In the past the reason why they lowered rates is because there was a recession and they had no choice but to cut rates.
This time you can say it’s different. It appears there might be a soft landing instead of a crash and when they cut it , it will be because employment is still strong but inflation is under control.
Will this work? It’s hard to tell. Economy is pretty bad right now. All it would take it one bank failure and all hell would come loose.
Topic: Why do people rush in to buy things when rates are about to be lowered? - page 2. (Read 366 times)
December 14, 2023, 12:24:38 AM
December 14, 2023, 12:14:09 AM
From the subject of the topic, I will like to clear up some perceptions of your thinking in economics. If you have ever encountered what is called the theory of demand, you would have understood why people rush for certain goods if the prices are low.
The theory of demand stated that as the price of the product increased, the lower the demand for that same product in the market, and as the price of the product decreased, the higher the demand. So, in marketing or economics, if the price of a product is high, the number of people purchasing that product will be low, and if the price of that product is low, the number of people buying the product will increase, which is the main reason why people rush to buy things if the price of such things is low.
The theory of demand stated that as the price of the product increased, the lower the demand for that same product in the market, and as the price of the product decreased, the higher the demand. So, in marketing or economics, if the price of a product is high, the number of people purchasing that product will be low, and if the price of that product is low, the number of people buying the product will increase, which is the main reason why people rush to buy things if the price of such things is low.
December 14, 2023, 12:07:24 AM
before rate news is released people prepare for the worse. so they buy before news.. locking-in certain rate.. then when the news is released that rates are not as feared the market corrects.. and people can short/refinance their asset at the lower rate
before 2000, market rates were alot higher so people fear rates going back to the 1980's highs..
mortgages used to be 14% and many fear those numbers again so when there is a "rate risk" announcement approaching many will buy from 2-6 fearing the feds call for 10-14
after all we have just seen inflation reach 11% recently so numbers above 6 are a possible risk.
before 2000, market rates were alot higher so people fear rates going back to the 1980's highs..
mortgages used to be 14% and many fear those numbers again so when there is a "rate risk" announcement approaching many will buy from 2-6 fearing the feds call for 10-14
after all we have just seen inflation reach 11% recently so numbers above 6 are a possible risk.
December 13, 2023, 11:07:48 PM
If you look at a chart that puts the sp500 on top of the FED rates, you will notice a pattern that shows how whenever the FED has lowered rates, the sp500 has crashed pretty bigly. So im wondering, is this going to be different this time?
https://en.macromicro.me/collections/9/us-market-relative/91/interest-rate-sp500
Since the year 2000, when I believe the dynamics of the FED changed and the QE era started, the baseline for rates is basically near 0, with small pumps here and there whenever inflation was starting to go to high, or whenever government spending was needed (see the Covid incident)
So basically, why is people buying, if with 100% of certainty, this has been working since the 2000? Shouldn't you be considering a scenario where prices will be lower?
In that case, how would BTC perform? Will it successfully decouple from the markets, or is it going to mimick SP500 and just crash harder? Will the ETF hype + halving be enough to counteract these dynamics?
https://en.macromicro.me/collections/9/us-market-relative/91/interest-rate-sp500
Since the year 2000, when I believe the dynamics of the FED changed and the QE era started, the baseline for rates is basically near 0, with small pumps here and there whenever inflation was starting to go to high, or whenever government spending was needed (see the Covid incident)
So basically, why is people buying, if with 100% of certainty, this has been working since the 2000? Shouldn't you be considering a scenario where prices will be lower?
In that case, how would BTC perform? Will it successfully decouple from the markets, or is it going to mimick SP500 and just crash harder? Will the ETF hype + halving be enough to counteract these dynamics?
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