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It's Time To "End The Era Of The Fed Put" & Get Back To Basics
Authored by Brad Brooks, originally posted at BloombergView.com,
Why The Fed Should Raise Rates Now
Now that U.S. stock markets have experienced their first 10 percent correction since 2011, investors are again looking to the Federal Reserve to bail them out. Although the Fed hasn't raised interest rates in almost 10 years, sympathetic pundits say it's still too soon to raise them now. The economist Larry Summers, runner-up for the top spot at the Fed a few years ago, says raising rates would risk "tipping some parts of the financial system into crisis."
How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle?
The process started a dozen years ago, when Alan Greenspan -- then chairman of the Fed -- decided to lower rates to 1 percent after the country had emerged from the mild recession that followed the popping of the tech bubble. Then, when the Fed began to tighten policy, it did so with agonizing slowness -- raising rates just a quarter of a percent at a time, so as not to upset the financial markets.
This set the table for the subprime housing debt mess in a way that neither Greenspan nor his successor, Ben Bernanke, could foresee. Everyone assumed real estate was too diverse an asset class to ever be in a bubble. Despite credible warnings about the potential problems starting in 2005, the Fed and Treasury were still blindsided in 2008 by the enormous losses at Bear Stearns, Lehman and AIG. Suddenly, the emergency 0 percent overnight lending rate was required and, almost seven years later, it's still deemed necessary. Meanwhile, three rounds of quantitative easing have added roughly $3.5 trillion in purchases to the Fed's balance sheet.
What we have to show for this is a more concentrated financial system, in which the top five banks control nearly half of all U.S. financial assets. Even more troubling is evidence that, this time around, asset bubbles have formed in multiple arenas. Earlier this year, the economist Robert Shiller, who predicted the tech and real estate bubbles, warned that the U.S. now faces a potential bubble in the bond market. The high-end housing and art markets also seem to be in bubbly territory, but before they can cause too much trouble we're likely to see a serious correction in the U.S. equity market.
The trigger is likely to be the hundreds of billions of dollars worth of bad debt in the energy sector -- loans that were made to finance the fracking frenzy. Even when the price of oil was twice what it is today, many of the borrowers involved were not cash-flow positive, and few adequately hedged their exposure. While the experts like to talk about how quickly the price of oil rebounded after the financial crisis, the current oversupply makes today's situation more akin to what happened in the 1980s. That took years to correct, as desperate companies and governments kept producing more crude.
Whatever the catalyst, a handful of indicators suggest that since the beginning of this year, the U.S. equity market has been significantly overvalued. The ratio of gross domestic product to market cap, as well as Shiller's CAPE ratio (stock price divided by 10-year average of earnings divided by inflation), demonstrate that the market has been stretched to extremes not seen since 2007. The amount of margin interest being used is at a record high, as is merger and acquisition activity. Earlier this summer, PEG ratios (price to earnings growth expectations) by analysts of the companies in the Standard & Poor's 500 were at 1.7 -- the highest in 20 years, and 30 percent higher than average.
Perhaps the most disturbing statistic is that American corporations have announced dividends and share buybacks for this year that total more than a trillion dollars -- more than all their projected profits combined. This is happening at the expense of long-term capital investment, as corporations seem to care more about share prices -- upon which so much executive compensation is based -- than about prospects for long-term growth.
Another area for concern is the burgeoning private market for investments, where companies are finding it relatively easy to raise capital. Uber, for example, a not-yet-profitable car-service company, got two new rounds of such funding -- and saw its valuation jump to $50 billion, from $20 billion, in a little more than a year. As billionaire Mark Cuban, who sold his company Broadcast.com at the peak of Internet mania, said, "The bubble today comes from private investors who are investing in apps and small tech companies."
This is why the Fed has to finally take away the punch bowl. The economy may not be in top shape, but it's strong enough to handle an equity correction of 20 percent to 25 percent. (Stocks are still up 200 percent from the previous bottom.) Another mild recession would not be the end of the world; given how long it takes to revise economic data, it may turn out we've already been through one.
Fixed-income investors are subsidizing irresponsible lending, and getting too little return for it. Moreover, it makes no sense to try to solve a debt crisis by lending more money (a reality that seems to have eluded Europe, Japan and China). Writedowns can be painful, but they instill a sense of responsibility -- the kind that hasn't existed in the bond market for more than a decade, as investors have learned to count on government bailouts.
