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53 thoughts on “Why is the Fed So Desperate to Hike?”
Sisaid:
I don’t think the FED is desperate to hike….. it is desperate to convince people it is going to hike.
“Managing expectations”, aka scamming the “people” they claim to serve, is the name of the game in all societies build on, and propped up by, nothing but lies, more lies and statistics. And then some more lies.
Why are most people listening to the Fed instead of looking at realities. In soccer this is called ball watching. You are watching the ball instead of watching the man you are supposed to mark. When he scores you are looking like a fool.
Lars, the Fed looks busy, talks a lot, but insiders know they have been captured by the fast money crowd and exist only to support them, now. Free riders in the ECB and BOJ also have and influence. I wish it were different, but corruption is the way of the world now, and the Fed, I’m sad to say, looks awfully corrupt to me. They’re not ‘on the take’. They live in stark terror of disapproval and of public recognition of failure.
Lars, and by ‘public recognition of failure’, I mean the fast money crowd appears to have access and the loudest voice in the room. While you and I and lots of others bitch and moan about low rates, they don’t hear us and we have no credibility if ever do. The fast money crowd knows how to talk to them. monopolize access, and motivate them.
The FED is in a no win situation. They have fueled a raging asset inflation. Artificially low interest rates have fueled extreme economic distortion as companies who earn no profits may continue to grow and crowd out legitimate business investment.
– If they hike and kill the malinvestment and the eCONomy collapses they get the blame.
– If they do not hike the bubble and real business will eventually collapse on it’s on and they will get the blame.
– If they go to negative interest rates or restart QE the dollars toast and they will get the blame.
This makes absolutely no sense at all. OK so interest rates are ‘artificially low’ (they aren’t and the concept doesn’t make any sense but let’s play with it). So that doesn’t change the fact that if you loan someone money you still have to worry about them paying it back.
So why would you not loan first to the company with a legitimate business idea that is promising and instead loan to a company without profits? The concept of ‘malinvestment’ makes no sense and those who advocate it refuse to provide an intelligent definition that is coherent in any sense with any model of how the economy works.
“So why would you not loan first to the company with a legitimate business idea that is promising and instead loan to a company without profits? The concept of ‘malinvestment’ makes no sense and those who advocate it refuse to provide an intelligent definition that is coherent in any sense with any model of how the economy works.”
Easy. It is called “higher fees”.
Credit risky borrowers pay much higher fees / interest.
If I were a bankster, I’m lending to the no profit outfit first every time. The loan will NOT be kept on my bank’s books. I will find private placement or securitize with other loans. And ratings agencies have been proven to be owned by issuer of debt (If you want to rate another batch, you better give a good rating). The pension / institutional bagholder will take comfort in hedging with cds. And hoo cares if company has cash flow to pay loan? … its only worry is the ability to roll the loan …. and a bankster will always stand ready to help … for a (high) fee … (until the next crisis shuts down all the nonsense).
1. What does that have to do with interest rates, if you are paid a fee for making loans with higher rates then no matter what level interest rates are you will always score a higher rate loaning to a more risky borrower than a less risky one.
2. ‘fees’ miss the point. You get nothing if you lend money to someone who doesn’t pay you back anything. Someone less risky by definition means you are more likely to get paid back.
I’m not keeping the loan on my bank’s books. All I care about is originating the loan (for a nice fee … credit risky borrowers pay higher interest / fees … the higher interest rates are what will allow me to easily place with someone else) and passing it on to bagholder.
Once it is off my hands I could care less what happens to it.
You need to get rid of that 1970’s textbook next to you … and study up on financialization / securitization.
Yes if you can make a lot of crappy loans and sell them off real fast you will profit. This presumes whoever is buying the loans from you doesn’t care about getting paid back. Since the 2008 crash established loan quality does matter I’m still not clear what your point is?
You seem to be imagining that because some people get paid by the loans they originate, loan quality doesn’t matter and the whole system still only loans to high risk businesses while leaving high quality borrowers without needed loans. Even if that is the case what does the interest rate have to do with it?
