I will continue to research the issue of if/why the Fed will raise rates. I completely agree that its crazy. However, as I’ve seen and heard of late, they’ve been laying the ground work for this rate increase for quite some time now and Yellin is getting impatient to make the move.
The best reason I’ve come across, and its a lousy one, for why the Fed feels compelled to raise rates is that rate control is one of the very few tools in their tool box and to the extent that rates remain near zero, they are essentially deprived of the use of this “tool”. Frankly, I think there’s something more to this, but I’ve not been able to parse it out. I will continue to try to discover it.
The greatest problem I see with this is that albeit the endless volume of speculation over hyper inflation, what the Fed has really been fighting is Deflation and we presently stand at the precipice of a Deflationary spiral. It would thus seem to me that to raise rates would be to push this economy off the cliff into that Deflationary spiral and with their history laid out before them, I have to believe the Fed knows that.
Interesting surmise about raising rates and it is a part of human nature as regards power. If you have it you want to use it. That’s political and emotional thinking. Given that the Fed is made up of human beings no more able to predict the future than we are.
Lastly, there is no such thing as a market deflationary spiral. Where it exists it is always caused by government action. See the Long Depression and dispel this myth.