If the Taylor Rule -- a practical recommendation on setting nominal interest rates -- were taken more seriously, the Fed would have lifted overnight rates back up to the 2.5 percent range years ago. This would generate at least a trillion dollars annually, if not more, for fixed-income investors -- and a possible boost of 6 percent to GDP. The average American wouldn't likely suffer, because credit-card interest rates still average 13 percent and, given a likely flattening of the yield curve, mortgage rates would barely increase.
And while some people will worry that higher interest rates could exacerbate trade problems, a 2 percent differential is not all that relevant to currency fluctuations. Even without a change in overnight lending rates over the past few years, the dollar-to-euro exchange rate has varied by 10 percent to 20 percent annually.
So let's end the era of the "Greenspan put" and Bernanke's quantitative easing, and return to basics. The Fed should raise rates 0.25 percent this September and 0.50 percent thereafter. Already this century, the Fed has helped enable two bubbles that resulted in equity corrections of 40 percent and 50 percent. Investors would be wise to remember that if the Fed doesn't raise rates now.
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"How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle? "
Two answers:
1. Quarter point rate hikes are like potato chips- you can't have just one.
2. Any interest rate over 0% is too high when you're in a liquidity trap.
I know where the Fed can put it ....
The whole system is standing... barely
How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle?
George W Bush
This whole debacle started long before GWB was born...
He, like many others, was a willing participant who has profited handsomely from its monopoly.
DaddyO
> 1/4 percent interest rate hike will fix everything
> NIRP and Drone Pinata's stuffed with cash you shoot down
So let's end the era of the "Greenspan put" and Bernanke's quantitative easing, and return to basics.
Should be replaced with:
So let's end the era of the "Jewish central banker put", and return to basics.
"It's Time To "End The Era Of The Fed Put" & Get Back To Basics"
How about simply... "It's Time To End The Era Of The Fed"?
Banks are controlled by Satanists, not Jewish people. People like the Bernank and Yellen are just puppets doing what they are told by their real masters.
But the Satanists and their primary lieutenants just happen to be jewish. Remarkable coincidence.
Is that why November 16, 1914, the day the Federal Reserve banks were opened for business, was called the Fourth of July by the Fed’s chief planner and founder, Paul Warburg of the German banking house Kuhn, Loeb & Company.?For it was on that day that Daddy Warbucks proclaimed:
“This day (November 16, 1914) may be considered as the Fourth of July in the economic history of the United States.” -- Paul Warburg
So, who then owns the Fed?
I have the third edition of The Secrets of the Federal Reserve by Eustace Mullins, printed in 1985 and “dedicated to two of the finest scholars of the twentieth century, GEORGE STIMPSON and EZRA POUND…”
HERE THEN, according to Mullins, are THOSE FOR WHOM GREENSPAN, BERNANKE AND FISHER-YELLEN WORK:
“The shareholders of these banks which own the stock of the Federal Reserve Bank of New York (which sets the interest rates and directs open market operations, thus controlling the daily supply and price of money whose stockholders are the real directors of the entire system) are the people who have controlled our political and economic destinies since 1914.
“They are the Rothschilds, of Europe, Lazard Freres (Eugene Meyer), Kuhn Loeb Company, Warburg Company, Lehman Brothers, GoldmanSachs, the Rockefeller family, and the J.P. Morgan interests (Rothschild).” -- Eustace Mullins, The Secrets of the Federal Reserve, p. 34. Copyright 1983
The whole debacle started when the first Rothschild was born.
try "$18 trillion in federal debt and counting"
1/4% hike = $65B in extra interest payments on the debt, which kick in real soon because these scumbags went heavy on short-term issuance.
Exactly, and this is the elephant in the room that no one seems to want to ever acknowledge. At some point and at some level of rate raising, the servicing of the debt becomes simply too big of portion of the incoming tax revenue stream. And suddenly, it is painfully obvious that the emperor is without clothes.
You are mistaken if you think they care even one tiny bit about how much interest they pay on the national debt. They will just borrow more money to pay the interest. Most of the interest is refunded to the gov by the Fed anyway. You need to learn how the system actually works.
How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle?
Better answer: it's a criminal enterprise.
Me too. If the Fed really wanted inflation then they would hand every single taxpayer a check for a million dollars.
They are a criminal organization hiding in plain sight.
Can't you already see how this game plays out?
