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Andy Fately's avatar

excellent writeup Fabian, and I think mostly spot on. one thing to consider about the Trump plans for efficiency, though, is that he is not running for re-election, so may be willing to absorb some pain to achieve longer term goals. just a thought. and I have read and come to agree with Robertson's views on the risk-free rate over the past months. I think it makes a lot of sense and demonstrates the impact QE has had, which is not merely lowering rates, but confusing the Fed itself

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Fabian Wintersberger's avatar

Thank you Andy. Yes, I tend to think that the plan is go through that short-term pain - but we also know Trump can change his views very rapidly, so I'm not 100% sure about that. But yes, I agree, he might do the right thing. I heard George's claims a lot, but never quite got it, to be honest. The latest Forward Guidance interview helped me here. And thinking about QE, monetary expansion and all that happened since 2020, now that I understand him, it makes a lot of sense. And since I am sure I did a much sloppier way to create the 'hypothetical 10y', I was astonished how closely it tracked the "real" nominal 10y until 2020.

I think, the Fed completely messed up - it just doesn't know yet.

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