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Tony Bennettsaid:
“Since the 2008 crash established loan quality does matter I’m still not clear what your point is?”
You really need to learn the game being played. Institutional investors are buying this stuff (given investment grade rating by rating agencies whose allegiance with the issuer. The issuer pays the rating agency). As protection they buy insurance (credit default swap) for the assets purchased. Works until it doesn’t (see AIG).
And my point?
To your original point on who would lend to a dodgy profitless business over one with stellar credit. Any bankster would (provided loan not kept on own books) because there is more $$s associated.
“The artificial lowering of the market interest rate induces additional investment. At the same time, savings decline and consumption increases. As a result, the economy starts living beyond its means. The boom is inflationary: all that has increased is the amount of money, not the supply of the means of production, such as labor and land.”
Bingo, where’s the inflation? We are supposedly consuming too much (because saving is rewarded less) and demanding too much investment goods (since interest is so low it’s easy to borrow money to upgrade investments). This assertion is simple Keynes, try to stimulate a fully employed economy more and you get inflation.
Except that doesn’t fit the present times, so where’s the evidence that interest rates are too low?
We are on the other side of the inflationary curve now, since 2008 at least. Inflation, price inflation, does not necessarily follow monetary inflation, though current attempts are trying to stop post boom price deflation, hence the little effect.
You might argue that price deflation is destructive, but I would say that it is actually a reward, and that if it were left alone prices would remain realistic and the market would continually adjust to a steady price turnover, some deflating, and others appearing in the form of new activity to service the savings obtained by the consumer.
I don’t think a market, a currency, politics, that is socialized and managed is any the more secure than the one I describe, nor any fairer, but that is so complex it remains in many ways a matter of opinion or of ideal. I think people here have a certain ethic that is more true, they appreciate face value and do not like it manipulated, especially not grossly, the values should be set without interference as far as possible by the real market, the street if you like.
Do you really seriously believe that ANYONE at the Fed or government will be blamed? Recall last time, after years of warnings, they NEVER saw it coming…and Bernanke is still hailed to this day as some savior genius. As long as the press supports the progressive big government that believes that they have the power and the moral right to intervene in our core economics, they will NEVER be blamed, except to be blamed for not going far enough.
You hear it already on the left, where IF they were to ever admit a faltering economy, it is simply due to the fact that CONSERVATIVES prevented them from printing more, lending more, giving more away. Listen to every progressive who opens their mouth and they are absolutely convinced that our markets, at an all time high, are the empirical proof of economic success…..and the Clinton Global Initiative is doing God’s work.
The fact that the Fed cannot allow the market to exist without artificial supports only PROVES to them and the world that intervention is an absolute necessity and that capitalism has failed.
You would never believe this if you read it in a book, but in real life it all seems perfectly feasible to many….if not most.
I’m at a complete loss to under stand how you can be critical of the Fed’s possible interest in hiking rates (I’m personally skeptical they will … oh so close … come back next meeting), but continually … continually … write about problems caused by or related to low rates?
I believe rates are abnormally low and cause many of the economic problems we now have.Keeping rates low and waiting for things to improve is barking at the moon, or worse.
Raising them is needed to provide income to savers and return the rate of interest to it’s classical function of ranking projects that traditionally create jobs. Yes, wall street will bomb … don’t care even a little. Bonds will crater … too bad but I didn’t create the problem. To me, these are investment opportunities and someone such as yourself could prosper from the opportunities presented. I plan to. In a couple of years, the US economy should look pretty good if rates are allowed to normalize. Then everybody wins.
“I’m at a complete loss to under stand how you can be critical of the Fed’s possible interest in hiking rates”
I don’t get that impression at all. I believe he is just pointing out the entirely farcical reasons claimed for their decisions to hike or not. And I think there are multiple reasons why they seem desperate to hike:
Asset bubble worry (far too late for that)
So it can cut later
Clueless faith in models
Also, from a Facebook comment, “Because they are getting pressure from pension funds, insurance companies and banks.”