1. FED does a small 0.25 or 0.50 rate hike and the dollar strenghtens. Initially we'll probably get a market rally because the algo's and stealth QE are in buying frenzy mode. Within a couple of months reality starts to sink in about the debt payments and strong dollar which is killin' exports and jobs.
2. This allows the FED to unleash a new form of QE to pump' up their banks and stawk' market again.
3. This then allows other countries around the world to start passing the QE baton back-and-forth again for the next couple of years. First U.S. does QE, then Euro does QE, then China does QE, then India does QE, etc., etc. Expect the same results as before. Wall Streek makes a killin' while everyone else slowly descends into the abyss. More phony unemployment numbers, GDP numbers, inflation numbers. More price suppression of safe haven assets like gold.
4. Rinse and Repeat!!
This is what has been going on for 40+ years. The middle and the real supply lines cannot hold much longer.
This is why I expect an uncontrolled, with fits and starts and stops, changeover to a "black market" economy. It's already happening in it's initial stages. There's a growing culture of men in America who refuse to work for anything other than cash, crypto, or PMs. They find a way to live on that, and they essentially live outside the system. I expect this culture to grow with every batch of QE they put out, and eventually there'll be an economic reckoning on which market matters. You know who will win, the market with the basis in reality. The question is how far down the line we have to go for that situation to tip over.
While what you say holds truth, I think you may fail to give the masses the full credit of their stupidity. Rather, they will fail to see the system collapsing around them until it is far too late to save any vestage of their way of life. When they finally awake from their slumber, they will have lost far more than can be absorbed, and will be relegated to the worst characteristics of the humane experience. Barter will be left to those prudent enough to have something to barter.
History is chock full of populations starving to death when a fairly simple lifestyle change could have saved them. Normalcy bias is a bitch.
I used to be this optimistic about popular adaptation. I grew out of it.
What is the end game in all this QE frenzy? How will the world look in 10 years, 20 years, if they continue the extend and pretend model?
Don't forget to factor in the upcoming WW3
"What is the end game in all this QE frenzy? "
Aside from all the hand-wringing over 1/4 of 1% more cost to the most-favored friends of the Fed, just think of the demonstration of American power; something that Obama doesn't seem to comprehend.
A quick phone call to Yellen encouraging her to hike. Result- more and more US dollars head home, getting the inflation they claim they want. More and more liquidity drained from countries that despise the U.S.
What is good for the country may not be what is good for Wall Street, but a hanging in the morning tends to clarify ones priorities; and that day is coming.
Its not 'our' financial system
Its the banksters theft system.
And it does exactly what they designed it to do.
True dat. Wait. I don't know about that. The Fed owns 3.5 trillion in Treasuries. Right now that looks great on the balance sheeet- the price of those bonds has consistently gone up with ZIRP. But with a rate increase, the bond price is going to take a hit. Bond holders will take it in the shorts. To say the Fed is holding is the understatement of the century.
The Fed lends money into the economy. Obviously on the face of it, lending is how the Fed makes money, but they don't make any at ZIRP, unless you count the fact that they simply create the money out of thin air.
If the Fed raises interest rates and the economy siezes up, creating a default chain reaction, then the Fed loses two ways, bond price and no money back.
Honestly, I think the Fed is not run by bankers per se, but rather by economic bureaucrats who wanted to try an experiment. In other words, the Fed was not acting, as a banker should, on its own interests, (bottom line). That experiment helped the banks in the short run, but it has painted them into a corner.
There are two ways out- one the Fed has helped kill off the banks, which os great irony, or two, they are thinking so many moves ahead, I can't keep up, and when we see how they all make money off of this, we will be so shocked all we can do is laugh about the sheer genius of the criminal mind.
"If the Fed raises interest rates and the economy siezes up, creating a default chain reaction, then the Fed loses two ways, bond price and no money back."
Wrong.....
By charter, The Private Fed Corp cannot lose money on their "inverstments"... They are backstopped by the USSA Treasury (taxpayers)..
Owens-Glass Act of 1913 (aka "The Federal Reserve Act")
6% if I am not mistaken. Non Taxable.
http://www.federalreserve.gov/aboutthefed/section7.htm
we got here because "here" is the inevitable conclusion of a debt based, private central bank controlled, monetary system and fractional reserve banking. ill leave it to TJ to explain further:
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
"Our" financial system?
