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dtwest

They were going up a couple of years ago.

https://fred.stlouisfed.org/series/FEDFUNDS

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What happened in 2019?

Politics. Rates had to go down for the re-election effort.

I think that is probably naive, they can't raise rates for many reasons including the fact that it would basically immediately blow up significant parts of the economy that are only enabled/possible due to rock bottom rates

"immediately blow up" - if such fragility exists, is it a good thing? I mean, even raising rates a few basis points causes such collapse...

No I think it's an awful situation, but lawmakers and governments have made the bed for us by stepping in over and over to rescue and backstop failing entities and sectors time and time again which has allowed what would otherwise be insolvent and long ago bankrupted entities and business models to flourish

Rates went down because the underlying economy was seeing slowing growth; particularly due to impacts of the trade war.

Trump on the one side of his mouth was trumping up "record economic growth!" but on the other side of his mouth was complaining "the economy will crash if they raise rates!"

It is crazy that the Democrats are the fiscal conservatives these days while the Republicans are much more irresponsible (though Obama and Biden are definitely nowhere near Clinton in terms of responsibility, they are way more responsible than Bush/Trump).

Corporate debt. Fed raised rates and then when it came time to roll over their debt, a lot of major corporations said "Uh, if interest rates keep going up, we are going to go bankrupt because of the higher costs of debt service." The markets had a taper tantrum (the S&P 500 dropped by about 18% in the second half of 2018), and then the Fed reconsidered and started dropping rates again.

Situation is worse now, because it's highly likely that the U.S. Government would go bankrupt if they had to roll over their debt at higher rates, given that the U.S. debt-to-GDP ratio skyrocketed from 105% in 2020 to 130% now.

> Situation is worse now, because it's highly likely that the U.S. Government would go bankrupt if they had to roll over their debt at higher rates

Is it even possible for a sovereign nation to go bankrupt in its own fiat currency?

Sort of. Bankruptcy means you "cannot" pay your debts. The US can get itself into a situation in which for structural reasons it "cannot" pay back its debtors because the political/social costs of the money printing or taxation required are infeasible, e.g. nobody who will do it can get elected. In that case even though it would be technically possible, it wouldn't happen and the US would refuse to pay.

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