Winston, maybe I read it wrong. I was relating it to some comments made earlier about raising rates being a bad idea due to the ‘data’. To me, the ‘data’ will never improve as long as rates remain low. It’s a negative feedback loop.
Agree completely with your negative feedback loop point. I think it is difficult to detect sarcasm in Mish’s posts or, for that matter, those of anyone posting on-line which is why you see the html-like /sarc tags added to prevent misinterpretations. I get the sarcasm impression from Mish constantly pointing out the farcical nature of virtually everything in “our” modern “markets.”
It’s a trap. They have built a bomb that if they keep rates low, the economy will never grow, but if they raise rates much at all, the interest burden on sovereign debt and the record amount of corporate debt will eat them alive…us along with them. We have been on pain killers too long, numbing ourselves to the reality of our circumstances, and to suddenly go cold turkey could be terminal.
I do not think there is an answer to this and THEY KNOW IT. They are simply stalling because that is all they have left. I think it is terminal, I think THEY think it’s terminal. Like the scenario of a killer asteroid headed for earth, they perceive no advantage to truth if it is only going to create panic and chaos… and if there is panic and chaos, they want to control it to the advantage of their friends and themselves. Living like it’s 1999.
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Darensaid:
Because Mish and all his clients are all in on gold and rooting for the US economy to tank not prosper.
“Raising them is needed to provide income to savers and return the rate of interest to it’s classical function of ranking projects that traditionally create jobs. Yes, wall street will bomb ”
1. Interest rates are 0%. Your business can buy machine A for $1M that will yield net $100K per year. Or it can buy machine B that will yield only $50K per year. Which will be funded if they only want to borrow $1M? The more profitable machine A or less profitable B? If rates are 10% or -10% does the answer change? Do the math.
2. Savers
a. Do not ‘need’ to be rewarded anymore than farmers or plumbers or people with sick dance moves need to be rewarded. If rates are low or negative then the reward for saving is low, that’s all. If the price of corn is low then the reward for growing corn is low.
b. ‘Normal’ rates of 5-6% were accompanied by higher inflation so it is hardly clear that savers are that much worse rewarded today than they were in the past. The entire finance industry centers around pushing savers to get out of simple savings and into more complicated investments like portfolios of stocks and bonds in order to achieve higher returns by taking on more risks and to mask failures by highlighting some people who get exceptional returns to focus attention off of those who lose money (just as casinos highlight the jackpot winners while ignoring those sinking their rent money into the slot machines).
No, they’ve run out of the bullets they’ve been using so far and to use a new and different type could end the CONfidence game in the emperor that’s keeping him (now her) clothed.
I’m starting to wonder if the ‘Communication Strategy’ is just a calculated way to say F U. They’re pissed because we don’t appreciate them.
Seriously.
It’s as reasonable of a conclusion as any. Lots of talk. No action. Faux promises. 100% benefits to the monied set. None to us.
Is it possible Bullard, Yellen, and the others are just saying F U in the most verbose way they can, and then laughing about it among themselves for fooling us some more?
IF ALL THESE NUMBERS ARE LIES OR TWEAKED — “what difference at this point does it make ??”
Seems like our elected officials do absolutely nothing good for the American people or the economy other than feather their nests, their off shore accounts and whatever Buffett, Bezos or Cook need them to do. Don’t let me forget to mention golf.
My vote would be they raise .25 for your local friendly banker……………………
Yeah, sure. Clearing checks isn’t as much fun as dominating the lives of all the citizens in the US and making friends wealthy beyond the dreams of the kings of old. But it’s still good work that meets a need. They can reduce the meeting schedule to 1 per decade.
So they can cut it later. They must know that their asset bubbles are going to collapse one way or another, and they must be in a position to inflate the bubbles one more time. They need more road to kick the can along. Right now, they have run out of road.
Once the bubbles burst, the debate will be about whether Fed should have raised the rates, even if the rates were only 1% when the bubbles collapse. The real debate should be about why we need the Fed in the first place. But that will not happen any time soon.
I think it is desperation in wanting to believe the economy is actually in recovery rather than a Depression. All the Fed’s models are probably telling them this economy wasn’t even possible. I think that leads to an incredible level of cognitive dissonance.