"Their" financial system.....fixed it for ya...........
articles like this overlook the larger need for a complete overhaul. the writer claims the problem started a dozen years ago, as if this manipulated money system was ever sound. I would say it started with the creation of the federal reserve 100 years ago and got increasingly wild from 1971 onward, when we lost our anchor to reality.
the writer pines for the good old days when phony money did its job with fewer perturbances, never admitting or realizing the fiat experiment is going exactly where it was made to go: into the pockets of the very few who created it.
You're not going far enough either. Our whole civilizational model is irreparably flawed.
Any interest rate over 0% is too high when you're in a liquidity trap.
Except we aren't in a liquidity trap, we are insolvent.
Good Luck
How did our financial system weaken to the point . . .
Banksters.
want to know why they call it USURY...............
cause FUCK YOU was already taken
Peole who loan money should never expect to profit from such loans.
So why are you borrowing? It is how bankers get their power.
banks are borrowers, not lenders..........
When you point a gun at someones head first, it is STEALING...
not borrowing.
I am done "loaning" these dirty mother fuckers ANYTHING.
MOLON LABE you parasites !!!!!!!
Jump, you fuckers!
"Because, this is end...my only friend, the end..."
"corporations seem to care more about share prices -- upon which so much executive compensation is based -- than about prospects for long-term growth."
Corporations aren't stupid. They know there is no growth coming any time soon. Demographics and wage-arbitrage on a global scale have seen to that.
let's be more specific. "corporations" as entities, not people as they are unfortunately legally defined in our backwards legal system and culture, cannot be stupid, since they are only organizations of people.
the people running corporations, in this case wall street financiers and CEOs, are also not stupid, but they act in their own self interst instead of the interest of the corporation, which again is just a collection of people.
CEOs ship as many jobs overseas as possible to reduce costs while borrowing artifically cheap funny money from wall street to fund share buybacks which increase PE ratios and lead to higher bonuses and compensation packages. wall street borrows at no interest from central banks and pumps this money into the shares of the aforementioned corporations, making windfall profits in the process.
the people who make up the overwhleming majority of organizations, the workers, are not in control and are typically the ones who are screwed in the process.
so youre right that the people running corporations, CEOs and wall street, know there is no growth coming soon, and sacrifice the long term health of their companies for short term profit. the workers are probably mostly unaware, or stupid, as to what is happening, but get fucked all the same.
The process started a dozen years ago...
Also a factor was financial de-regulation, repeal of Glass-Steagal by Clinton, allowing large US banks to get even larger and also lever up to 30X.
Canada maintained financial regulatory oversight (despite political pressure to join the US dereg party) and the worst case for Canadian banks was that BMO almost (almost) had to cut their dividend.
The process started a dozen years ago...
The process actually started 102 years ago when on December 23, 1913, the Federal reserve Act created the US central banking system now known as the fed.
Actually what is needed is a strong dose of unfettered Free Markets. Not democracy. Not regulations. Not manipulation. Not even elections, just fuhgeddaboutit, We don't need no stinkin' sociopathic monopolistic corrupt dictators. Trade your Fiats for real money. Get out of the bank, they own 50% of the financial markets. Find alternative forms of curency. Just Do It!
Suwee, suwee, suweee, moar QE!
Dumb-asses!
The truth of the matter is that the global monetary system no longer requires any real collateral for money creation. The earth has been in fact practicing a "let the majority eat cake" monetary experiment. A relative few have been able to print money for themselves and enslave everyone else. Let me be clear, fuck em, time for a refund or serious retribution.
i have to disagree slightly with this. the global system still requires real (i define this as "accepted") collateral and nothing proves this better than the quadrillion dollar derivatives market. now i would guess that you and i agree that CDS etc are not collateral in the long term, but for the time being the financial world treats them as such. the collateral leading up to 08 was housing and government debt, but in 08 when both took a hit while trillions of dollars of new credit/FRNs came into existence, we saw CDS rise exponentially to become the new collateral for the newly printed FRNs. this was one of the ways that serious inflation was offset. as long as there is no shock to the derivatives market, they will continue to act as real collateral. but one day, hopefully very soon, they will go the way of MBS and all the collateral these cocksucking banksters thought they had will disappear in the blink of an eye.
Correct, and that day will be when the middle and the supply line break in earnest. Look around.
Alternatively, why can't the global banking cartels simply get together and agree to forgive all their CDS/derivative debt instruments?
