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The Fed Put Still Lives | Vincent Daniel

Forward Guidance

CHAPTER

The Crowding-Out Effect of Interest Rates

The Fed can't possibly raise rates to 3%, let alone 5%, because there would be a widespread default borrowing costs would go up. I personally think there's no way we could afford interest rates to go to 6% to 7% and stay there, right? If they stay there, then all of a sudden, we're talking about an interest expense line item on our balance sheet that is materially higher than almost anything else other than healthcare. That's freaking scary, that our interest expense is a bigger payment than defense. That's insanity.

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