I have a bankster friend who knows Betsy Duke. Duke was federal reserve governor until a couple of years ago. After she left, he had a chance to ask her in private about current monetary policy. She said what they say in public. That they saved the country from a depression.
Only now are they (maybe) having doubts about their efforts.
The ‘Fed’s Models’ would probably look ridiculous if they were explained in everyday terms a normal person who otherwise couldn’t care less could understand. The math hides the stupid.
They would probably make as much sense as:
1. square wheels, except for the three sided wheels all trying to become round via the addition of more angular wheels and slower speeds.
2. Eating lots of fattening foods, but keeping them cold so the calories reduce in size from being cold and therefore don’t count as much towards fat.
3) Person 1 wearing a T-shirt saying “I’m with stupid”. Person 1 is alone.
I had to laugh a few months ago re Yellen’s temerity to tell John Taylor – only the inventor of the Taylor Rule – that he was using the wrong neutral rate for the Taylor Rule.
Doesn’t Pretcherian orthodoxy that the Fed really has no control over rates and raises them when the bond market tells it to?
I think the Fed talks up hikes to give credibility to the fake recovery. I can’t imagine the Fed every going through with meaningful hikes with negative real bond yields and sub 2% growth
They will hike late in the election cycle. Last week in Octobwr with a claim of, “the economy isoving fo obama/Hillary” Al globalist move, that’sj all.
The economy is much stronger than ‘top line’ GDP states.
Consumer spending grew strongly at 4.4 percent in the second quarter—its second-fastest quarterly growth since 2006—and, in contrast to the pattern in recent quarters, net exports also added to GDP.
wages & many components of inflation (especially housing, medical care, and new cars) are rising at a much greater rate than the ‘top line’ CPI number
When you run the rates to zero and below you have no other direction to go except up. That is why. It’s either do nothing or do something. The only something left to do is raise rates. Anything else and you do nothing which enforces the belief the Fed needs to be abolished.
You forgot to mention reasons #1-5. The Big Banks want higher rates. The small loan spreads are killing them. The Big Banks own the Fed, literally. Big Banks call the shots and they want higher rates now.
The banks told the Fed if they “normalize” they can declare their policy a victory. For bureaucrats, that’s chin music.
Banks are hurting because the spread is low, they are screaming for higher rates. The fed wants to help their beloved Wall Street banks, but higher rates might bring recession, plus no way can they raise before November… So unable to move they jawbone rates a little higher, best they can do just now for the banks.
Not gonna happen, recession coming if not already here. IMO ten year going to zero.
We will need to release $8T in QE by 2020 or else the GDP will be negative. An easy way to expand the debt is through parabolic entitlements. Likely means we will have to take in 30-50 million ++additional++ immigrants by 2020 and put them on entitlements or else everyone from Wamart to Dollar store will crash in value. The American economy is debt based entitlements. There is no growth without growth to the entitlements. If you’d remove the population gains since 1992 and removed the entitlements you would be at -3% gdp right now, and the national debt would be $7T less. USA/Europe You are eating yourself to death using debt.
I don’t think the FED is desperate to hike….. it is desperate to convince people it is going to hike.
Touche!
“Managing expectations”, aka scamming the “people” they claim to serve, is the name of the game in all societies build on, and propped up by, nothing but lies, more lies and statistics. And then some more lies.
Ah, yes, the old head fake.
So it can cut later … with a side of strengthening $US hegemony.
As other central banks head toward Crazy Town … any talk of SDRs, yuan, whatever supplanting the $US will fade to black.
Why are most people listening to the Fed instead of looking at realities. In soccer this is called ball watching. You are watching the ball instead of watching the man you are supposed to mark. When he scores you are looking like a fool.
Lars, the Fed looks busy, talks a lot, but insiders know they have been captured by the fast money crowd and exist only to support them, now. Free riders in the ECB and BOJ also have and influence. I wish it were different, but corruption is the way of the world now, and the Fed, I’m sad to say, looks awfully corrupt to me. They’re not ‘on the take’. They live in stark terror of disapproval and of public recognition of failure.
