Atlanta Fed president Dennis Lockhart keeps making a fool out of himself by yapping about rate hikes for over a year.
This time, not only does he warn about hikes, he is on the lookout for bubbles.
Why he cannot see them is a mystery.
Dennis Lockhart Has Eye Out For Bubbles
MarketWatch reports Fed’s Lockhart Doesn’t Rule Out Rate Hike as Soon as September
Atlanta Fed President Dennis Lockhart said Tuesday he would not rule out an interest rate hike in September and said he was watching closely for signs of possible asset bubbles.
“At this point I don’t rule out a rate increase at the next meeting or later in the year,” Lockhart said in an interview on CNBC.
Lockhart Did Not Rule Out Anything
In addition to not ruling out rate hikes, he did not rule out Apple Pie or Tuna Casserole. In fact, he did not rule out anything that I am aware of.
Thank goodness he is on the lookout for bubbles. We should all be relieved.
Dudley and Kaplan “Hikes on the Table”
I addition to Lockkart, Dallas Fed president Robert Kaplan and New York Fed president William Dudley warn that rate hikes are on the table.
However, Dudley and Kaplan fail to convince market.
A pair of Federal Reserve officials, on separate visits to Asia, suggested overnight that the financial markets are too complacent about a September rate hike. However, investors back in the U.S. basically ignored the admonishments.
In a Bloomberg television interview from China, Dallas Fed President Rob Kaplan said a September rate hike “is very much on the table.”
New York Fed President William Dudley, in a speech in Indonesia, said he could definitely see the Fed raising interest rates even before the election.
“The market doesn’t believe the Fed, it hasn’t been listening for a while,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.
Always Complications
Flashback August 24, 2015: Fed’s Lockhart Says Planned Rate Hike Complicated by China.
Rate Hike Excuses
Rate Hike Odds 50-50
Rate hike odds are roughly 50-50 for June of 2017.
Finally, Inquiring minds may wish to consider what happened Lockhart had “Kaleidoscope Eyes” for rate hikes.
For discussion, please see “The hikes are coming! The hikes are coming!”; Kaleidoscope Eyes Revisited.
Mike “Mish” Shedlock
“In a Bloomberg television interview from China, Dallas Fed President Rob Kaplan said a September rate hike “is very much on the table.””
I think Kaplan meant that a rate hike was “tabled.” Meaning it is now off the table, which has been cleared for Mish’s apple pie and tuna casserole.
If it makes the clinton/Obama/GoldmanSachs party look worse, they just ain’t gonna do it…. at least until the election fraud takes place in November.
greg nails it.
“Dallas Fed President Rob Kaplan said a September rate hike ‘is very much on the table.’”
Unfortunately, that table is the “no rate hike” table. The “rate hike” table is far too full with a large stack of paper listing the excuses for no rate hikes.
If only we can stitch their lips between meetings…at least we need not hear these meaningless mouthfuls…
WHAT??!! He is “watching closely for signs of possible asset bubbles.”??!!
That is like saying one is watching for signs of possible snowfall when standing in the middle of a blizzard!
I would welcome rate hikes if it meant higher interest rates for retired investors like myself, but somehow it doesn’t seem to work that way.
Rickards Link [http://dailyreckoning.com/governments-can-kill-cash/]
“The global elites are using negative interest rates to do the same thing as inflation — make your money disappear…The traditional way of stealing money from savers is with inflation…Any way you look at it, you lose…In theory, savers will be dissatisfied with NIRP and react by spending their money…This theory is junk science…Instead of inducing savers to save less and spend more, NIRP causes savers to save more and spend less. It’s a perfect example of the law of unintended consequences. When abstract academic theories are applied in the real world by central bankers with no real-world experience, you get the opposite result of what’s intended. These unintended consequences have already appeared in Japan and Europe…”
Thar ’tis,,,,no bubbles, just currency devaluation.
Beginning in the early 80’s when the Dow went from under 1000 to the 8000 range in the “Irrational Exuberance” episode, was it productivity based or devaluation based?
So, is the Dow going back to 1000 again? No. Just as it will not return to 18000 after the next wave of devaluation, when it is trading in the 30000 range. And no, home prices are not going back to $5000 as in the early 60’s, nor will minimum wage return to $1.15 an hour, or a Sixer of Coors be under $1.00 again.
Deflation only happens in commodity backed currency regimes. In all others, devaluation is the rule.
Harmless bubbles demo:
I guess he could just call it all “Jewish confetti” and have a good laugh at all the morons who post here instead.
Hip-hop, hooray!
We are Zimbabwe!
And Zaire too!
Trump says Janet Yellen and the seven dwarfs are stupid.
NYSE = Asset bubble. There, I helped him.
Ask Kaplan and Dudley if they see any “savings glut” taking place anywhere.
Every single investment newsletter I read bemoans the poor savings habits of Americans and how unprepared most are for retirement.
The Fed? They remain very concerned about what appears to them to be a glut of savers who are averse to spending/consuming and it is creating too much saving, despite the three decades worth of punishment that savers have subjected to by the Fedetal Reserve.
Then step up to the plate, like a man, and short it.
Sorry, not so according to the FOMC.
Simply put, if any member admits to seeing an asset bubble then they must EXPLAIN the asset bubble. They must say where it is, how badly is it inflated, when might it burst, and what might the correct price level be.
MOST IMPORTANTLY …
The FOMC member must explain where the bubble came from, what conditions caused it to inflate, and who is responsible.
You will see said FOMC member bark at the moon naked in a public place first.
