Joseph Wang - the Fed Guy

[Viking]

Joseph Wang delivers so much value i thought it would be beneficial to start his own thread. Adam (the interviewer) is a doom and gloomer. Probably good for business. Adam asks great questions - often peddling the ‘victim’ narrative. And Joseph does an absolute superb job in this interview of redirecting Adam… and suggesting that perhaps the world will not end… with his well thought out and articulate answers.

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One question i have today concerns how long interest rates can stay high. My thinking has been that there is too much debt in the system , especially government debt, and interest costs would explode. And therefore, high interest rates were not sustainable. Joseph has a very different take. He says private and government debt are very different animals. With private debt, consumers have refinanced mortgages at very low rates so most are not affected by rising interest rates; they are getting 6% wage increases and paying 3-4% on their long term mortgage. Lots of corporate borrowers also extended maturities when rates were crazy low so, overall, the corporate bond market will be somewhat insulated from rising rates. What about government? Higher interest costs are not a problem at all. They will simply issue more treasuries. Higher deficit spending on the part of the government will be inflationary. Joseph sees lots of near term trends that are inflationary (versus a return to deflation). And the fact Fed policy has no impact of government spending and debt levels  also limits the effectiveness of Fed policy today (raising interest rates to control inflation). Super interesting stuff to think about. 

 

 

Edited October 20, 2022 by Viking