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The Truth Arrives: JPM Slams ZIRP - "It Has Been Impeding Rather Than Promoting Economic Recovery"
Earlier today Bill Gross joined the ever louder chorus of voices saying that "unconventional" monetary policy in its current iteration is not working to boost the economy (even if it is quite effective at boosting asset price inflation), however a far more prominent critic of the Fed's status quo emerged last week when JPM's chief global strategist David Kelly released a paper titled "Avoiding the Stagnation Equilibrium" in which he flat out rejects the conventional wisdom canon and says that "zero interest rate policy actually reduces demand in the economy, prompting the Federal Reserve to prescribe even further doses of a medicine that, for a long time, has been impeding rather than promoting economic recovery."
Of course, there were no such calls by JPM in 2008 and 2009 when it was QE - a logical continuation of ZIRP whose effects were insufficient to boost asset prices and the stock of JPM - that saved not only his employer but the entire financial industry together with taxpayer-backed loans and guarantees that backstopped the western way of life as we know it.
It is also odd how such calls for a rate hikes emerge only after there has been a 200-some point rally in the S&P500, following a drop resulting precisely due to concerns of a tighter Fed.
We doubt, however, that his recent refutation of all that is Neo-Keynesian will be sufficient to brand him a tin-foil hatter: he merely admits what others such as this website have said all along: the epic build up in debt may have helped holders of assets but has dramatically hurt the overall economy and the middle class.
There is, as usual, a footnote: while traditionally rising rates would be seen as negative for stocks as the swoon that started with the release of the Fed's August minutes showed, and culminated with the ETF flash crash of Monday August 24, Kelly thinks this time rising rates will be accepted by the market as a sign things are improving.
Here, JPM resorts to the traditional formulation: what does the Fed know about the economy (that nobody else supposedly does), if it is willing to get off the emergency lower bound? To wit:
Nothing is more important to the health of a free-enterprise economy than confidence. Confident consumers and businesses, at the margin, spend a little more, hire a little more and invest a little more. If this causes demand to exceed supply in the economy even by a small amount, it helps the economy grow. Because of this, one of the biggest drawbacks of the Fed’s aggressively easy monetary policy in recent years has been its negative impact on sentiment. On each occasion when the Fed announced a new quantitative easing strategy, hesitated to taper bond purchases or postponed a movement from zero interest rates, it undermined confidence. The typical question has been: What bad thing does the Fed know that we don’t? Conversely, when the Fed raises rates from very low levels, it generally acts to boost confidence.
The implication being that a rate hike will imply a "good" thing which only the Fed knows which the rest don't. Like subprime being contained for example.
Whether or not the Fed will listen remains a different question, although judging by the creep higher in December fed fund futures, the probability of a rate hike in just over 1 month is increasingly entertained.
Here, for those interested, are the key points from Kelly's argument:
At their September meeting, the Federal Reserve decided, for the 54th consecutive time, to leave short-term interest rates unchanged at a near-zero level. While only one voting member of the Federal Open Market Committee (FOMC) dissented, the Fed’s action, or rather inaction, was hotly debated.
Those advocating an immediate hike argued that the economy had progressed far beyond the emergency conditions that had led to the imposition of a zero interest rate policy in the first place and that the Fed was already dangerously “behind the curve.” Those lobbying for further delay pointed to a lack of wage inflation and signs of weakness in the global economy.
However, frustratingly, we believe this argument, like all monetary policy debates in recent years, has been waged on a false premise, namely that increasing short-term interest rates, even from these extraordinarily low levels, would hurt aggregate demand. We believe that the opposite is true. The real-world relationship between interest rates and aggregate demand is non-linear and an examination of the transmission mechanisms suggest that the first few rate hikes, far from depressing aggregate demand, would actually boost it.
The true relationship may, in fact, be as portrayed in Exhibit 1. As we outline in the pages that follow, raising short-term interest rates from very low levels could actually increase aggregate demand as positive income, wealth, expectations and confidence effects outweigh relatively innocuous negative price effects and ambiguous exchange rate effects. However, as interest rates increase further, the price effects of rate increases become more damaging while wealth, expectations and confidence effects eventually turn negative, causing rate increases to drag on economic demand. In other words, monetary tightening from super-easy levels can actually accelerate the economy beyond its potential growth rate before slowing it, ideally to a soft landing at a higher level of output and interest rates.
