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The Hype Surrounding Today's Federal Reserve's Interest Rate Decision is Way Overblown
Today the Federal Reserve will meet and announce at 2PM NY time whether or not they are hiking rates. The fact that there is so much mainstream media attention being placed on this announcement as one that could tank the US stock markets if they announce a rate hike versus cause it to soar if they announce further delays is absurd if one pauses for a rational second to consider the following. The US Federal Reserve cut interest rates to 0.00% to 0.25% on 16 December 2008, and it has been at this level for more than 6½ years now! Furthermore, starting in about the last quarter of 2009, the mainstream media has been speculating that the Feds would raise interest rates. This means that for 23 consecutive quarters, the mainstream media has speculated that the Feds would raise interest rates, and for 23 straight quarters, the Feds have issued a bunch of rambling nonsense about “subdued inflation trends” and low US unemployment imbedded within a non-wavering statement that they will maintain a fed funds rate at 0% to 0.25%. Just check out the consistency of the statements they have released every few months for the past 6½ consecutive years below (I have only posted their decision from one statement per year though all FOMC statements every year for the past 6½ years state the same basic nonsense.)
Release Date: August 12, 2009
“The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Release Date: August 10, 2010
“The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Release Date August 9, 2011
“The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
Release Date: August 1, 2012
“The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
Release Date: July 31, 2013
“The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”
Release Date: July 30, 2014
“In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation.”
Release Date: July 29, 2015
“The Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation."
Even more ridiculous is the Fed’s modification of this standardized statement after stating in 2013 that they would hike interest rates if the “official” (but very fake) unemployment rate dropped below 6.5 % and their “official” (but very fake) inflation statistic was projected to be “no more” than 2.5%. Given that the latest “official” inflation rate through the 12 months ended July 2015 was 0.2%, which is “no more” than the given 2.5% inflation target, and the latest “official” inflation rate was 5.10%, well below the 6.5% target at which the Feds stated they would start raising the Fed Funds rate in 2013, one would think that an interest rate hike today was guaranteed if one trusts the bankers’ rhetoric. However, if one simply looks at the facts, one will realize that the Feds’ word is worth next to nothing, as all their policy decisions are driven by what is best for their masters (industrialists, statists and corporatists), and never by what is best for the country.
The facts are as follows. The “official” unemployment rate has been below 6.5% and the “official” inflation rate has been “no more” than 2.5% for 17 consecutive months. Consequently, we have met the conditions for 17 consecutive months for the Feds to start raising interest rates but yet no interest rate raise has transpired. Why? Janet Yellen knew that if she raised interest rates 17 months ago (when their stated conditions for raising interest rates were initially met), that this action would have had disastrous consequences for US stock markets and for hundreds of trillions of notional amounts of derivative contracts, the vast majority of which are directly tied to interest rates. Furthermore, it appears that 17 months ago, they had not yet provided ample opportunity to their crony corporate friends to exit the US stock market. Consequently, they could not have chosen to start manufacturing a stock market decline 17 months ago for fear of angering the ruling class that lords over them. Consequently, the Federal Reserve bankers merely altered the language contained in their statements regarding the conditions that had to be met for them to start raising interest rates. Instead of stating that they would raise interest rates if projected inflation was “no more” than 2.5% and if unemployment dropped below 6.5%, they stated that they would only raise interest rates by assessing realized and expected “progress…towards its objectives of maximum employment and 2% inflation.”
The facts show the total absurdity of paying attention to anything Central Bankers state, as their statements should have zero credibility among the people after this inspection of their past statements and actions. Unsurprisingly, mainstream media journalists seem to be waiting with bated breath upon every word that comes forth from Janet Yellen’s lips. Furthermore, to add to this mountain of absurdity, is a 0.25% rate raise even significant after nearly 7 consecutive years of 0% to 0.25% interest rates? When Nixon took the world off the Bretton Woods standard in 1971, and Jimmy Carter called upon Paul Volcker to repair the world’s loss of faith in the USD, note that Volcker raised Fed Funds rates by a whopping 10.75% from 4.75% to 15.5% in less than two years from 1977 to 1979, and then again, by another 4.5% in the next year to 20%. Today, even a 2% raise in interest rates seems unfathomable, as such an interest rate raise may cause so many defaults on interest rate driven derivative contracts that chaos and financial Armageddon may ensue.