To offer such honesty would be an admission that they are 1) in the business of intentionally building asset bubbles as a function of monetary policy or 2) they are utterly clueless and just doing the same thing over and over again with the hope for different results, or 3) They’re just following orders.
those rates only apply to banks, not markets. And banks have $4 trillion sitting in reserves. The fed can do whatever they want and no one will care. QE killed the golden goose.
If it were possible to have a “credibility score” of less than zero, the Fed would already be there – and these clowns (Dudley, Lockhart. Bullard, et al) seem intent on pushing it even lower.
They are a laughingstock.
I do not know about their “credibility score” but Bullard saved the market in Oct 2014 with QE4 and Draghi with whatever it takes…. Now if you ask me how they did it, I am foxed but market seems to love this BS.
Discussing whether or not rates will be raised is pointless. They can’t raise rates without destroying the economy. Maybe a token 0.25, but nothing close to normalized rates. Look at Japan to see our future.
“I addition to Lockkart, Dallas Fed president Robert Kaplan and New York Fed president William Dudley warn that rate hikes are on the table.”
http://movieboozer.com/wp-content/uploads/2014/08/lucy-football.jpg
Ha, perfect! I think of this cartoon just about every time I hear the Fed talk about potential rate hikes.
Bubbles:
Stocks, bonds, auto prices, home prices, college costs, student debt, renewable energy, unskilled labor, medical care,dentistry, commercial property, cell phones, razor blades, fast food, home delivery, marijuana, pharmaceuticals.
“Atlanta Fed President Dennis Lockhart said Tuesday he would not rule out an interest rate hike in September”
They didn’t rule out one in June. They said June was live. Nothing happened. They didn’t rule out one in July. Nothing happened.
It is a broken record devoid of substance.
Raise the rate or shut up. You have no credibility Lockhart.
Could someone here coherently explain why low interest rates or QE should generate bubbles? Now don’t get me wrong, if you raise rates enough you’ll prevent bubbles from ever forming. Squash the economy enough and you’ll never get a bubble. North Korea’s economy isn’t likely to see a bubble either.
But why should low rates cause a bubble? Bubbles, by definition, are price increases disconnected from underlying reality. Examples might include believing home prices will rise 20% a year forever or that at some fuzzy point in the near future all dot com companies will reap huge profits therefore its worth paying just about anything to buy some shares now.
In these cases interest rates don’t seem to matter very much. If rates are 4% instead of 7%, that’s not going to do much if I really think prices will rise 20% per year. Or if I think dot-coms will zoom up 500% per quarter then it would be rational for me to incur 25% cash advance interest charges on my credit card in order to buy shares now.
When interest rates do not cover the risk of lending to business then banks gamble their money on stocks, bonds, derivatives, real estate, commodities, and currencies. Zero interest rates is free money to banks. Zero interest rates provide unlimited capital for banks to bid up prices.
First, most of the assets cited as ‘bubbles’ today are not purchased by banks using unlimited borrowing. For example, banks cannot borrow unlimited amounts at 0% interest to buy shares of the S&P 500.
Second, even unlimited borrowing doesn’t address the problem that you still have to pay back the loan. For example, you still have to pay back your student loan even if it is at 0% interest so it is not rational to simply accept any tuition out there if you don’ believe it will somehow increase your earning power.
Even if you can borrow at 0%, it is not in your rational interest to borrow and buy something that is overpriced. Normal economic rules apply even at 0 or negative rates. It’s more rational to borrow and buy something that will yield a 5% return than a 1% return even if you can get 0% rates from your bank or negative.
So I ask again why bubbles? If houses, say, are overpriced why would I borrow at super low rates to buy something I would expect to fall in price? Wouldn’t I borrow and buy something I’d expect to increase?
See my post at the bottom. Banks create money by lending thus blowing bubbles.
look it up on google..
Normalize rates already. “Emergency” rates have been in place for almost a decade now. Enough is enough.
These wealthy bureaucrats who have been assigned power by their crony friends are nothing more than talking heads and clowns.
They reminding me of little chihuahuas barking from behind the safety of a cyclone fence.
An average third grader should be able to see the folly in Lockhart’s statement. All of us know that the Fed can’t raise rates to any degree in our debt-laden economy. Doing so would be the equivalent of lighting the fuse to a toxic economic TNT explosive.
I believe we are in for long-term ultra low rates until Mr. Math steps into the picture and hikes the rates involuntarily vis-a-vis the Carter era.
Eventually the sucker is going to blow sky high.
We can figure it out. Isn’t it odd that a scholar and an expert in economics and finance like Lockhart can’t?
You have to remember, where Lockhart went to school they still teach that banks don’t matter in macro economic theory. Banks simply intermediate between savers and borrowers. Since this just moves money from one pocket to another there is no macroeconomic effect other than maybe money moves from pockets of the patient to pockets of the impatient. This is called loanable funds assumption and it underlies everything Paul Krugman and Larry Summers believe. Unfortunately it couldn’t be more wrong.
Banks do not intermediate. Banks lend new credit money into existence every time they lend. Thus banks control the money supply. Not central banks, just the banking system controls the money supply. CBs control interest rates and rates influence bank system lending. It’s the lending that creates bubbles and right now banks are lending to corporations to buy back their own stock (creating a stock market bubble) and lending to real estate speculators (in Australia) creating a real estate bubble there, and to corporations in China to build coal to chemical plants there creating a coal to chemicals bubble there. So CBs lower rates, banks create more new money by lending, new money blows new bubbles, bubbles burst, banks fail, CB’s recapitalize banks by buying hinky paper off their balance sheets (aka QE) and in the end game, CBs actually just buy assets at bubble prices thus saving everyone the trouble of bank failures. Coming up next? Cats and dogs lying together, gnashing of teeth, rending of garments, real biblical shit. Or not.