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1940s Yield Curve Control Review
Created on: 3/14/2021 8:48:34 PM   Last Update: 3/15/2021 2:01:50 AM Posted by: RTT

1940s-yield-curve-control-reviewYield curve control was operational during and post World War 2 for a 9 year period.

The US stacked up a huge national war debt. With war comes with higher inflation, this time higher inflation could not be allowed to be followed by higher interest rates as the national income could not pay the interest bill and a sovereign debt default would follow. The response by the Federal reserve was to cap interest rates near 2.5% to contain the interest expense.

The chart below shows this period.

In the chart below while inflation (CPI) is above the 10 year interest rate this is known as 'negative yield' and purchasing power destruction of the currency (USD), hence why funds will flow into anti US dollar trades like gold, silver, bitcoin and oil.

The bond holders become the investors holding the short stick as inflation destroyers their capital, stocks do well, commodities do well. The problem for the FED is the bond holders are massive in number and for the FED to contain their selling they would have to buy all which is sold or convince this class of investor that it is best for national interest that they 'do not sell' and take the loss for the good of the nation. During World War 2 the bond investors made this patriotic choice, today maybe not so much, hence the FED buying could be exponential.   


Currently the FED is jawboning the idea of yield curve control for a period of 2 years. Get the feeling the DEM's are targeting mid term elections with the FED help, hmmmm.


POINT: The FED's choice is to trash the dollar to save the economy, or trash the economy to save the dollar. 


Reminder ..


..."I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that."..

Jesse Livermore



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Investing Quote...

..."I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that."..

Jesse Livermore


..“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.”..

Bernard Baruch


.."A socialist is someone who has read Lenin and Marx. An anti-socialist is someone who undertstand Lenin and Marx"..


Ronald Reagan

.."A market is the combined behavior of thousands of people responding to information, misinformation and whim"..

Kenneth Chang


Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.

Nobel Laureate for Economics Paul Samuelson




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