“…corruption is the way of the world now…”
Was it ever otherwise? Perhaps before Adam bit the apple or Pandora opened the box, but since then?
Lars, and by ‘public recognition of failure’, I mean the fast money crowd appears to have access and the loudest voice in the room. While you and I and lots of others bitch and moan about low rates, they don’t hear us and we have no credibility if ever do. The fast money crowd knows how to talk to them. monopolize access, and motivate them.
The FED is in a no win situation. They have fueled a raging asset inflation. Artificially low interest rates have fueled extreme economic distortion as companies who earn no profits may continue to grow and crowd out legitimate business investment.
– If they hike and kill the malinvestment and the eCONomy collapses they get the blame.
– If they do not hike the bubble and real business will eventually collapse on it’s on and they will get the blame.
– If they go to negative interest rates or restart QE the dollars toast and they will get the blame.
I look forward to the the chaos.
Yes, their “ZIRP trap.”
This makes absolutely no sense at all. OK so interest rates are ‘artificially low’ (they aren’t and the concept doesn’t make any sense but let’s play with it). So that doesn’t change the fact that if you loan someone money you still have to worry about them paying it back.
So why would you not loan first to the company with a legitimate business idea that is promising and instead loan to a company without profits? The concept of ‘malinvestment’ makes no sense and those who advocate it refuse to provide an intelligent definition that is coherent in any sense with any model of how the economy works.
“So why would you not loan first to the company with a legitimate business idea that is promising and instead loan to a company without profits? The concept of ‘malinvestment’ makes no sense and those who advocate it refuse to provide an intelligent definition that is coherent in any sense with any model of how the economy works.”
Easy. It is called “higher fees”.
Credit risky borrowers pay much higher fees / interest.
If I were a bankster, I’m lending to the no profit outfit first every time. The loan will NOT be kept on my bank’s books. I will find private placement or securitize with other loans. And ratings agencies have been proven to be owned by issuer of debt (If you want to rate another batch, you better give a good rating). The pension / institutional bagholder will take comfort in hedging with cds. And hoo cares if company has cash flow to pay loan? … its only worry is the ability to roll the loan …. and a bankster will always stand ready to help … for a (high) fee … (until the next crisis shuts down all the nonsense).
that is how the real economy works.
1. What does that have to do with interest rates, if you are paid a fee for making loans with higher rates then no matter what level interest rates are you will always score a higher rate loaning to a more risky borrower than a less risky one.
2. ‘fees’ miss the point. You get nothing if you lend money to someone who doesn’t pay you back anything. Someone less risky by definition means you are more likely to get paid back.
Brian,
I’m not keeping the loan on my bank’s books. All I care about is originating the loan (for a nice fee … credit risky borrowers pay higher interest / fees … the higher interest rates are what will allow me to easily place with someone else) and passing it on to bagholder.
Once it is off my hands I could care less what happens to it.
You need to get rid of that 1970’s textbook next to you … and study up on financialization / securitization.
Yes if you can make a lot of crappy loans and sell them off real fast you will profit. This presumes whoever is buying the loans from you doesn’t care about getting paid back. Since the 2008 crash established loan quality does matter I’m still not clear what your point is?
You seem to be imagining that because some people get paid by the loans they originate, loan quality doesn’t matter and the whole system still only loans to high risk businesses while leaving high quality borrowers without needed loans. Even if that is the case what does the interest rate have to do with it?
“Since the 2008 crash established loan quality does matter I’m still not clear what your point is?”
You really need to learn the game being played. Institutional investors are buying this stuff (given investment grade rating by rating agencies whose allegiance with the issuer. The issuer pays the rating agency). As protection they buy insurance (credit default swap) for the assets purchased. Works until it doesn’t (see AIG).
And my point?