Raising short-term rates from near zero should boost economic demand,
although raising rates from higher levels could reduce it
There is, of course, more to the story. All of these effects have changed over the decades so that this argument might not have been as strong had a zero interest rate policy been employed, say, in the 1960s. In addition, the impact of interest rates on the economy is asymmetric — a cut in interest rates from a normal level that had been sustained for some time might well boost demand even if an increase to that level didn’t dampen it. Finally, on the supply side, there is likely a significant long-term cost in lost economic efficiency from holding the price of money at an artificially low level. All of these issues are worth further research. However, for the Federal Reserve, the basic point is the most important one. The reason it should have raised rates in September and the reason, failing that, that it should do so in October isn’t that the economy can handle the pain but rather that it could do with the help.
A rate hike, JPM claims, would work favorably through the following 6 mechanisms:
• The income effect: Higher interest rates increase the interest income of savers while increasing the interest expenses of borrowers. In the household sector, in particular, short-term, interest-bearing assets are far larger than variable rate interest-bearing liabilities so that increasing short-term interest rates should boost income and thus aggregate demand.
• The price effect: Higher interest rates make it more rewarding to save and more expensive to borrow. In theory, raising interest rates will encourage households to save rather than consume and cause some businesses to forgo investment projects because they are unlikely to generate the cash flow to justify the higher interest cost. Higher rates could also reduce the number of families that qualify for home mortgages, thus slowing the housing market. All of these effects should reduce demand in the economy.
• The wealth effect: The value of an asset is generally determined by the discounted value of future cash flows that that asset will produce. Higher interest rates increase the discount rate in these calculations and thus could reduce wealth and thereby consumption through a negative wealth effect.
• The exchange rate effect: Short-term capital flows are important in determining exchange rates. In theory, currency traders like to park their money in currencies with higher overnight interest rates. In this way, higher interest rates could increase the demand for dollars, thereby boosting the exchange rate and, by doing so, suppress exports and slow the economy.
• The expectations effect: When a central bank begins to raise rates and signals an intention to gradually increase them further, households and businesses may try to borrow ahead of further rate hikes, boosting both consumption and investment.
Finally, the conclusion, which warns about all those ZIRPy things we have been cautioning about since 2009. Better late than never:
There are, of course, many other problems with a zero interest rate policy. It may, over time, lead to growth in both debt and asset prices that exacerbate inequality in the short run and can end badly when rates return to more normal levels. More fundamentally, interest rates play a crucial role in the allocation of resources in the economy. Artificially low interest rates lead to credit being assigned inappropriately, whether, for example, through the application of unreasonably tough lending standards on small business loans and or unreasonably easy ones on student loans.
However, the most urgent point is simply that, right now, the economy could do with a little more demand. We believe that the positive impacts of income, wealth, confidence and expectations effects are only slightly offset by negative price effects and thus the first few rate increases would actually boost demand.
It is immensely disheartening that, in 2015, this point is not only not generally accepted but has to be argued on each occasion. Federal Reserve officials ponder the effectiveness of monetary stimulus in helping the economy but never consider that, at near-zero interest rates, the question is not one of degree but rather of direction. Politicians either assail the Fed for too much stimulus or too little, but never contemplate whether the supposed stimulant is actually a sedative. Academic economists largely avoid the messy arithmetic of positives and negatives on this crucial issue in favor of more mathematically challenging inquiries into more obscure topics. Meanwhile, most media coverage, often aimed at the lowest common denominator of financial understanding, feels little compulsion to advance beyond the assumptions of Econ 101.
But the dismal recent history of monetary stimulus demands a more thoughtful analysis. Japan has wallowed for 20 years with zero interest rates without showing the slightest evidence of “stimulated” demand. The mild U.S. recessions of 1991 and 2000 were followed by anemic economic recoveries, even though the Federal Reserve in both cases lowered rather than raised interest rates even as the economy was healing. Perhaps most damning of all has been this miserably slow expansion — the slowest of all the economic recoveries since World War II. While some will argue that this is due to extensive damage to the financial system, it isn’t. American financial institutions have been very well capitalized for years. Rather, America’s recovery may well have been hobbled by repeated bouts of monetary “stimulus” that have starved households of interest income, undermined confidence and undercut any incentive to borrow ahead of higher rates.
