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Fed hikes rates as inflation worries push up bond yields

184 points · 250 comments · wslh

  1. bwb · · focus · HN ↗
    Get ready for a fun ride my friends :)

    Fun ride =

    Oil is going up, possibly for a long time, which will have a big inflationary effect on everything. And it appears the USA government has lost the conflict it started and effectively given control over key oil delivery channels to Iran. Not to mention Saudia facing real issues from rebel groups / Yemen (simplification).

    Government debt is high in several key economies, and the bond market is being saturated with AI-related bonds, as well as possibly people finally tired of lending the USA/France/UK money at low rates and demanding higher ones. And with higher interest rates and bonds rolling over it means more and more money going to pay for the debt, rather than core services.

    Wild cards lurking in the bushes... AI, AGI, RSI.

    And yonder you have a nuclear power floundering; its only source of hard currency is being rightfully degraded, and its leadership delusional.

    And the one to watch IMO... Russian wheat export ability: wheat prices are up considerably, and combined with inflation from oil, this is the kind of stuff that creates waves of political change like the Arab Spring.

    1. leptons · · focus · HN ↗
      This comment isn't helpful. Please explain for those of us without a degree in economics.
      1. TrainedMonkey · · focus · HN ↗
        Higher rates means USG will need to print more money to pay for $40TN debt which will increase inflation which will force higher rates.
        1. darth_avocado · · focus · HN ↗
          The debt is owed by the treasury, fed prints the money. What you’re describing is not how the monetary system works.
          1. almost_usual · · focus · HN ↗
            The Fed purchased Treasury securities during COVID QE. Those securities had low yields and cash reserves were created during those purchases.

            Those cash reserves are held by banks which the Fed funds rate pays interest on (what was hiked).

            Meanwhile the fixed rate debt from QE remains the same.

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