To your original point on who would lend to a dodgy profitless business over one with stellar credit. Any bankster would (provided loan not kept on own books) because there is more $$s associated.
https://mises.org/library/cure-low-interest-rates-disease
From your link:
“The artificial lowering of the market interest rate induces additional investment. At the same time, savings decline and consumption increases. As a result, the economy starts living beyond its means. The boom is inflationary: all that has increased is the amount of money, not the supply of the means of production, such as labor and land.”
Bingo, where’s the inflation? We are supposedly consuming too much (because saving is rewarded less) and demanding too much investment goods (since interest is so low it’s easy to borrow money to upgrade investments). This assertion is simple Keynes, try to stimulate a fully employed economy more and you get inflation.
Except that doesn’t fit the present times, so where’s the evidence that interest rates are too low?
We are on the other side of the inflationary curve now, since 2008 at least. Inflation, price inflation, does not necessarily follow monetary inflation, though current attempts are trying to stop post boom price deflation, hence the little effect.
You might argue that price deflation is destructive, but I would say that it is actually a reward, and that if it were left alone prices would remain realistic and the market would continually adjust to a steady price turnover, some deflating, and others appearing in the form of new activity to service the savings obtained by the consumer.
I don’t think a market, a currency, politics, that is socialized and managed is any the more secure than the one I describe, nor any fairer, but that is so complex it remains in many ways a matter of opinion or of ideal. I think people here have a certain ethic that is more true, they appreciate face value and do not like it manipulated, especially not grossly, the values should be set without interference as far as possible by the real market, the street if you like.
Do you really seriously believe that ANYONE at the Fed or government will be blamed? Recall last time, after years of warnings, they NEVER saw it coming…and Bernanke is still hailed to this day as some savior genius. As long as the press supports the progressive big government that believes that they have the power and the moral right to intervene in our core economics, they will NEVER be blamed, except to be blamed for not going far enough.
You hear it already on the left, where IF they were to ever admit a faltering economy, it is simply due to the fact that CONSERVATIVES prevented them from printing more, lending more, giving more away. Listen to every progressive who opens their mouth and they are absolutely convinced that our markets, at an all time high, are the empirical proof of economic success…..and the Clinton Global Initiative is doing God’s work.
The fact that the Fed cannot allow the market to exist without artificial supports only PROVES to them and the world that intervention is an absolute necessity and that capitalism has failed.
You would never believe this if you read it in a book, but in real life it all seems perfectly feasible to many….if not most.
I’m at a complete loss to under stand how you can be critical of the Fed’s possible interest in hiking rates (I’m personally skeptical they will … oh so close … come back next meeting), but continually … continually … write about problems caused by or related to low rates?
I believe rates are abnormally low and cause many of the economic problems we now have.Keeping rates low and waiting for things to improve is barking at the moon, or worse.
Raising them is needed to provide income to savers and return the rate of interest to it’s classical function of ranking projects that traditionally create jobs. Yes, wall street will bomb … don’t care even a little. Bonds will crater … too bad but I didn’t create the problem. To me, these are investment opportunities and someone such as yourself could prosper from the opportunities presented. I plan to. In a couple of years, the US economy should look pretty good if rates are allowed to normalize. Then everybody wins.
“I’m at a complete loss to under stand how you can be critical of the Fed’s possible interest in hiking rates”
I don’t get that impression at all. I believe he is just pointing out the entirely farcical reasons claimed for their decisions to hike or not. And I think there are multiple reasons why they seem desperate to hike:
Asset bubble worry (far too late for that)
So it can cut later
Clueless faith in models
Also, from a Facebook comment, “Because they are getting pressure from pension funds, insurance companies and banks.”
Winston, maybe I read it wrong. I was relating it to some comments made earlier about raising rates being a bad idea due to the ‘data’. To me, the ‘data’ will never improve as long as rates remain low. It’s a negative feedback loop.
Agree completely with your negative feedback loop point. I think it is difficult to detect sarcasm in Mish’s posts or, for that matter, those of anyone posting on-line which is why you see the html-like /sarc tags added to prevent misinterpretations. I get the sarcasm impression from Mish constantly pointing out the farcical nature of virtually everything in “our” modern “markets.”