We do not propose a complete rejection of traditional economic assumptions. Steadily, if the Federal Reserve raised rates to normal levels and beyond, the effects of rate hikes on wealth, confidence and expectations would turn from tailwinds to headwinds and the price effects of higher rates would become more biting. Beyond a certain level, rising rates would slow demand and the economy could, with some luck, achieve a “growth” equilibrium, where the economy grows at its potential pace, facilitated by a normal level of interest rates.
However, today after almost seven full years of a zero interest rate policy, this seems like wishful thinking. Sadly, it is probably more likely that we get stuck in a “stagnation equilibrium” where a zero interest rate policy actually reduces demand in the economy, prompting the Federal Reserve to prescribe even further doses of a medicine that, for a long time, has been impeding rather than promoting economic recovery.
It is unlikely that policy-makers will recognize this but it still doesn’t mean that the situation is hopeless. In the fall of 2015, while demand is still only growing slowly in the U.S. economy, very low labor force and productivity growth are producing both further labor market tightening and some mild upward pressure on core inflation. If this continues, the Fed may feel an obligation to follow its latest guidance to raise interest rates to slow the economy. We don’t believe this would actually slow the economy, but in order for interest rates to regain their normal role as an efficient allocator of capital and a governor of aggregate demand, interest rates will have to rise through a region where they could actually help the economy grow faster.
Besides, as the economy weathers the impact of slow global growth, a high dollar and an inventory cycle, it will likely grow a little more slowly over the next few quarters anyway.
"If" - and if it doesn't, well the Fed will just do what it always does when it is out of other options, and cut right back to zero (or below) and boost QE.
Full presentation below (pdf)
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Gee, you don't fucking say?
I love it when parasites get so hungry they turn on their fellow parasites.
They seem to still be living rather high on the fucking hog from where I sit. Take their fucking heads, then things might get back to basics/free market -ish principles, for a while anyway...
same as it ever was.
Slamming ZIRP is becoming more like a financial "fashion statement" than serious policy discussion. You write an article about it so you're one of the cool kids but you don't actually do it. I don't believe for an instant JPM actually wants to end ZIRP and slit their own throat.
JPM and Goldman could in fact hold out much longer than most banks around the world. You see, then they could buy everything when the "fire sale" starts...
No doubt the a global, one world, domination is at play here. Criminals/physcopaths do what they do.
same as it ever was...
Nothing to see here, just more kabuki.
Now move along please....
JPM is faking an injury for the team to quieten the crowd.
Another trailer for the "Dec Rate Hike"
In script to drive the point deep into the subconscious, the article proclaims, "Raising rates from a low level should actually stimulate demand..." Bullshit.
This is a head fake by JPM. Raising the interest rates by .25% ain't gonna do squat for increasing demand. It will however throw the market into a tizzy.
The sole reason this bullshit story is being published now, is to get everyone ready for the day JPM comes out and says, "See? We tried raising interest rates, and no increase in demand occurred."
The country has finally figured out that they're getting screwed by the ZIRP and by the banks that benefit from their cozy relationship with the FED. Now JPM is trying to condition the public into believing that ZIRP is still the best policy, based on the failure of a .25% interest rate increase to stimulate demand. What horseshit.
Wall Street is not the economy. JPM would like everyone to think Wall Street is the economy. But trust me, JPM doesn't depend on the stocks it owns to pay the bills.
Wall Street is just a crooked gambling casino, a casino where the big players (including JPM) have their vampire fangs into every part of our economy. When the FED raises rates a quarter of a percent, trust me, JPM is going to be tipped in advance, just liker Goldman. They'll both make a bundle.
To rebuild the economy, everyone needs to understand, raising rates a quarter percentile is just the start of a long road to recovery that is going to take patience and courage. Remember what Volker did? That's the only way get these ZIRP vampires off the neck of our economy.
ZIRP impeding?
Nope! JPM has earned on insider gambling and bonuses much more than under any other circumstances. And that's what economic recovery is all about.
Yep, similar to the "hawks" at the FED. Completely meaningless bullshit.
It's taking longer than I thought it would.
That's what she said.
Just to recap the public were encouraged to borrow, which created a debt bubble, which led to the 2008 crisis, which led to ZIRP and QE as the parasites organised the Govt. to fill the gap by spending on behalf of the public, which further inflated the debt bubble and now JPM wants rates to rise, which will with 100% certainty prick the debt bubble, which will destroy the remaining public wealth and hopefully the parasites as well...and we are expected to believe that our best and brightest are working for the parasites.
A day late and a dollar short, you greedy assholes.
Does this mean Jamie will now very publically commit suicide nail gun in hand in front of HQs?
