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Benefit of higher risk free rate

Summary:
The higher rates provide higher risk free income to critical USD accounts.  This is and will turn out to be a better policy than the MMT policy of permanent ZIRP with current institutional arrangements of ERISA.A drawback of the policy adjustment though has been the severe reduction in NPV of all financial assets of moving it from 0.05% in March to the projected 4.5% in December…  9 months…A 10-yr asset would project a 35% reduction in NPV due to an immediate adjustment from 0 to 4.5%… so with a 9 month adjustment period we perhaps see a bit less than this…They should have done this a lot slower over multiple years for a more stable outcome for financial assets… but we ofc have Art degree morons in there trying to run it and reduce their figurative “inflation!” so there’s going to be

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The higher rates provide higher risk free income to critical USD accounts.  

This is and will turn out to be a better policy than the MMT policy of permanent ZIRP with current institutional arrangements of ERISA.

A drawback of the policy adjustment though has been the severe reduction in NPV of all financial assets of moving it from 0.05% in March to the projected 4.5% in December…  9 months…

A 10-yr asset would project a 35% reduction in NPV due to an immediate adjustment from 0 to 4.5%… so with a 9 month adjustment period we perhaps see a bit less than this…

They should have done this a lot slower over multiple years for a more stable outcome for financial assets… but we ofc have Art degree morons in there trying to run it and reduce their figurative “inflation!” so there’s going to be chaos…




Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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