Posted on 08/24/2015 7:05:22 AM PDT by SeekAndFind
All one needs to do is turn to the financial shows and get a litany of “financial experts” blaming the Federal Reserve and its coming rate hike for the recent market break.
They are incorrect. The recent break in equity prices is not about a proposed and measly ¼ point rise in rates off of zero.
Short term rates were between 4% and 5% in 2007 when the stock market made a then all time high of 14,000. Hand wringing over a ¼ pt raise is curious.
The Federal Reserve’s mere hinting of a meager raise didn’t roll the Chinese stock market over to a near 50% loss, it did not make crude oil lose 60% of its price, and it didn’t make Greece and Puerto Rico go toes up.
It is not the raising of rates, but the idiocy of having rates too low for too long a period where the criticism should be directed.
The cost of borrowing was forced down to levels that prompted and promoted the creation of debt to aggregate levels nearly double that of 2007. Wasn’t too much debt the issue, the culprit, back in 2008?
The Federal Reserve forced everyone to the same side of the boat. Dividend and rate of return capture became a sport in which investors eventually locked themselves into what are currently attractive rates but near historically low levels. The “beach ball” was to be held under water by the Fed for the foreseeable future. Stock market bulls, or salesmen for the market, were relying on just this condition to continue.
But if a dividend rate of 2% is attractive, what of a 10% drop in the stock price?
(Excerpt) Read more at americanthinker.com ...
The Federal Reserve is the foundation of progressive/leftist government
Without a fiat centrally-controlled currency and fake intrerest rates there is absolutely no way the US Government could pay for its thousands of social engineering schemes from Obamacare to planned parenthood to HUD
If the free market were allowed to price interest, we would still have downturns but then the market would operate at the right prices. The central banks have just kicked the can down the road.
First of all, the Fed is politicized. The last Fed to be truly independent was the Martin Fed (William McChesney) until the late ‘60’s. With the possible exception of the Volker Fed, they’ve all been increasingly politicized.
The way it has been for decades is this: the Fed takes it’s direction from the Treasury, and the Treasury Dept takes its marching orders from the White House. Period.
Bottom line is the finger should be pointing directly at the Congress, who hold the pursestrings. And also the President. If Washington was responsible, the Fed would have no need to print - or at least print so much cheap money.
The Federal Reserve and the U. S. Congress are the main cause of all our current financial problems. When a nation spends and overspends annually and the result is a national debt that is mind boggling, it is no wonder that the financial markets go bananas. It may be too late, but the only way back to financial sanity is to reduce the size of government, balance the nations budget, eliminate many rules, regulations and laws that prevent the private sector from doing its job of creating new businesses and jobs. (And many of our people might not like such a program since they would no longer be receiving free lunches).
This.
The author’s point, that the threat of a 1/4 point increase in the fed funds rate isn’t the cause of the current carnage in the stock markets across the world, is a good one to keep in mind because it’s probably correct.
Nevertheless, the Fed has built a box of its own making and will now have to figure out how to get out of it. Raising rates in the middle of a financial meltdown isn’t a good way to build confidence in the Fed, so they’ll probably not tighten for now.
But if we’re drifting into a recession, and we just might be doing exactly that, the Fed is going to have to become very creative if they’re to remain at all relevant. Unfortunately, creativity is what built the current box they find themselves inside.
The Fed has really screwed the pooch this time around worse than their normal screw ups of the last century. They actively went along with the scam that obama’s economy is on fire, only 5.6% unemployment, it’s all skittles and unicorns out there, knowing it was one of the bigger lies out of Washington DC and the obama regime.
Now with reality setting in on just how bad the US and world economy really is whats a central bank to do since they have run out of bullets and kept interest rates at 0 for years in an allegedly stellar economy.
Do you raise rates in September and “believe” the numbers this regime puts out and then when reality hits and the economy crashes even further into depression jerk that pitiful increase back down in December, not that it will do any good at this point. When it comes crashing down and the obama regime claims your rate increased caused the disaster do you take it or tell the truth about how badly obama and his band of apparatchiks have damaged the economy and out right lied for 7 years? Interesting times... Got gold, silver and lead?
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