Their debts are gone, yours are not. They have done this before, many times.
it is never enough the maggots always want MOAR BITCHEZ
Those greedy little shits. Now they want "more bitchez", after all the "plain moar" we've given them for years. Like demanding Bearnaise sauce with their rack of lamb. I mean the shit's free and now they want bitchez along with it. I give up. Might as well let John Kerry negotiate a disarmament treaty with the forces of rag headed turban evil for all that's worth.
I could use a couple of MOAR BITCHEZ. Part time though. Maybe on a trial basis. If that doesn't work out? NEXT!
Take my bitchez, PLEASE!
(Rodney Dangerfield voice)
"Another area for concern is the burgeoning private market for investments, where companies are finding it relatively easy to raise capital."
Who the fuck would want to jump through the insane regulatory hoops PLUS a Wall St. ass-raping on fees to go public when much simpler, less costly, private funding is slobbering all over you and begging you to take their money?
There are two things which one can not compete with, insanity, and free.
O/T
I hate to say this, but this site is a major pain in the ass on mobile.
I have Gohstery and ABP on my desktop, and it's not bad at all. But on mobile I get redirects, pop-ups, and I even got a "virus scan". It's ridiculous. I'm now embarrassed to link to it because I know not everyone uses ad blockers and anti tracking ad ons.
Clean this shit up, FFS, Tyler.
I tried to do ZH on my mobile phone once. Once.
You fellers are going to go Magoo right quick. Mobile shit/iCrapple hand helds are lasix/eye doctors wet dreams.
Wait for in front displays/projections...coming soon.
'in front displays/projections.'
We need tickers!
5th that. The mobile site has gone pear shaped. Totally fucked.
TYLERS, YOU CAN'T SELL ADS IF THEY PREVENT PEOPLE FROM VISITING THE SITE!
I've got complaints from people I've shared articles with. First and foremost is that dumb fucking pop up, then the ads on the right side a close second.
I tried to do ZH on my mobile phone once. Once.
Do what I do. Punch out at work, go home, pop a top, turn ZH volume up to max and REPLY TO COMMENTS! Remember not to shout too loud because ... neighbors.
All those stock buybacks and special dividends were financed with debt. There will be no way to pay down this debt since capex to fund future growth has been absent.
All the seed corn has been popped for the big stock option party, and the sound of the CEO jets revving up will wake up the hung over partiers sleeping on the floor.
Ha!
Yeah, raise rates to not make bubbles. Uh, duh! Too f'ing late!
None of us here have the gray matter necessary to tackle this most confabulated of Harvard Soviet puzzles.
Check inside your brain, I think you'll find plenty of it.
You may be in need of a sarcasm detection module....
Nope, I know what I need next time, a silencer machine gun and 3 blind mice to be rid of.
None of us here have the gray matter necessary to tackle this most confabulated of Harvard Soviet puzzles.
Hayek.
An assumption, but none-the-less most likely an accurate one.
So what must be done is what is morally and ethically right (which is a hard thing to define, but you know when you have done it) regardless of the consequences. I do not believe that "we" are likely to be able to solve a corruption problem using corrupt methods.
However, I would not make the assumption that elitist technocrats and ivory tower egos are more capable of solving the issues of the day with their methods than the average man on the street with his.
The metrics they say they use to guage yea or nay or interest rate decisions is bunk. They look at the markets period. They are scared shitless to do anything to spook Wall St. News flash...markets are allowed to go down.
Taylor rule (FF based on deviation of CPI and Unemployment from target levels) does say Fed should raise rates, but Taylor rule is distorted by Unemployment which is discreditied by labor force drop-outs.
Plug U6 Unemployment and 0% CPI into Taylor and what do you get?
Fed is fucked.
Instead of throwing Trillions at banks Fed should have given money to MIT and built a time machine. Go back to 1999 and assasinate Gramm-Leach-Bliley...and Greenspan.
It's a quarter of a fucking.....POINT.....all this hoopla for what?
Jeeeeeeesus TITS!
***MY prognostication? The FED raises, then dovish the fuck out of (for the foreseeable time horseshit statement), the markets see saw wildly.......as everyone diasects the fuck out of every fucking word.....ad nauseum
and the algos ass rape the markets going down and back up. market direction means little to the algos, only volotility matters.
Accounting magic and cheerleaders, yeah, that will fix things.
EMs are so fucked. Do they not know they are only the fuel for someone else's machine?
I want to see who gets the leaked information ahead of the FOMC. Gonna watch the ol' ticker and see what jumps at 1:52 PM. Guessing it will be....banksters!
Anyone notice how banks own our local court systems?