In other words, it is absurd that the global financial system today is so fragile and so overblown with hot air, that the more than quadrillion dollars of notional value of derivatives and the entire US stock market’s fate is now balanced on a fulcrum that could tip into a deep slide by interest rate increases that would be viewed as insignificant and piddling just a few decades ago. This is absurdity at its finest. Furthermore, if you wonder why I don’t refer to the “official” $700+ trillion of derivatives contracts in use today, since an accounting trick was used to knock the notional value of global derivatives overnight in half from $1.4 quadrillion to $700 trillion a few years back, yes, the real notional value of global derivatives is still $1.4 quadrillion.
So will the Feds raise interest rates later today? Given their past history, I believe the answer is no and that they are engaging in the same bluster and using their mainstream media pawns to spread propaganda that they may raise interest rates. Consequently, this would allow the MSM to spin continued inaction and paralysis on their end into a “positive” for US stock markets. However, this is pure speculation on my end as predicting the decisions of psychopaths is not a science or an art or even worthy of anyone’s attention. We all know that the US Federal Reserve causes massive price distortions that the MSM likes to falsely call “booms”. We all know as well that the US Federal Reserve bankers deliberately unwind the massive price distortions they create from time to time, ensuring that their crony corporate friends are informed of this move well in advance of the time they decide to execute it. History has proven that crony industrialists and corporatists don’t tend to have their riches destroyed by “busts”. Quite to the contrary, they tend to enrich themselves on the “bust” cycle of this equation as well. To crony corporatists, the artificially engineered “bust” part of the cycle is just another opportunity to become even richer. So whenever the Fed bankers decide is the right time to engineer the "bust", they will raise rates, and no one but they and their crony friends know when this time will be.
Consequently, this is not an article about predicting the Feds decision on interest rates later today, because as I stated, there is no science or art or even anything to be gained by predicting the moves of psychopaths. To do so is tantamount to flipping a coin, stating that it will come up heads, and when it does, to pat oneself on the back in an absurd congratulatory manner for this accurate “prediction”. Who cares if I’m right and the Feds do nothing as usual? Even more importantly, who cares if I’m wrong and the Feds hike interest rates? A guess is just a guess and nothing more. Whatever the decision today, there will likely be a knee-jerk reaction to this decision in US stock markets, and it could even be a significant knee-jerk reaction, but if the Fed bankers decide not to raise interest rates, this is NOT a win for the US stock market despite any short-term knee-jerk reaction that may falsely interpret this decision as a win. On the contrary, unless the Feds decide to raise interest rates by 0.50%, a 0.25% raise is not going to really affect any markets significantly in the long run unless they are followed by quarterly raises every quarter. In the end, whatever the Feds announce at 2PM NY time today should not affect your long-term outlook on markets as neither of the two possible decisions will significantly alter the future fate of global markets. Instead, the most important thing to understand is the massive fraud that is systemic in the global financial system and to allow a deep and complex understanding of this fraud to drive your investment decisions. This understanding is much more important than the Fed's interest rate decision later today. If one doesn’t understand the systemic fraud in this system, one will be driven to poor decisions by knee-jerk reactions to short-term events rather than to build and formulate a strategy that will ignore short-term knee-jerk reactions and survive and thrive in the long-term. With off-the-charts volatility in US, Japanese, Chinese and European markets caused by 6-sigma and 7-sigma events, as I discuss in the below vlog, trying to build an investment strategy around these banker-created, HFT algo driven, short-term volatile events is pure foolishness.
This article is a commentary on the complete absurdity of the state of our global financial system that has been created by foolish Central Banker monetary policies designed to benefit only the smallest sliver of society, the disinformation that passes as “news” today, the lack of integrity in MSM financial journalism, and the fact that one must separate the wheat from the chaff to understand how to formulate intelligent investment strategies moving forward no matter if the Feds decide to do nothing or decide to hike interest rates by a piddling 0.25% later today. Oh, and one last comment. Yes I do realize, and have realized for decades, that the official economic indicators stated by governments worldwide are falsified. Real inflation in the US is a minimum of 2% to 3% higher than the “official” statistic and real unemployment in the US is a minimum of 4 to 5 times higher than the “official” 5.10% statistic. But since the Feds used these fake statistics in their statements to provide the timeline of when they would hike the Fed Funds rate, I thought that it would be particularly absurd to illustrate that even when their fake targets are met using their fake statistics, the Fed bankers still renege on their previous promises to raise interest rates due to the calamity that significantly higher interest rates would wreak upon the notional 1.4 quadrillion of outstanding derivatives contracts.