How's his cancer doing? Any progress killing him off? No? What a shocker.
Jamie Dimon doesn't get cancer...cancer gets Jamie Dimon.
"Japan, young Skywalker. Remember your failure in Japan."
"The U.S. is not Japan. In fact Japan is not Japan." -P Krugman
"Totally wrong. Aliens will save us." -P. Krugman
Whatever. The fact is that bankers and financiers are now useless, overcompensated, middlemen stuck between the computer/printer (where money is created without any real capital) and the producer/consumer in the REAL economy.
It is in fact time to execute the middlemen!!!!
NOTHING changes otherwise...
Free enterprise eCONomy? Where in the fuck is there a fee enterprise eCONomy? You oligarchs have finacialized, regulated, and taxed the death out of the free enterprise eCONomy in order to save your sorry asses. The best thing that could happen for our economy is for institutions like the morgue to die and stay dead.
JPM will be for higher rates until it loses money then it will be for lower rates. When you cannot create wealth, jawboning is all you have.
Durden should sue these clowns for stealing all the stuff outlined in ZH over the past 6 years.
JUST DO IT , GRANMA !
The Laffer Curve rotates 90 degrees and becomes fed policy insight.
Breaking News on RT:
Crash victims' injuries show midair explosion likely caused A321 crash - investigatorhttps://www.rt.com/news/320655-a321-midair-explosion-version/
This is all bullshit, Fed is getting it's cronies to push the "Rate will go up soon" meme.
Even if they are actually advocating for ending ZIRP and raising rates, and even if the Fed does it, it is still all bullshit. No matter what they do, it is bullshit. That is the nature of running the biggest pyramid scheme in the history of mankind.
notice the tone has changed - all these banks are indicating that the first rate hike "will" happen in December.
LOW RATES WAS "FOR THE PEOPLE" TO HELP THEM.
HIGHER RATES ARE "FOR THE PEOPLE" TO HELP THEM.
OMG! WTF!
So can we assume JPM is now into instruments whose value is positively correlated with interest rates now? Maybe they've run out of sucker counterparties.
Ha ha ha... look who's complaining...
So typical. After these money changers have made a fortune living off the system that we know is corrupt as hell,
THEY SUDDENLY FUCKING GET RELIGION!!!
Dissention in the ranks? Not really but rather a shifting of blame from one branch of the banking system to another department. If JPM's derivative holdings are 50 trillion and leveraged even at a low 10:1 then any increase in rates, say 10bp would be multiplied by the leaverage or 100bp. What this would do to the derivative game might prove catastrophic. Rates not only will not be raised but cannot be raised unless collapse is the desired outcome.
Given that most sheeple don't know how to fucking spell "derivative", much less what it is, I believe that the banks of the world could in fact get together and cancel the derivative market entirely (especially when faced with the guillotine). They would be "doing us all a favor" by forgiving THEIR liabilities...
They have done this many times before (socialization of losses with NO consequences). Of course, you must still pay YOUR debt/liabilities....
In the US alone, you would be making a bet that is over $200 trillion on that.
Exactly. They will wrap it in patriotic sounding doublespeak legislation to ensure “Just Us” and their minions are not accountable and/or responsible for their actions.
Expect nothing less from the largest banana republic on the planet.
Zero Confidence.
"collapse is the desired outcome."
After rearragning the forward deck chairs on the Titanic for the 4th time with the stern of the ship underwater and rising waterline, the realization set in that the ship is sinking.
Market says rate hike is ON!
And GS and JPM wouldnt lie to us, would they? sarcasm here.
And GS and JPM wouldnt lie to us, would they? sarcasm here.
BLOOMBERG:
"GM Leads Fastest Car Sales Since 2000 in Sign of U.S. Strength"
Hoo boy.
Let me get this straight, JPM is finding fault with the FED.
So, JPM which is a share holder in the Federal Reserve Corporation(private), is criticizing the company that it part owns?
JPM, GS, Deutche bank, BOE, Rothchilds et al OWN the FED.
Nice.
Or, he has positioned himself to benefit from a rate increase.
Looks like they are preparing "investors" for a Dec rate hike...
because, it makes perfect sense to move when the market is at its thinnest. maybe they can keep every trader at their desk between xmas and new years day. high-fives all around.
So now that their access to unlimited amounts of zirp is secure and granma's nest egg is consumed, it's time to turn the screws on the USG. Great!
