Fed Balance Sheets, Gov Deficits, Price Earnings Ratio

The Big Three Don’t Matter Anymore..

Today FED Chairman Powell said that the FED is reaching limits as to what it can do, and when the next economic collapse comes around they will have to lean on Congress for more fiscal spending.

Interesting as the result of the Trump tax bill, deficits are already rising faster than GDP

Interest Rates have Probably bottomed..

At least that is what we have been saying since last summer.

 Price Earnings Ratio seems to benefit from economic problems..

As well it should with a FED that has been lowering interest rates or at least has the market believing that it will keep lowering them..

As mentioned above, Powell says that won’t happen, but so far the market is ignoring that with record highs on the markets.

What eventually happens in a rising government deficit Scenario ?

According to a google search that I just ran..

When an increase in government expenditure or a decrease in government revenue increases the budget deficit, the Treasury must issue more bonds. This reduces the price of bonds, raising the interest rate.

SO……………………………..of course then the FED could buy the bonds and put them on its balance sheet..

Are we all doomed?

 

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