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264 sats \ 1 reply \ @Undisciplined OP 6 Nov 2023 \ parent \ on: Meta Econ Takeover Day 20 meta
Do you think we're heading right back to ZIRP with the new war de jour? I had been expecting rates to stay elevated because of inflation concerns, but then war were declared.
I'm thinking a ZIRP move would scare the hell out of the markets. They will try to avoid it. Here's the scenario I see. Treasury issues lots of debt to pay for wars. Bond yields keep rising. All banks including TBTF are weakened by the plummeting bond values. Everyone is shocked because yields keep rising in the face of higher for longer interest rates. Reality is lower demand for U.S. debt. To help the banks, there will be an FDIC recapitalization while at the same time maintaining higher for longer interest rates. This will prevent spiraling inflation for a while, though it will still be way above the target rate. At least they think it will forestall hyperinflation. Who knows what will actually happen? The end is near.
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