Posted on 03/20/2014 8:59:18 AM PDT by xzins
I would like to win the lottery; many others would like to win the billion dollar prize for the one with the perfect brackets for March Madness, some would simply like the year off with pay and a whole bunch of Americans would like a job. Where are the fairy God Mothers when we need them?
A large number of our friends and relatives would like to rid themselves of diseases that are holding them back; a large group would like peace in our time; the President would like a computer and internet Guru, too many young girls would like to get rid of their fetuses and not enough young ladies are able to bring their fetuses to full term.
The new craze is to smoke, you dope, and feel mellow yellow while thousands of senior citizens are just happy to breathe and enjoy clean air and the debate goes on. I bring all of these thoughts forward because as Americans we believe we can move mountains in theory, but we also know that in reality we soon will not be able to pay the interest on the national debt. And Janet Yellen wants to raise interest rates.
For those who either don't watch tennis, ping pong or the Federal Reserve in action, you can look at their mandate as a racket type game. One side of the court is inflation and the other side is recession. The Fed is at its best if they keep the ball very close to the net, moving between inflation and recession. However when interest rates rise two things can happen: we can see the start of inflation from higher prices from higher interest cost and we can also see the long beginning of a recession because the higher interests costs effect business and cause lower profits and eventually more layoffs.
When it comes to housing, an industry that hasn't come close to all the way back, we see other problems. We still have at least 2 million homes, minimum, that are "under water" value wise and a very large amount of Americans who are out of work and cannot qualify for a house purchase at this time. Housing as a commodity generally works as follows: as the fear of interest rates going higher there is generally a push to get into a house before they can't qualify at a higher interest rate. We probably will not have much of a push because of the low employment and the new problems from the qualified mortgage from Dodd-Frank: Harder to qualify!
Last but not least we still do not have a balanced budget and we borrow yearly to balance the budget. WE STILL HAVEN'T LEARNED! Higher interest rates will mean more borrowing and a bigger deficit.
Trying to manage the economy by raising interest rates is premature and shouldn't be put into action until we can balance our budget. It is insane to borrow money to pay the interest on our borrowing!
Any idea why the Fed would kick the nation toward higher interest rates and higher inflation — which means kicking the nation closer to another recession?
Could it be because the Republicans are close to taking over the House & Senate, and that way this FAKE recovery and the terrible effects of ObamaCare can be blamed on them?
Could it be because she sees the only possible way to pay off trillions in debt is by inflation of Jimmy Carter proportions?
Could it be because increased interest means doubled interest payments annually on our debt and the creditors get some money before the house of cards comes crashing down?
Cause and effect are being confused here.
Higher interest rates are the result of (price) inflation. Not the effect.
hate to say it but she’s right...they’ve manipulated interest rates for ten years now by artificially keeping them low which has created a fake economy and this BS recovery...
agreed- problem is they don’t factor in food or energy prices for inflation which is BS....has anyone not seen their grocery prices increase 20%-30%???
It’s about time that savers get something for their diligence in saving for the future. They’ve been robbed by the Fed and Wall St. since the crash of ‘08.
They do cheat the CPI. Price hikes have been terrible on meat and coffee to say the least.
Higher inflation brings about higher interest rates.
However, higher interest rates can be arbitrarily applied in a controlled economy...such as we have with the Fed.
How does a business accommodate higher costs? One way is to raise prices.
This guy must be a Banker, Inflation(THEFT) is caused by Unbacked Credit emitted into society,ie. Creating Money out of Thin Air. Which spends exactly the same as Existing Money. It dilutes the supply, causing higher prices from DEVALUATION of current dollars (inflation). Higher Interest rates will lead to serious deflation as it reduces greatly the amount of people that can borrow and the amount to be borrowed into society. Deflation is a Good Thing. Oh sure all those people living on CREDIT will be financially destroyed. But the People as a whole are better off. Our Entire Monetary System is based on FRAUD as their guiding principle.
Then how did Jimmy Carter manage to have both skyrocketing inflation and skyrocketing interest rates? I lived through those times. I remember.
I’m something of a layman at how this works. But that doesn’t stop me from having an opinion / grin
The Fed’s balance sheet is now so big that it is running out of the “assets” it uses to “buy” the Treasuries, making it more and more difficult to maintain the smoke and mirrors of the game. Because the Fed can’t *legally* print money, it has to rely on the fiction of using over valued assets as collateral to buy the notes.
I think the Fed’s balance sheet is reaching the point where it can no longer be pretended that any of it is real. They are trying to back out before that happens, but it’s gone on so long that the cure is liable to kill the patient.
IOW, we are screwed.
Good Question. When the “people” stop borrowing for whatever reason, the Government MUST BORROW or PRINT to keep the Credit Bubble going, or immediate Depression Kicks in. Wall Street Banks collapse, Stock Market collapses. Which is why we need all those stimulus plans as well the gift to Wall Street known as quantitative easing. THEY CREATE MONEY OUT OF THIN AIR, which spends exactly the same as existing money, but dilutes the existing supply.(COUNTERFEITING) instead of Commercial Banks doing it. The result is the same. We have had about 8% inflation annually since Obama assumed the position, mathematically.
I should point out the obvious, ALL MONEY is LOANED into society via the Fed, however not a single dime of the interest required to extinguish this debt is created. So you must borrow more and more every year at a compounding rate just to keep up. We all know the story about the grain of rice and the chess board. Same thing. It is All one big Ponzi scheme. The best part is that the way our current system operates, All Interest is Paid by the Blood and Sweat of Labor, the money does not Exist. Sounds like Involuntary Servitude to me. Unless of course ANYBODY can show me where the interest required to pay these debts is created?? I will concede that “coinage” is minted and not DEBT, but not enough coinage exists to pay the interest owed.
I have money in the bank and higher interest rates are a net gain for me. I just won’t buy anything new and barter for the rest.
Higher interest rates do not cause inflation. This author has no idea what he's talking about.
I order cod liver oil online...Price has gone up 40% in 4 years...Some could be demand but sheesh
she will get it as she controls the flow of “money”.
Higher interest rates are themselves higher costs. I think there’s more a symbiotic relationship between the two than a cause/effect one. If one raises, then you’ve affected the other. In our controlled economy, arbitrary decisions to increase interest rates are met by increased prices to confront increased costs.
I know for a fact because I lived through it, high inflation led directly higher rates on savings and CDs during the Jimmy Carter era. So that higher interest paid, led to higher interest rates across the board.
Artificially low interest rates have not only been the reason for mal-investment, they have been the reason for the mother of all mal-investments, i.e. greater deficit spending by our government. Had the interest rates been higher, interest payments on the national debt would have been many times more than they are,and that would have constrained further government spending and adding more debt.
Amen. Excellent post.
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