It’s a trap. They have built a bomb that if they keep rates low, the economy will never grow, but if they raise rates much at all, the interest burden on sovereign debt and the record amount of corporate debt will eat them alive…us along with them. We have been on pain killers too long, numbing ourselves to the reality of our circumstances, and to suddenly go cold turkey could be terminal.
I do not think there is an answer to this and THEY KNOW IT. They are simply stalling because that is all they have left. I think it is terminal, I think THEY think it’s terminal. Like the scenario of a killer asteroid headed for earth, they perceive no advantage to truth if it is only going to create panic and chaos… and if there is panic and chaos, they want to control it to the advantage of their friends and themselves. Living like it’s 1999.
Because Mish and all his clients are all in on gold and rooting for the US economy to tank not prosper.
I think gold will do well from here regardless of what the economy does.
“Raising them is needed to provide income to savers and return the rate of interest to it’s classical function of ranking projects that traditionally create jobs. Yes, wall street will bomb ”
1. Interest rates are 0%. Your business can buy machine A for $1M that will yield net $100K per year. Or it can buy machine B that will yield only $50K per year. Which will be funded if they only want to borrow $1M? The more profitable machine A or less profitable B? If rates are 10% or -10% does the answer change? Do the math.
2. Savers
a. Do not ‘need’ to be rewarded anymore than farmers or plumbers or people with sick dance moves need to be rewarded. If rates are low or negative then the reward for saving is low, that’s all. If the price of corn is low then the reward for growing corn is low.
b. ‘Normal’ rates of 5-6% were accompanied by higher inflation so it is hardly clear that savers are that much worse rewarded today than they were in the past. The entire finance industry centers around pushing savers to get out of simple savings and into more complicated investments like portfolios of stocks and bonds in order to achieve higher returns by taking on more risks and to mask failures by highlighting some people who get exceptional returns to focus attention off of those who lose money (just as casinos highlight the jackpot winners while ignoring those sinking their rent money into the slot machines).
They’ve run out of bullets…I guess. Now slash and burn…maybe..
No, they’ve run out of the bullets they’ve been using so far and to use a new and different type could end the CONfidence game in the emperor that’s keeping him (now her) clothed.
No! Not ‘slash and burn’
Coast and BS.
I’m starting to wonder if the ‘Communication Strategy’ is just a calculated way to say F U. They’re pissed because we don’t appreciate them.
Seriously.
It’s as reasonable of a conclusion as any. Lots of talk. No action. Faux promises. 100% benefits to the monied set. None to us.
Is it possible Bullard, Yellen, and the others are just saying F U in the most verbose way they can, and then laughing about it among themselves for fooling us some more?
Is the Fed just smoke and mirrors ???
IF ALL THESE NUMBERS ARE LIES OR TWEAKED — “what difference at this point does it make ??”
Seems like our elected officials do absolutely nothing good for the American people or the economy other than feather their nests, their off shore accounts and whatever Buffett, Bezos or Cook need them to do. Don’t let me forget to mention golf.
My vote would be they raise .25 for your local friendly banker……………………
Bank of Japan Prepares for Crash Triggered by Fed Tightening
Building up a big pile of dry powder
by Wolf Richter • August 26, 2016
http://wolfstreet.com/2016/08/26/bank-of-japan-prepares-for-crash-triggered-by-fed-tightening/
As this column points out, they did the same before the last hike, a MONTH BEFORE the Fed publicly claimed that a hike was likely.
Negative feedback loops are stabilizing! What you mean are feedback loops with negative consequences.
As for the fed hiking or not – there should not be a Fed
They are in a no win position of their own making
If you don’t have a Fed, who will clear the checks? Don’t throw the baby out with the bath water. Even ugly ones.
Yeah, sure. Clearing checks isn’t as much fun as dominating the lives of all the citizens in the US and making friends wealthy beyond the dreams of the kings of old. But it’s still good work that meets a need. They can reduce the meeting schedule to 1 per decade.
So before the Fed. no one ever wrote a check?
So they can cut it later. They must know that their asset bubbles are going to collapse one way or another, and they must be in a position to inflate the bubbles one more time. They need more road to kick the can along. Right now, they have run out of road.
