FEDERAL FUNDS HIT 19.99%

Interest rates called Federal Funds are the overnight rate the Treasure charges to banks who need cash to handle day to day operations such as cashing checks and handling payrolls etc. Today the FOMC rate hit an astounding 19.99% which is unbelievably expensive.

Usually Federal Funds are not closely watched but when the rate hit 19.99% it was headline news world wide.

FOMC rates when I was born were 2% which is far less expensive. Clearly with high inflation the high rates will gobble up cash quickly which should being inflation under control. For far too long too much spending and printing of excessive amounts of cash are not solving problems. It is pretty clear that nobody has unlimited nominal spending power, nobody.

The rule of 72 is outright scarry. The doubling period with 19.99% is a mere 3.6 years. This is the only monetary tool the Treasury has to restrain run away spending.

It’s likely that household credit rates are going to rise as well given the position of the Treasury.