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IIF Warns Household Wealth Gains Will Disappear Unless Fed Normalizes Rates Soon
"Easy policy has passed the point of diminishing return and keeping it longer would only increase moral hazard and distort financial markets," exclaims the Institute of International Finance, warning that the gap between the value of Americans' holdings of stocks, bonds and other financial assets and the trend growth rate of the economy is still large and not far off the level that prevailed in 2007 before the financial crisis. "The Fed should start to normalize policy as soon as possible," removing the excess as the 'gap' "typically ends up being narrowed by a correction in the stock market."
As Bloomberg details, household financial assets have ballooned, far outstripping the growth of the economy since 2013, as the Federal Reserve's ultra-easy monetary policy fuels excesses in the markets...
That's the message from a measure compiled by the Institute of International Finance (which represents close to 500 banks and financial services companies worldwide) which compares the rise in the value of Americans' holdings of stocks, bonds and other financial assets to the trend growth rate of the economy.
While the gap between the two has narrowed in recent months as the bull market in equities has stalled, it is still large and not far off the level that prevailed in 2007 before the financial crisis.
Hung Tran, an executive managing director at the institute, said the inflated level of asset prices is one reason the Fed needs to begin raising interest rates from the near-zero levels that have prevailed since 2008.
"The Fed should start to normalize policy as soon as possible—meaning liftoff this year," he said. "Easy policy has passed the point of diminishing return and keeping it longer would only increase moral hazard and distort financial markets."
Under the IIF's measure, a positive financial asset gap suggests that stock and bond prices are overvalued relative to their long-term trends and the underlying growth of the economy. When it is negative, as happened in 2009, it implies that financial assets are undervalued.
When the difference is large and positive—as it is now—it typically ends up being narrowed by a correction in the stock market. Tran said that's what he expects to happen again, although the timing of the price decline is difficult to predict.
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For now, The Fed appears to have listened (talking hawkish despite the economic turmoil) and has the market starting to believe in December liftoff.
Charts: Bloomberg
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There will be no liftoff. GET TO DA CHOPPA!!!! does not apply when the helicopter has crashed after it last helicopter drop of money on Wall Street.
What exactly is going to "lift off"?
Why does the Fed do this cool talk stuff, talk professionally.
Never happen
More like is household poverty!
http://twitter.com/BorisAlatovkrap
This actually is a warning to the banksters:
HURRY!! NOT MUCH LEFT TO STEAL!!!
'Household wealth' LOL
does this make sense?
I don't think this makes sense.
'Household Wealth' = 'Inflated Paper products'
So here is the thing that I am confused about.
Ubummer is taking Wall Street money ..
And, Obomber is murdering innocent people in the Middle East
BUT, Obumblef*ck is doing everything he can to kill both the American economy and the American people ..
And, Obumblpuke is aligning with Iran (and seemingly secretly Russia) and others AGAINST Israehell and Saudi Arabia.
Obumbles has fired every militarily competent and warhawk general and put in their place loyal incompetents and has created his own army of incompetents and spies.
So, the question is: Who is Barrack Insane Obozo really working for? Is he some kind of alien consciousness implanted in some kind of human body? Does he want a "new world order" under technocrats or doe she want to destroy the banking/economic powers and elitist monarchies and release the world from them? Is he his own person or just a toy-boy?
It seems like it could go either way.
Who took Obama from Occidental and made him president of the Harvard Law Review?
Yes, he hates the American middle class. I don't know why.
oh look,a Mexican Stand-off between sustaining wealth,and lift-off
how will it ever end?
i don't care...just end it.
"16:53 EDT - Here's the latest sign that US Treasurys are the next trading instrument that regulators and plaintiff lawyers are scrutinizing: Citigroup noted in a quarterly regulatory filing that it -- along with a bunch of other banks -- has been sued by private parties accusing the banks of manipulating the US Treasurys market. The lawsuits were filed in Manhattan, Illinois and the Virgin Islands, Citigroup said. The Wall Street Journal reported last month that the Justice Department and the New York Department of Financial Services are looking into whether banks colluded to rig the auctions of US government debt. (christina.rexrode@wsj.com; @chris_rexrode)
(END) Dow Jones Newswires"
Should be fun to watch.
You don't have to remind the Banksters that their scheme is working. They know its working.
You don't have to remind us how we are getting screwed. Those of us not enlisted in the FSA know we are getting screwed-especially if we read ZH.
Similiarly it doesn't end with buying PM. Every timne I purchase from APMEX, it seems the very next day they put out a "special" on the fucking things I just bought yesterday. (Maples)
I cant seem to connect the dots here.
50 percent of the country makes less than 30k a year. I presume thise group is not included.
Many peoples nest egg is their house, rates bump prices come down.
Rates bump stocks come down.
so... help me here.
the only way to extend the ponzy is print more
bomz a weigh
http://www.showrealhist.com/recDJIAtoRD.html
Gains will disappear if long, and double if short. Guess what the hedge fund guys have been up to?
"Easy policy has passed the point of diminishing return and keeping it longer would only increase moral hazard and distort financial markets,"
Financial markets, as well as the economy, are well past distorted.
Hold it! In September Christine the LIZARD, spoke publically about encourage the FED NOT to raise rates, now she says it is critical to do so 30 days later? WTF! The Global Clown Posse is in the house
What household wealth are they referring to, exactly? Most Americans couldn't scrape together $2k in cash in an emergency.
They refer to household wealth of the IMF employees.
To quote Dana Carvey doing Bush 41: Not..gonna.happen.wouldn't ...be...prudent.
Not going to happen as long as the dollar exists.
Whenever I see or hear the word "wealth" preceded by the word "household", especially when followed the word "gains", I want to punch someone on the mouth.
Wealth doesn't live in a fucking "house".
Rates will remain at zero.
That's all folks!
Rates will increase dramatically an entire .25% in December.......victory will be announced.....several weeks, perhaps even several months later a couple of hundred trillion dollars of gambling debts, know as derivatives will implode resulting in a race for negative interest rates and a ban on cash, the ban on cash will be portrayed as a war on drugs, crime and terrorism.
And yes, I've been wrong before and probably will be again.
Normalize rates. Yeah, sure. I can certainly see paying say 4% on approx $20T of debt, annually...no problem.