Is the changing Fed story something that should concern you, or is it just growing pains adapting to the massive balance sheet inherited from the unconventional policy QE?
Over the past few years, some well-known economists have been alarming investors with their predictions that the Federal Reserve’s quantitative easing (QE) program fuels inflation. If inflation does heats up, interest rates will rise, and investors who own both stocks and bonds will see the value of their bonds fall.
In this very informative and timely white paper, veteran financial advisor Tim Hayes walks through the process of where new money comes from and the role it plays in fueling bubbles and wealth inequality.
You have probably been in conversations where people worried about what would happen to interest rates if China stopped buying our government debt. Moreover, before China, people were concerned about Japan
Apparently, the Congress does not know who benefited from QE nor do they understand how the Federal Reserve reduces their balance sheet. Because if they did, there is no way they would support this tax bill.
When there is talk of rates going up, people and companies that are considering borrowing money tend to speed up their decision-making processes to lock in the lower rates. Investors who own a lot of bonds in their portfolios also get anxious because, when rates go up, the value of their bonds starts to go down.