Levin, Stabenow welcome news that toxic hotspots in Lake Superior and Lake Michigan are removed from list of Areas of Concern
By Robert Romano
Consider the following factors.
North American oil production is experiencing a boom, largely driven by the shale oil miracle.
China is slowing down, including its demand for oil.
Europe is still in the thick of a major recession.
Overall, oil consumption in the OECD is down this year.
As a result, the trade deficit should begin going down, meaning less dollars exported overseas.
The budget deficit, the amount of net, new U.S. treasuries entering the market, has also been decreasing from its recession highs. Meaning there are fewer new government bonds to buy.
Yet, demand for dollars, and dollar-denominated assets like treasuries, is rising — seen in the strong dollar on international currency markets.
As a result, interest rates in the U.S. have been dropping all throughout 2014.
The Fed has not moved its zero interest rate policy since 2008. And as of this writing, still has not hiked interest rates. And as far as quantitative easing goes, the Fed has been tapering new asset purchases since 2013.
Therefore, there is little reason to expect interest rates to rise even with the end of quantitative easing, since there has been little correlation between interest rates and Fed asset purchases in the first place.
The $3.5 trillion of treasuries and mortgage-backed securities purchases was unprecedented when it announced at the end of 2008. Whereas interest rates have been dropping since 1981. The fact that rates continued along a 30 year downward trend in the past five years, in that sense, is not at all surprising.
Yet it is hard to know what the counterfactual might have been.
Would the excess treasuries and mortgage backed securities have been bought by markets without the Fed intervention?
Once could argue that, eventually, yes, they would have, but at prices the market demanded. That might have meant higher interest rates, but it could have just as easily meant lower or the same rates if the flight to safety was going to ensue anyway in 2008 and 2009.
Leaving that aside, a key factor looking forward is the Fed’s position on existing assets. If it keeps its current level of bonds — purchasing new bonds as the old ones mature — then quantitative easing is not really over at all. It will continue to eat a certain market share particularly of government and mortgage bonds.
Now, if the Fed was going to dump its surplus $3.5 trillion of holdings all at once, one might expect a short-term interest rate shock. But nobody’s talking about that. It’s not even contemplated. Alternately, allowing its bond portfolio to mature might put upward pressure on interest rates, but only if the rate of maturity exceeded the rate of demand shift.
Finally, there is the policy rate. One can show a strong correlation between the federal funds rate and overall interest rates. And this makes a lot of sense, since that is the rate that financial institutions borrow at. If their borrowing costs temporarily rise, one would expect overall interest rates to rise.
However, that too could be offset should overall demand for bonds and dollars remain high, resulting in a higher policy rate but overall lower interest rates, or even an inversion of rates.
For example, in 2006 and 2007, the federal funds rate exceeded the rate on 10-year treasuries, even as the 10-year rate actually dropped in 2007, the second year of the inversion. Inversions also occurred in 2000, 1998, and 1979 through 1981.
The point is that the Fed could hike its policy rate, but it might only have a temporary effect on overall rates, meanwhile the overall trend could very well remain downward.
While there are ups and downs, any reasonable analysis of the 30-year downward trend of interest rates must conclude that it is based less on the Fed’s infrequent policy proclamations than the day to day supply and demand of bonds, particularly those denoted in dollars.
Robert Romano is the senior editor of Americans for Limited Government.
The Wallops Incident Response Team completed today an initial assessment of Wallops Island, Virginia, following the catastrophic failure of Orbital Science Corp.’s Antares rocket shortly after liftoff at 6:22 p.m. EDT Tuesday, Oct. 28, from Pad 0A of the Mid-Atlantic Regional Spaceport at NASA’s Wallops Flight Facility in Virginia.
The following statement is from William Gerstenmaier, Associate Administrator of NASA’s Human Exploration and Operations Directorate, regarding the mishap that occurred at Pad 0A of the Mid-Atlantic Regional Spaceport at NASA’s Wallops Flight Facility in Virginia during the attempted launch of Orbital Sciences Corp’s Antares rocket and Cygnus cargo spacecraft at 6:22 p.m. Tuesday, Oct. 28.
NASA Wallops Preparations on Track for Tonight’s Orbital Sciences Launch to International Space Station
Ahead of the third U.S. commercial resupply mission to the International Space Station by Orbital Sciences Corp., NASA’s Wallops Flight Facility in Virginia continues to enable successful launches from the Eastern Shore. Orbital’s Antares rocket carrying 5,000 pounds of NASA cargo aboard the company’s Cygnus spacecraft is scheduled to liftoff at 6:22 p.m. EDT this evening from Pad 0A of the Mid-Atlantic Regional Spaceport at Wallops.
NASA is soliciting proposals for concept studies or technology development projects that will be necessary to enable human pioneers to go to deep space destinations such as an asteroid and Mars.
Oct. 27, 2014, Fairfax, Va.—Americans for Limited Government president Nathan Mehrens reacted today to a news report that House Majority Leader Kevin McCarthy hopes to pass a long-term funding bill for the federal government during the lame duck session.
“While we appreciate Majority Leader Kevin McCarthy’s intent to avoid a funding fight in early 2015, allowing the Democratic-controlled Senate to dictate government funding terms even after they have likely been defeated is a mistake.
“President Obama has made it clear that he will continue to push the boundaries of constitutional lawlessness through regulations and executive orders, and the power of the purse is one of the only powers Congress has to rein in a rogue Executive. Throwing away this power to stop the most misguided of Obama’s initiatives through the defunding process, cedes the only realistic tool this Congress has to check the President’s excesses, and would negate the mandate of the people to halt the lawlessness of this Administration.
“Over the past four years, major advances toward fiscal sanity have been made through the government funding process and giving away the only legislative tool that the President respects is to declare defeat before the new Congress is even seated.
“It is our hope that Majority Leader McCarthy will consider this trial balloon popped and instruct appropriators to work with the Committee on Oversight and Government Reform and other authorizing committees to identify the most egregious excesses and put a plan in place to defund those activities. Americans for Limited Government has been active in identifying these abuses and dangerous policies, and will be continuing to inform Congress about them.
“Over the past four years, the only major advances toward fiscal sanity have been made through the government funding process and to throw away the only legislative tool that the President respects is to declare defeat before the new Congress is even seated.”
To view online: http://getliberty.org/alg-urges-majority-leader-mccarthy-to-rethink-government-funding-strategy/
The third Orbital Sciences cargo mission to the International Space Station under NASA’s Commercial Resupply Services contract is scheduled to launch at 6:22 p.m. EDT Tuesday, Oct. 28, from Pad 0A of the Mid-Atlantic Regional Spaceport at NASA’s Wallops Flight Facility in Virginia.
NASA has awarded the Hydrospheric and Biospheric Sciences Support Contract to Science Systems and Applications, Inc., of Greenbelt, Maryland.
Read more here:: NASA Awards Hydrospheric and Biospheric Sciences Support Contract
The same phenomenon that causes a bumpy airplane ride, turbulence, may be the solution to a long-standing mystery about stars’ birth, or the absence of it, according to a new study using data from NASA’s Chandra X-ray Observatory.