Traders Need Fed’s Rate-Cut Signal to Keep Stocks Rallying.
The US $ Dollar is the currency of monetary exchange for trade and transaction issued by the United States Federal Bank system.
Until 1933 US Federal bank notes, were redeemable (convertible) in gold. The US main gold reserves are stored in the US Bullion Depository which is located in a fortified vault next to the US Army Post at Fort Knox, Kentucky. The Depository is protected by the US Mint Police under the auspices of the Federal law enforcement agencies and the US Army (originally of the 1st US Cavalry Regiment). Since 1933 the US Federal bank notes, are redeemable in their purchasing power (convertible exchange value).
The Federal Reserve Notes are legal tenders for all debts, public and private as is printed on each note. The notes are liabilities of the Federal Reserve Bank System, backed by financial assets that the Federal Reserve Banks pledge as collateral. These are mainly US Treasury securities and mortgage agency securities.
The notes issued are lent by the US Federal Reserve to the banks. The cost of use of the US Federal capital (currency) is priced in the rates of interest charged on the financial facilities (currency circulations), provided by the Federal system. Federal interest rates price the financial risk and the economic return on the cost of the federal currency issued and lent. Therefore interest rates are set according to the qualification and quantification of financial and economic risk and return in the US Federal Reserve Bank system. It follows from this that,
– Low interest rates are driven by low (financial) risk against high (economic) return.
– High interest rates are driven by high (financial) risk against low (economic) return.
Security is attribute of risk. Success is attribute of return.
