Welcome to 0%
December 17, 2008 · Posted in Monetary Economics
Today the Fed, in a move of futility, dropped discount rates to 0%-.25% ; another way of saying 0%.
This of course has little effect in the light of near 0% yields for short term Treasury Bills on the open market.
The yield for the Treasury Bill even turned negative recently for a short moment.
The re-iteration by the Fed that it will use all tools possible to “save the world” certainly precipitated some market reactions:
- 10 yr Treasury Notes soared yet another day and now yield a historically low 2.23%. Treasuries have pretty much developed as expected.
- 1 month Libor is now at .88%. Good news for everyone who has an adjustable rate mortgage
- Stocks soared, the S&P 500 rose by 4.77% – a purely inflationary rally as can be seen in a significant rise in gold, silver, and related stocks: NEM rose by 7%, PAAS by 13%. Like I said I am still bullish on silver
- The Dollar dropped sharply against the Euro, the Pound, and the Yen – my premonition from September unfortunately turned out to be true – I only see it dropping further from hereon, unless the central banks of Europe, Great Britain, and Japan join the hyperinflation course