Additional commentary available below in our latest SmartKnowledgeU vlogs:
SKU_Vlog_005: Use 6 Sigma Events to Predict Market Behaviorv
SKU_ Vlog_006: We’re in a Bear Market for Honor & Integrity
SKU_Vlog_007: Society Has Success All Wrong
About the author: JS Kim is the Managing Director of SmartKnowledgeU, a fiercely independent investment research, analysis and education firm that provides investment and wealth preservation strategies to combat the systemic fraud of the global banking and investment industry. Come by SmartKnowledgeU to learn more. Click on this link to download a free excerpt to JS Kim's book, The Golden Gift (Solutions to our Global Banking & Monetary Crisis), available until 18 September 2015 only.
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Fukushima – Glowing Blue Cucumbers Is Not A Good Sign, and Blue Pigs
In Japan, they call cucumbers "Curies"
Which is amazingly prophetic given this picture of a Glowing Blue Curie
The picture is from Fukushima Diary, which has a chat room too. In that chat room I also saw a statement of the nuclear industry spending $1.4B annually in "communication" aka propaganda. I asked the NEI for their audited financials, and they sent me a tax return. Just that one organization spend $99M a year promoting nuclear. I'll do a new article on this.
Cesium has a blue color to its emissions.
- See more at: http://nukeprofessional.blogspot.com/#sthash.eYltBfeJ.dpuf
No rate rise and I've been correct for the past 2 years. You cannot taper a Ponzi scheme and with all the share buy-backs, any interest rate rise will put half the 500 companies in shit, because their market cap is a fraud. Buying shares at ZIRP to 1% is the only thing sustaining this fraud and lie. Any type of interest rate increase? It will be squeaky bum time for these companies. HP is a prime example of a dead company walking.
I find it repugnant. The (financial) world waits with baited breath for: an inkling, a gesture, a wink or a nod; from an institution beholding only to a cabal of private banks.
What have we become?
Pathetic.
One day the interest rates will rise up and we will get a new President
A bit off topic, but has anyone read an intelligent analysis of what might have happened if the TBTF banks had not been saved?
As far as I can see our "socialized capitalism" (meaning the government protects those in the top 0.1% at the expense of the 99.9%) is still in effect.
Everybody is speculating what they are going to do or not do. They can keep it the same (nuttin), bang it up a faries phart (a tad above nuttin) or bang it up 1%. The wheels are still going to fall off no matter what they do or don't do, the only difference being the timeline.
It would be a better horse race if you could pick what the excuse is going to be this time rather than the amount.
What I find interesting is how longer-duration bank lending rates have fluctuated up and down during the last 18 months by more than a full percentage point on their own in the market. These are the rates than matter most to businesses and home buyers who tend to borrow for long term commitments. They have survived, and in some cases thrived amid this volatility. But, somehow we’re now supposed to believe that a Fed orchestrated change of 0.25% in the short term rate is going to rock their boat so hard it tips over again.
Really? Once again we can clearly see the Fed is not about responding to the mainstream economy at all. It’s about doing what it thinks is best for the financial system at the expense of everyone else. If the banking and financial sector is so fragile, unstable, and incapable of handling a minute change in short term rates, (less than a quarter of what mainstreet has already proven it can handle), that’s clear evidence that the financial sector has been broken all along, and the the Fed’s policies have already failed.
Going to take a nap; wake me up at 1:55 pm, when the leak is out. The FED kicks it down the road until October and maybe December depending on the "fill in the blanks of your imaginations". Have a nice day!!
The last two days of stock market activity indicate that the leak has already hit the streets for the Wall Street boys and girls...I wanted to be politically correct during this election year..
I wouldn't say hype, a better word may be false perceptions, which is all the fed is today.
QUOTE: "However, if one simply looks at the facts, one will realize that the Feds’ word is worth next to nothing, as all their policy decisions are driven by what is best for their masters (industrialists, statists and corporatists), and never by what is best for the country."
Nothing to add, I tell ya!
This is so pathetic. A Frankenstein experiment.
Not at all over blown. This is the turning point for a multi-decade policy change...tightening.
If their Masters will profit the most from raising, then they will raise. If their Masters profit the most by NOT raising, then they will not. All other speculations as to "data dependent" analysis is mere "NOISE" to keep the attention of the "peasants.
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They will NOT raise rates unless they have already protected the damage to their Master, Satan & will profit on the short side.