Just MHO, but it was probably leaked 15 minutes before the close of markets in China.
"Wait, wait....not yet, now fire!"
ya, what they said.
https://youtu.be/QPKKQnijnsM
"How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle? " This may give a clue.
https://youtu.be/QPKKQnijnsM
Sure END THE FED, I've been hearing this song for years following Ron Paul. WHAT'S IT GOING TO TAKE??? FIFTY POUNDS OF FLESH FROM EVERY MAN, WOMAN AND CHILD!!!
They'll crash the currency so everyone starves and starts eating each other before they replace the FED with something even worse.
Time to hang the fuckers IMO.
Do you realize Ron Paul was in office longer than most of us were alive? And he never sponsored a bill that was passed?
How could that happen unless he’s in on it!!!
O/T – if you watched the debate last night you noticed at the end Trump and Bush were high-fiving like friends.
"unless he’s in on it"
Unbelievable! Stunningly shallow non-thought.
No, just reality. Paul was always controlled opposition.
I'm sure you've seen many make the ridiculous claim that WE LIVE IN THE MATRIX.
I had that claim in mind when I chose my username: Arthur Schopenhauer.
Arthur S said:
All truth passes through three stages.
Well, I don't think we all actually have tubes and shit stuck in our heads... but I'm inclined to think we kind of do live in a matrix, in terms of the Federal Reserve Bank and how it dictates the outcome of our lives... every last one of us.
"10% correction..." ?? IT'S FKING 6% off all time high w/ 3 quarters of double-digit earnings collapse !
Human pride and human greed is endless, and is the cause of consistent building and destruction of civilizations.
Get all those fucking Jews out of the Fed!
They know how you feel about them and this time they are better armed.
Even some journalists are waking up to how broken the system is? Wow, only took the better part of a decade of ZIRP.
Yellen is today's Paul Volcker. But instead of raising rates to fight inflation she is raising rates to begin reversing a monetary policy that has led to a deflationary dead-end.
Discuss.
Volcker is a Lutheran.
Don't even go there with that "A non-Lutheran considers what is in society's best interest horseshit"
I use Dolphin browser on my Mobile phone for ZH.
Seems to work ok.
This bloviating CNBS moron 'Rick Santelli' today said he doesn't like Verizon. WTF... Two weeks ago during the erratic drop in the Dow he said he liked Verizon....
Why would Verizon CEO come out and say 2016 estimates are expected to be flat./ Hmmm.......
A rate increase will be a signal by the Fed that it is putting the car in reverse.
Do you realize Ron Paul was in office longer than most of us were alive? And he never sponsored a bill that was passed?
So all the bills he sponsored must have been anti-oligarch anti Wall street, thus is why they were not passed.
Leverage.
The Federal Reserve: Giving psychopaths all the leverage they could possibly desire for over 100 years.
Useless article, dream on. The people who manipulate will continue until their last breath, whatever it takes.
When rates get very small, rises become very big in percentage terms.
A 0.25% rise, now means you will be paying 100% more interest.
That is significant.
Just take a look at Detroit.There's your answer.A bunch of moron politicians in Washngton sold out America to Communist China in order to get funding for their war campaigns that all turned into disasters.McCain,George Bushs,Clintons,etc.should all be thrown in jail for life.These are all ow-lifescum and Americana want to re-elect the same scum?
After reading many of the comments it appears that too much collateral damage would result in a small interest rate change...therefore Janet..it is time to stay put...
Poor Janet. What to do. Continue with ZIRP and admit you're a failure or raise the interest rate .25% and watch the economy crash, an even bigger failure.
How about just ending the Fed altogether? Let's be honest, they won't go willingly but if we are ever going to live in a free world with real opportunity for all and equal justice within the law, then we have to eliminate the fiat paper ability to control every aspect of our lives.
What a sad, shitty world we live in where educated people wait with baited breath for "the decision" like it was some TV episode finale or where LeBron James is going to play basketball. Our current existence is a joke until we take back our own lives, our own government and our economy. Until then, we wait for Puxatawny Janet to emerge to look for her soulless shadow.
Weill, Rubin, Summers repealed Glass Steagal in 1999. It only took 8 years to collapse the US monetray system.
How much money have these three made from 1999 until present day?
Why aren't these people in jail?
It's Time To "End The Era Of The Fed " & Get Back To Basics- Fixed it for ya.
"My greatest flaw. I surround myself with idiots."
