By fixed income you mean on the verge of poverty? In a real sense most working people are on a fixed income. They have a fixed salary or a fixed wage with a fixed number of hours in the day. People who leverage money by borrowing or inducing investors to part with money, and then apply that leveraged money to a market via goods or servic…
By fixed income you mean on the verge of poverty? In a real sense most working people are on a fixed income. They have a fixed salary or a fixed wage with a fixed number of hours in the day. People who leverage money by borrowing or inducing investors to part with money, and then apply that leveraged money to a market via goods or services, are just about the only people who’s incomes are not fixed.
Anyway, I digress. In answer, Fern, people on a fixed income are screwed either way. Fed interest rate policy is never about helping individuals. It’s about keeping the economic ball in the air. On those rare occasions when the Fed takes seriously the labor side of its two part mandate (the second being price stability, I.e., inflation), all they try to do is increase the number of opportunities for people to find jobs. If opportunities outstrip job seekers, the job seekers have the chance to bid up their wages. But those instances are brief because a wage driven increase in inflation scares the shit out of the coupon clippers who sit on, and are represented by, the Fed. They have visions of the Weimar Republic, plus they don’t think workers deserve a good life (a perverse Calvinism at work there).
Gary, Thank you. I believe the following spells it out.
'Inflation can have a negative effect on fixed-income assets when it leads to higher interest rates. It usually does. Central banks like the U.S. Federal Reserve typically set inflation targets and, when inflation exceeds the desired threshold, they raise interest rates to bring it under control.
The longer term of a bond, the greater the risk that inflation will hurt the investor's real return.
Fixed-income assets can be found with terms ranging from a few months to five years or more.'
'The longest bond offered by the U.S. Treasury is a 30-year bond.
An investor in a one-year bond is taking less risk that inflation will erode its value before the bond matures.' (Investopedia)
In that regard, coupon clippers are the same as everyone else. Prices go up during periods of inflation. I referred, particularly, to those on a fixed income.
By fixed income you mean on the verge of poverty? In a real sense most working people are on a fixed income. They have a fixed salary or a fixed wage with a fixed number of hours in the day. People who leverage money by borrowing or inducing investors to part with money, and then apply that leveraged money to a market via goods or services, are just about the only people who’s incomes are not fixed.
Anyway, I digress. In answer, Fern, people on a fixed income are screwed either way. Fed interest rate policy is never about helping individuals. It’s about keeping the economic ball in the air. On those rare occasions when the Fed takes seriously the labor side of its two part mandate (the second being price stability, I.e., inflation), all they try to do is increase the number of opportunities for people to find jobs. If opportunities outstrip job seekers, the job seekers have the chance to bid up their wages. But those instances are brief because a wage driven increase in inflation scares the shit out of the coupon clippers who sit on, and are represented by, the Fed. They have visions of the Weimar Republic, plus they don’t think workers deserve a good life (a perverse Calvinism at work there).
Gary, Thank you. I believe the following spells it out.
'Inflation can have a negative effect on fixed-income assets when it leads to higher interest rates. It usually does. Central banks like the U.S. Federal Reserve typically set inflation targets and, when inflation exceeds the desired threshold, they raise interest rates to bring it under control.
The longer term of a bond, the greater the risk that inflation will hurt the investor's real return.
Fixed-income assets can be found with terms ranging from a few months to five years or more.'
'The longest bond offered by the U.S. Treasury is a 30-year bond.
An investor in a one-year bond is taking less risk that inflation will erode its value before the bond matures.' (Investopedia)
Which is why coupon clippers freak out over inflation.
In that regard, coupon clippers are the same as everyone else. Prices go up during periods of inflation. I referred, particularly, to those on a fixed income.