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Category

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Fun
Transcript
00:00A lot of investors are very uncertain about the direction of rate cuts into the end of the year.
00:07Currently, the market is pricing in around two, but you had Atlanta Fed President Rafael Bostic saying maybe one this year.
00:14Do you think, given where we stand in the economy today, that the Fed has room to cut?
00:19I think the Fed right now should not cut monetary, should not cut interest rates,
00:27and it's in a very difficult position to try to balance these things.
00:32There's a great deal of uncertainty, and there is a deterioration in sentiment, but really the actual economy.
00:39So they're in a difficult position.
00:41I think that when we look farther out, we're dealing with the political aspects.
00:46You touched on that.
00:47I think that when there's a new Fed chair, there will likely be more inclination to cut rates
01:00because it's an old story of conflict between those in power and political who like stimulation,
01:08and because of the enormous impact of interest rates on debt service because the debts are so large,
01:18there's going to be a pressure that way.
01:20But one man's debts are another man's assets.
01:25And so the problem here is that if you drive those rates down, they provide lesser returns.
01:34And how does it get driven down?
01:39There could be those cuts, but at the end of the day, there has to be interventions.
01:44And those interventions lessen the value of money.
01:47So that's why we have this value of money conflict.
01:50I think if we were to take not-too-distant future changes in the monetary policy,
01:57and we start to imagine that, and we also start to think about midterm elections,
02:02I think that that will be a period of great concern.
02:07I think the markets, if they were to see a too aggressive cut in monetary policy,
02:15too inappropriate cut, that it would actually be bad for the bond market.
02:20Watch the yield curve.
02:22As you get rates rising by long rates, and you have also at the same time,
02:27let's say movement down in the dollar and rises in gold,
02:31that kind of dynamic is reflecting a movement out of the bonds
02:35because the value of money matters a lot.
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