- Victor von Doom
It's actually fairly simple and something Fisher and Friedman both predicted long ago -- the success of the Volcker/Greenspan/Bernanke inflation targeting regime led investors to adopt low inflation expectations, resulting in lower nominal rates.
Like the BOJ, the Fed has not adapted well. Most CBs still seem to think a return to "normal interest rates" is both desirable and achievable through, of all things, tightening.
Based on recent data from the major monetary areas, there seems to be a range of inflation below 2% where debt-deflation effects or other phenomenae result in lower growth/employment with large deltas from small movements because the inflection points in policy are so important in this range. The recent correlation between stock prices and monetary signals is historically unusual -- right now markets see growth in looser money.
Eventually CBs will figure all this out and adopt something like NGDPLT, but given that we're still arguing over what caused TGD 80 years later it may take a while.
Finally, if you think the Fed is inflating the stock market, look at The Great Inflation and returns from the days when people wore Whip Inflation Now buttons -- the Fed can only inflate markets if markets see growth from additional inflation.
They are admitting that getting back to basics can't happen.
"So let's end the era of the "Greenspan put" and Bernanke's quantitative easing, and return to basics. The Fed should raise rates 0.25 percent this September and 0.50 percent thereafter."
I think all this focus on interest rates misses the much larger issue. There is no functioning formal economy anymore. The elites have stolen all the means of production and are in the process of stealing everything of value from anyone who works. Worse, the elites stand poised to pillage anyone who wants to work hard and be successful in the formal economy. If you want to start a business, there is a gauntlet to run that ranges from punitive taxes to Obamacare to poisonous regulations. Contributors to the system are robbed, beaten and driven out. All that are left are parasites, the bankers and CEOs and the courtesan class of yes-men and belly scratchers.
Anyone who hopes to survive the next decade is fleeing the formal economy and going native. They are returning to the land and small, local economies where a handshake seals the deal and where reputation counts for everything. Without a motivated producer class to exploit, the formal economy is dead. That's why interest rates don't matter. The system is collapsing and no amount of policy tinkering will ever fix it. Word has gotten out that working in the formal economy is for chumps and suckers and you can't fix that with interest rates.
If you really want to see what 500 years of chronic bad economic policy produces despite a high level of education, go to southern Italy. They constantly labor against a regime that sucks money out of their local economy to service the public debt (which is income to the governing class). It results in underinvestment, malinvestment. There is a constant brain drain as the ambitious ones leave for Canada, France, the US, Brazil, even though a steady birthrate should be the engine of prosperity. What I am saying is....other countries have arrived at this rodeo before us, and without a real effort ot change it, this b.s. can persist a very long time.
if levitating the stock market is all they have achieved why would they want to risk taking that away?
No comment. Ease or no ease is the preverbal question.
PUBLIC IMAGE LIMITED - EASE - YouTube
No problemo. Get used to the new paradigm, things will never be the same. Some new winners and losers but end result will be more progress, more building, more jobs. Along with three cars, five computers and eight big screens for every household. Isn't technology fun?
Siggghhh...
Fuck this. The fed is not the problem. The fed is a symptom. Our civilization is designed from the ground up to concentrate wealth and by extension power. That's what it does, and really all it can do. The fed is just a tool. Take it away and they'll just use another tool, and we'll all still live in a planet wide forced labor camp.
Same deal when Ug and Thug, the cavemen, got a little power. Always has been, always will be the same. Much ado about nothing.
Remember the good ol days when bernanke's even thinking about a possibilty of thinking about returning to normality. The bankers would throw a hissy fit a week before and dump stocks just to get his attention. Same thing happened last week.
The process started a dozen years ago, when Alan Greenspan -- then chairman of the Fed -- decided to lower rates to 1 percent after the country had emerged from the mild recession that followed the popping of the tech bubble. Then, when the Fed began to tighten policy, it did so with agonizing slowness -- raising rates just a quarter of a percent at a time, so as not to upset the financial markets.
This set the table for the subprime housing debt mess in a way that neither Greenspan nor his successor, Ben Bernanke, could foresee. Everyone assumed real estate was too diverse an asset class to ever be in a bubble. Despite credible warnings about the potential problems starting in 2005, the Fed and Treasury were still blindsided in 2008 by the enormous losses at Bear Stearns, Lehman and AIG. Suddenly, the emergency 0 percent overnight lending rate was required and, almost seven years later, it's still deemed necessary. Meanwhile, three rounds of quantitative easing have added roughly $3.5 trillion in purchases to the Fed's balance sheet."