Once the bubbles burst, the debate will be about whether Fed should have raised the rates, even if the rates were only 1% when the bubbles collapse. The real debate should be about why we need the Fed in the first place. But that will not happen any time soon.
I will believe it when it happens
I think it is desperation in wanting to believe the economy is actually in recovery rather than a Depression. All the Fed’s models are probably telling them this economy wasn’t even possible. I think that leads to an incredible level of cognitive dissonance.
They are clueless.
I have a bankster friend who knows Betsy Duke. Duke was federal reserve governor until a couple of years ago. After she left, he had a chance to ask her in private about current monetary policy. She said what they say in public. That they saved the country from a depression.
Only now are they (maybe) having doubts about their efforts.
The ‘Fed’s Models’ would probably look ridiculous if they were explained in everyday terms a normal person who otherwise couldn’t care less could understand. The math hides the stupid.
They would probably make as much sense as:
1. square wheels, except for the three sided wheels all trying to become round via the addition of more angular wheels and slower speeds.
2. Eating lots of fattening foods, but keeping them cold so the calories reduce in size from being cold and therefore don’t count as much towards fat.
3) Person 1 wearing a T-shirt saying “I’m with stupid”. Person 1 is alone.
I had to laugh a few months ago re Yellen’s temerity to tell John Taylor – only the inventor of the Taylor Rule – that he was using the wrong neutral rate for the Taylor Rule.
Doesn’t Pretcherian orthodoxy that the Fed really has no control over rates and raises them when the bond market tells it to?
I think the Fed talks up hikes to give credibility to the fake recovery. I can’t imagine the Fed every going through with meaningful hikes with negative real bond yields and sub 2% growth
They will hike late in the election cycle. Last week in Octobwr with a claim of, “the economy isoving fo obama/Hillary” Al globalist move, that’sj all.
The economy is much stronger than ‘top line’ GDP states.
Consumer spending grew strongly at 4.4 percent in the second quarter—its second-fastest quarterly growth since 2006—and, in contrast to the pattern in recent quarters, net exports also added to GDP.
wages & many components of inflation (especially housing, medical care, and new cars) are rising at a much greater rate than the ‘top line’ CPI number
wages? Hardly.
I’ve been tracking withholding tax revenues closely. The last few months have seen a dramatic slowing of growth.
Omit spending on health services* and revised annualized Q2 GDP growth is <1%.
http://healthblog.ncpa.org/gdp-health-services-grow-over-five-times-faster-than-sluggish-non-health-gdp/#comments
* and how long is that level of health services spending going to last with Obamacare in a terminal state?
When you run the rates to zero and below you have no other direction to go except up. That is why. It’s either do nothing or do something. The only something left to do is raise rates. Anything else and you do nothing which enforces the belief the Fed needs to be abolished.
The only tool (((Yellen))) has is staring back at her in the mirror…clueless filthy POS
You forgot to mention reasons #1-5. The Big Banks want higher rates. The small loan spreads are killing them. The Big Banks own the Fed, literally. Big Banks call the shots and they want higher rates now.
The banks told the Fed if they “normalize” they can declare their policy a victory. For bureaucrats, that’s chin music.
Banks are hurting because the spread is low, they are screaming for higher rates. The fed wants to help their beloved Wall Street banks, but higher rates might bring recession, plus no way can they raise before November… So unable to move they jawbone rates a little higher, best they can do just now for the banks.
Not gonna happen, recession coming if not already here. IMO ten year going to zero.
We will need to release $8T in QE by 2020 or else the GDP will be negative. An easy way to expand the debt is through parabolic entitlements. Likely means we will have to take in 30-50 million ++additional++ immigrants by 2020 and put them on entitlements or else everyone from Wamart to Dollar store will crash in value. The American economy is debt based entitlements. There is no growth without growth to the entitlements. If you’d remove the population gains since 1992 and removed the entitlements you would be at -3% gdp right now, and the national debt would be $7T less. USA/Europe You are eating yourself to death using debt.