When will we elect some responsible people to audit and confiscate +16T in "assets" the fed has accumulated in the last 7 years and either repudiate it, apply a 100% tax on all fed owned property and / or otherwise liquidate the proceeds for the benefit of all us that have had to witness and live through this carnage?
Hope springs eternal.
"zero interest rate policy actually reduces demand in the economy, prompting the Federal Reserve to prescribe even further doses of a medicine that, for a long time, has been impeding rather than promoting economic recovery."
So the FED is killing us with financial Munchausen by proxy?
But, but... what about all those surveys about historically hih confidence levels? should we just brush them unde the carpet?
Where's my nail gun...
CYA exp(2)
The US-based banks who own the Federal Reserve Banks (there are also foreign owners) want the Fed to raise rates because they earn money loaning to other banks.... This business is currently earning them almost nothing.
In the meantime, the economy has become overburdened with debt to such extent that there is not enough real economy to even service the debt.
If you do not understand the construction of the fiat debt-based currency known as the "Dollar" or "Federal Reserve Note" then you probably don't understand just how serious the situation is.
The "Dollar" (and all other current national currencies) is a check written by the central bank, or as an accounting entry from a commercial lending bank. As a check it draws sits on the banks' liability sheet. What this check draws upon is debt held by the bank. In the case of the central bank, these currency units (Dollars here) are called 'base money' and they draw upon debt that the Central bank holds on its asset sheet. In the case of either type of bank, they will also book an entry for the total of the interest payments that the debt is due to pay them until maturity. So, at 4% over 30 years that would be $72K. It is a simple interest calculation.
In this system there can never be enough currency to pay off those debts. Any particular debt can be paid off, only if a new larger debt, equal to the previous debt plus accumulated interest, is taken by *someone*, *somewhere*.
It doesn't really matter where, except that if the debt stops growing at any point, for any reason, then there will not be enough currency to pay off existing debts. As each existing debt defaults (because it there is not enough currency to pay it) currency that is drawing upon it (remember, currency is a check written against a checking account that holds only a debt) will cease to exist...just like any checks you wrote against an account you closed would cease to be useable for trading.
So, in the past, when there was commodity backing for the currency, this phenomenon primarily affected commercial paper...meaning currency that existed due to commercial banking loans. When the bank makes a loan, it is not giving the loan recipient currency that the bank actually has. Instead it is using deposits as a reserve (10% reserve in the US) against which it can write loans. In this way a single bank can turn a $10 deposit, into a $90 loan (though they would be foolish to lever up so near the maximum...because any default would make them bankrupt). The depositor thinks he has $10 that he can access any time. And each of the $10 loan recipients think they have the same $10...just as if you bought a car from a dealer, and while dealer 'prepared' the car...he actually sold it to 9 other people, betting that he could get copies of the car, or manage you and the other owners' pick-up times such that the 10 of you never discovered you had not bought 10 different cars, but all bought the exact same physical car.
Keep in mind that loan recipients will either deposit their loan, or spend it, and the person the recipient paid will deposit it. Once deposited it will form the basis for a new loan, and so on... Using this process the original "base money" from the Central Bank gets multiplied many times, a minimum of ten...and possibly very many more times, as the "loan" becomes a "deposit" at another bank and forms the basis of a new loan.
This falls apart when someone doesn't pay their loan. Maybe their business failed. Maybe the loan didn't increase their productivity enough. Regardless, when the loan fails, the only one who actually got the use of the money was the bankrupt debtor...the depositor who unwittingly was the 'reserve' for the loan gets wiped out...as do the whole chain of 'depositors' and 'debtors' based on that original deposit of base money.
This used to stop when it got to the base money...because the base money was secured by a physical commodity, not a promise of future payment. So, when the credit pyramid collapsed, someone gets handed the commodity...and the debt is extinguished.
But that is not the currency we have had since the end of the 19th century. Since 1914, the Dollar (and earlier for the other world currencies) have been based on debt. Until 1971 there were some caveats under which the Central Bank and Treasury would back *some* of the Dollars, for *some* of the claims against it, *some* of the time.... but since the Fed was created, we have been off any sort of real Gold standard...and had only a theoretical "Gold Exchange Standard" where if you were *special* you might be able to exchange dollars for gold (such as if you had a gold certificate until 1933, or such as if you were a central bank until 1971) but for most of us... no.