Yes...but...
ALL of these are the warping effects of TPTB's efforts to COPE with the ACTUAL problem...because...they can't fix it.
It seems hard to fathom that, a Bernanke or a Greenspan, with their mountains of academic training, did not see this. I believe they did.
They just didn't know what to do about it.
After all, earlier on in the long bonsai charge into mindless globalism (vis a vis shortsighted western corporate outsourcing), monetary manipulation DID seem effective. I mean, made it easy to buy a shack, for example, (regardless of the dangerous financial engineering necessary given the lousy condition of a seriously-injured middle class), and folks would at least FEEL good about themselves...for a little while...even as their financial lives on paper deteriorated with ordinary inflation and income growth decline. In fact, if you could entice great hordes into the same pseudo-prosperity, hell, you could inflate a huge racket into mimicking a real economy...
...until it crashes...again, and again...because it has no legs...
Since you never deal with the core problem, new crashes continue to exacerbate the original mess: the fatal blow that 40+ years of dimwitted western corporate outsourcing (REGARDLESS of the short-term logic employed) dealt the western middle class means of legitimate wealth creation.
It would be horrendous enough if the corporate types saw the depth of their lunacy, and at least, ceased and desisted. But, as recently as a couple days ago...HP's Whitman STILL hacks at American labor, and in coded language, tells us she has to send jobs abroad to save money...
They do NOT understand that such behavior in the past necessitates today's action, and that if they continue much more along this path, they will ultimately cut their own throats. They will NOT see that EVEN IF HP FAILS, it MUST NOT continue these practices, as the damage it (and so many others) does hurts the COUNTRY.
These cretins REFUSE to see that the old corporate model of company and shareholders (first and foremost) MUST now change to consider a broader picture of interests at stake...EVEN IF that means shareholders and executives must take comparative hits TOO. What these folks MUST BE MADE to understand is this: if HP (or any other corporation) doesn't directly and positively seek to grow WORKER'S wealth, thereby directly benefitting the home country, they are a LIABILITY to those people...and NOT an ASSET...regardless of profitability on paper, or to a microcosm of shareholders.
THAT'S what has to change to even begin to tackle our problem, and increasingly, it seems we'll have to go Mad Max first to get there.
Despite all of this...we find ourselves sweating the outcome of a fruitless (because that's all it HAS been) activity to try to "normalize" something that was never part of the problem in the first place...
...and we expect to recover?
m
One thought. We all know the UN plans to declare all humans permanent slaves in the next week or three, and declare something like "we must kill off 90% of the world population for their own good and the good of the planet" (banksters).
So one reason to raise rates now might be to create so much media chaos that nobody will be paying any attention to UN announcements for the next few weeks.
OTOH, all sorts of fictitious statistics have been released by all sorts of bogus agencies the past few days, virtually all of which are jiggered to scream "don't raise rates"!!!
Very clever critters, those predators-that-be.
"If the Taylor Rule -- a practical recommendation on setting nominal interest rates -- were taken more seriously, the Fed would have lifted overnight rates back up to the 2.5 percent range years ago. This would generate at least a trillion dollars annually, if not more, for fixed-income investors -- and a possible boost of 6 percent to GDP. The average American wouldn't likely suffer, because credit-card interest rates still average 13 percent and, given a likely flattening of the yield curve, mortgage rates would barely increase. "
If the Fed had raised overnight rates into that range, inflation would have headed to -5% and unemployment to 25%, and RGDP would have fallen by 10%, while many investors would lose everything to a massive wave of bankruptcies.
The Great Depression wasn't a bad time for people that 1) still had jobs or 2) had invested very conservatively.
Oh, and Pelosi would be speaker again, with FDR-sized majorities driving the country to new heights of spending growth. Socialism seems more plausible when CBs really fuck up.
Listen to the markets.
As John Hussman noted, if you plot the "Taylor rule" recommendations, it looks like someone had sneezed on a piece of paper. This guy is just another armchair planner who thinks he has a "better plan", but there is no "better plan". The only way to go is to abolish central planning of money and credit and leave interest rates 100% to the free market.
They missed the last crisis and they'll miss this one too. Yellen's remarks can be consolidated to one sentence: the decision on future policy change
is contingent on almost everything.
Meanwhile the housing bubble continues to inflate. 1 BR "luxury" condo in Nashville "priced to sell" at 1.2MM