Eurodollar University The Fed Is About to Cut Rates, Here’s What They’re NOT Telling You
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May 26, 2025 The discussion dives into why people expect interest rate cuts to stimulate the economy, revealing a shocking truth about the Fed's long-held narratives. It critiques the idea that lower rates guarantee growth, spotlighting historical failures. The talk further unpacks misconceptions about the Fed's actual control over rates, showing how real market behaviors challenge this belief. The cyclical nature of interest rates during economic booms and busts is explored, highlighting the hidden economic issues that low rates often obscure.
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Fed Rate Cuts Are Ineffective
- Fed rate cuts are widely believed to stimulate the economy by making borrowing cheaper.
- However, this common belief is almost entirely false and cuts have never achieved intended stimulus.
Interest Rates Signal Economy
- Interest rates serve as information about economic conditions, not a tool to manipulate the economy.
- The Fed focused on interest rates because it lacks control over actual money supply.
Rate Targeting Failed Repeatedly
- Fed adopted interest rate targeting in the late 1980s but it proved irrelevant across recessions and crises.
- Large rate cuts did not prevent recessions in 1990-91, 2001, or 2008 financial crisis.