will want to hold assets that can't be devalued by inflation, which means people will not want to hold government bonds unless the US pays a high interest rate on those bonds, and when the US government pays a high interest rate on its bonds. So, we would expect the stock market to increase temporarily, and people will want to buy that increase. The long-term bond market would tank because people would know nobody will want to hold US bonds. Overall it would be a very schizophrenic market.

dizlexic 1y ago

Audit the fed?

akkartik 1y ago
The point of GP is that market-external mechanisms like that will only affect the price when they seem likely to happen.
Buttons840 1y ago
I don't know what you mean. What would an audit check for? What would be the goals of an audit?
- dizlexic 1y ago
  The downvote because you don't understand is a bit silly. https://en.wikipedia.org/wiki/Federal_Reserve_Transparency_Act https://en.wikipedia.org/wiki/Federal_Reserve_Transparency_A...
  - deleted 1y ago
    [deleted]

MattPalmer1086 1y ago

But the cost of borrowing will go through the roof because the market knows the bad stuff will happen. So nobody is going to buy treasuries without a significant increase in return.

Buttons840 1y ago
Yes, the cost of borrowing for the government will go through the roof. The Fed will drop interest rates, this will make borrowing easy, people in the economy can get easy money. Inflation will rise, which makes borrowing even easier, because any debt is just inflated away. People will want to hold assets that can't be devalued by inflation, which means people will not want to hold government bonds unless the US pays a high interest rate on those bonds, and when the US government pays a high interest rate on its bonds. So, we would expect the stock market to increase temporarily, and people will want to buy that increase. The long-term bond market would tank because people would know nobody will want to hold US bonds. Overall it would be a very schizophrenic market.