What an idiotic article. The Fed, like the funds rate, is now largely irrelevant.
About damn time all the useless paper-pushers had to work for a living again.
I would have thought by your handle that you could read but apparently you can't or are to lazy to do so.
LMFAO!! Don't overthink this asshat. The Fed is in fact a criminal operation hiding in plain sight.
For example, they talk about how "inflation is low". Want to fix that, easy, cut every taxpayer a check for a million dollars.
This would result in inflation, jobs, and tax revenue and would be much cheaper than what has been done.
Yet another fucking sheep, go fuck yourself. You sound like another useless fucking paper-pusher who is scared because you might actually have to work for a living. Fuck off and die, better still, come here so I can take your fucking head.
get out there and buy or sell vix or something this is a huge day sitting on the sidelines is for pikers. get in the game bitchez. /s
Go long on the short.
State of Union since the 2008 financial crash-
High unemployment (>20%) coupled with an anemic job market- >90% of “new” jobs are temp positions- low pay, no benefits, zero job security (Link: www.zerohedge.com/news/2015-04-03/americans-not-labor-force-soar-record-931-million-participation-rate-drops-february)
For those working, wages have been stagnant or declining since 2000
Government deficits have soared
The FED has spent $ trillions of taxpayer funds (QE) to prop up (still) insolvent banks
Where has all this money gone? Into stocks, real estate in NYC, SF, Boston, etc and emerging markets (it is now fleeing these countries). The end result, multiple financial bubbles in the US coupled with falling commodity prices and emerging market currencies tanking. Financial markets in the US have been so inflated that no one really knows what the true “value” of stocks should be- thus we have high levels of “volatility” in the markets. Most recently, we saw the Dow drop 100 pts on Monday only to go back up over 400 points Tues and Wed (no doubt with $ billions poured in by the FED, more corporate stock buy-backs using ultra cheap QE $$), etc- a 500 point swing in 3 days.
Car sales are propped up with subprime auto loans (covered extensively by ZH)
We also have a US taxpayer funded multi-trillion $ war now stretching from the Levant, to Caspian Basin, Persian Gulf, China Sea, Indian Ocean, Horn of Africa (war in Yemen), the Maghreb, to Eastern Europe and Russian Border.
For entertainment, we just had the second installment of the village idiot’s convention- the Donald Trump Show aka the great Republican “Debate”. You can’t make this stuff up!
"The FED has spent $ trillions of taxpayer funds (QE) to prop up (still) insolvent banks" -- bingo. They could have solved this by simply cutting every taxpayer a check for a million dollars, they woud have more than hit their inflation target, jobs would be creaated, AND governments would have seen an increase in tax revenues.
The Fed is in fact a criminal operation hiding in plain sight.
'cutting every taxpayer a check for a million dollars'
If they did it alphabetically I might have gotten in before the dollar inflated to the moon. New safes, more PMs. That used Maserati would have been fun til it broke.
The whole name of the game is to fake left while continuing to run to the right. The Fed has to keep people convinced that they will raise rates in order to maintain credibility as a serious institution. The longer they can maintain credibility, the less they need to actually raise rates to maintain confidence in the currency.
If ever people realize that they are never going to raise rates, though, the whole calculus changes. As confidence in the currency evaporates, they will need to raise interest rates significantly and quickly to defend it.
Or, as many people here believe, they won't and will simply preside over the end of the dollar.
The analogy I draw for people is that of an insolvent but well-established restaurant owner. As he is perceived as creditworthy, he gets to borrow and buy things on account with ease. So long as people are convinced that he is able to pay, the less he needs to actually pay.
However, once people start to realize that he can't pay and start to ask for payment, he will have to ante up fast in order to stay afloat.
Or, alternatively, having stripped the restaurant of everything of value, he can just declare the restaurant bankrupt and enjoy drinking the restaurant's wine collection in the comfort of his home.
Yes, all fine and good so long as the former employees don't know where he lives I guess.
The idea that actions won't have consequences is silly.
What does the Laws of Physics actually say about the Creator of said universe, which those Laws abide within said universe? Oh that is off topic and hard for the most intellectually minded to begin to comprehend...my bad.
Are you suggesting that God is "too stupid" to come up with evolutionary genetics? LOL!!!!
Your bad indeed.
Kicking the rate can the day before a 4opex. Yeah. That would be appropriate. Why wait until October? That's like disclosing you slept with your fiance's sister...just as you're saying your vows.