Which brings us to the present. The Dollar is based on debts with future promises to pay. They are subject to the exact same dynamics as commercial banking was subject before. The debts backing the Central Bank base money are always larger than the currency that draws upon them. They are impossible to pay without new larger loans, with a later expiration date, backing the existence of enough currency to cover both the principal and the interest on the original loans.
In 2008, the economy of the WORLD could no longer take on more debt. The rate of productivity increase in the economy was not able to increase productivity enough that the increase could service the debts that already existed. The result was too many loans defaulted...which lead to even more currency disappearing in the present, which lead to the entire banking-and-currency-system halting.
Then the government stepped in to create the needed new debts, such that the Central Banks of the world could turn those debts into currency, such that the defaults would not spread...and some could be booked as not defaulting, even though they had actually already defaulted.
So why do the owners of the Fed now want to raise rates?
Why would they want to raise rates when they know the government, who DOUBLED (or more) its debts, to back additional currency creation, to bail them out, cannot pay higher rates?
Looks like they believe they are ready to crash the system in DEFLATION...
But others amongst them want to go through INFLATION first, if they can. HyperInflation, or price inflation, is actually just what we call it when people prefer to store their wealth outside the currency. Everyone buys something that is not the hyperinflating currency at the same time, sending the value of that currency downward.
Either way, it will eventually end in deflation....as the debts default, and the currency disappears.
They probably have credit default swaps that they believe make their books whole as the worlds governments bankrupt, and currency and debts simulataneously evaporate.
Others amongst them are on the opposite ends of those swaps.
But they can't personnally hold possession of everything they say they own.
I believe this is a major issue driving the current Geo-Political situation in the world... First they were looking for a 'Good Bank' to which they could transfer all the performing assets (China) so that the could let the "Bad Bank", which by then would have only the non-performing loans, bankrupt.
But now it just looks like they are each backing their personally prefered Autocrats, hoping that those Autocrats will be able to preserve wealth they claim, against everyone else's claims. Looks like they are betting heavily on numbers, and heavily on Socialist/Communist ideology.
And why would anyone believe their promises of future payment, given that they designed this system specifically to make everyone in the world other than themselves go bankrupt????
More to the point...Communists who have the power to decide who owns all this wealth, will decide that they themselves own it...and probably have the bankers shot.
Either way, we're going towards a world where issues of ownership are decided by the rule of "Tooth and Claw".
We'd have been better off in 2008 if we'd allowed the international monetary system to bankrupt...hung the owners of the current system, and started over.
For now everyone is preparing to kill everyone else, so that they can be the last ones standing on the accumulated wealth of the 20th Century world.
Should you ever find your self in the job market, I'd advise against applying at the parent company of Cliff Notes.
Well,
What would they pay me in?
Hookers and blow???
Not my fault they embarked on such a tomorrowless monetary system, each praying "Apres moi, le deluge!"
I guess these people think we're stupid. The Fed is owned by the people who own JPM and the other major private banks. Ownership and control of these banks is a well-guarded secret since I'm sure the American public would be shocked at the level of foreign ownership. (Unless they consider the Rothschild clan to be American that is.) You certainly didn't hear any complaints from JPM when they received untold wads of cash in 2008 at ZIRP rates to, among other things, buy Bear Stearns for pennies on the dollar. What we see is simple propaganda. They constantly talk about rate hikes through their various sources, then they don't raise rates. We see it over and over again, like clockwork. Don't be fooled. These greedy motherfuckers will never give up the gravy train.
What can you say but, "Doh!"
The fact that continued ZIRP keeps pumping billions of free money into bankster pockets couldn't have anything to do with it running five years too long (so far), could it?
JPM must think they have even bigger fish to fry now, wonder what that might be.
From the "now" perspective, raising rates will drive the USD up sharply.
US exports would then tank.
A higher USD would tank the markets too.
The Fed is cornered. But these people are not stupid. Something else is unfolding.
***the shilling intensifies***
FWIW, this is my interpretation of what Kelly is saying:
We (JPM) have reached the point of diminishing returns due to ZIRP and now need rates to rise in order that we profit tremendously from the assets that were acquired at fire sale prices because the sheeple will drive up prices as they attempt to buy said assets before prices and interest rates get higher. Additionally, we need rates to rise in order that we can cover the tremendous amount of short positions that we established to keep commodity prices artificially suppressed (especially in precious metals) before we lose control of the pricing of those commodities and suffer heavy losses.
In short, we made a killing driving the herd on the dive and are ready to make another killing on the rise.