Posted on 09/20/2015 4:30:14 AM PDT by dontreadthis
Yellen has inherited a complete nightmare. Thursday’s decision to delay yet again the long-awaited liftoff from zero interest rates is illustrating that the world economy is totally screwed. There is a lot of speculation about why the Fed seems so reluctant to “normalize monetary policy”. There are of course the typical domestic issues that there is low inflation, weak wage gains in the face of strong job growth, a hike will increase the Federal deficit and then there is the argument that corporations that now have $12.5 trillion in debt. All that is nice, but with corporate debt, our clients are locking in long-term at these levels, not funding anything short-term. Those clients who have listened are preparing for what is to come unlike government which has been forced to shorten the average duration of their debts blind to what happens when rates rise, which will be set in motion by the markets – not Yellen.
Fed is really caught between a rock and a very dark place. Yes, they have the IMF and the world pleading with them not to raise rates for it will hurt other debtors who borrowed excessively using dollars to save money. The Fed is also caught between domestic policy objectives that dictate they MUST raise rates of they will bankrupt countless pension funds and international where emerging markets will go into default because commodities have collapsed and they have no way of paying off this debt that has risen to about 50% of the US national debt. By avoiding the normalization of interest rates (hikes), the Fed has encouraged government to spend far more than they realize because money is cheap. This will eventually light the fire under the economy helping to fuel the Sovereign Debt Crisis. There appears to be no hope for the Fed and they will be forced to raise rates only when they see asset inflation in equities. Then they will have no choice. This is the worst possible mess and the longer they have waited to normalize interest rates, the worst the total crisis is becoming for they will have zero control over the economy and once that is seen, holy Hell will break lose.
The only solution is to print more money! /Alan Greenspan
Do us tax-paying little folk get some of it this time?
Strong job growth? I don’t think so.
The interest rate is being kept at zero because otherwise the world economy will collapse and it will be Obama’s to deal with. Eventually, the economy will collapse anyway, but the objective is to make the comparative good times last until Obama is out of office.
When the economy collapses the blame will fall on the Republicans.
I hope so. I needed a bailout 7 years ago. Still do.
It is time to make the politcal parties pay for what they have done... Fine each party 99 % of their contributions until there is no debt
Well, everything else does, so why not this when it happens.
saw that too
When you consider the rapid, dizzying changes of the internet-free 50s, 60s, and 70s, it’s amazing that Obama has been allowed, even helped to effectively put time and the markets to sleep in order to preserve some shred of positivity about his presidency. Of course, none of it would be possible without the media, whose own investment in their pet president has stiffed horribly.
As though any of these czars actually care . . . .
Hiding problems is one of the few things big government excels at. They have hidden a multitude of sins behind a cheap money policy.
Tax politicians. $100 bucks every time they open their mouth. Debt paid!
And that’s why the Republicans aren’t all that interested in winning elections.
I’ve been saying this for years.
Banks must be laughing.
They get their money at super-low interest, but still get to charge borrowers several percent. Pure profit, what a deal!!
No wonder the politicians are being pressured to keep interest rates low. Meanwhile, everybody with a retirement account that was depending on interest to pay for that retirement is bleeding.
Series, though. The Fed has dug itself a umpteen trillion dollar hole. They won’t even tell us how much. Hence, umpteen. Probably more. But they can’t stop digging because, ironically, this is a black hole that will dig itself even faster if they stop. What to do?
Yeah its a problem alright. I am not saying I agreed with the bailouts, but I understand it. The banks got themselves jammed up and the system needed to be cleared and lubricated so that money could move again. The dollar “broke” as it were, with people selling dollar deposits for less than $1. It was a bad way.
But then they went and did QE, QE2, QE3 and so on. Now this had many motivations, some of which was to boost the economy - to avoid deflation which this central bank fears more than anything. They also wanted the stock market to go back up because everyone’s savings is tied up there like it or not. They also wanted housing market to recover for similar reasons.
But if they were believers in “trickle down” then they probably aren’t anymore. The numbers are all ‘damned lies’ so to speak. Unemployment is down, but it is down by moving millions and millions into disability and welfare or early retirement. Dollar is strong, but mostly because every other currency is worse. They say we have 2% inflation but this number has been revised just about every quarter since 2008 and now with oil prices and commodity prices sunk input costs will drop and this will feed some profits in some areas but that just means prices for finished goods will stay competitive and that means inflation is unlikely.
The QE money went to banks, insurers, fatcats. Any regular Joe try to get a home loan since 2008? Its a little easier now but it has been very difficult. If you want the economy to grow you need inflation and if you want inflation you have to drive demand for goods and services. To do that the people need cash. Welfare, disability and early retirement income is not enough to stimulate the economy and anyway it it requires bleeding the cash off the productive to give it to the unproductive. As a closed loop system it cannot possible benefit the economy, except for the fact that FedGov prints or borrows $1 trillion more each year than it collects. That could cause inflation but isn’t. So imo the magnitude of the problem is clear: With QE and deficit spending we still have very low or no inflation. That is bad news. Its almost a liquidity trap.
There are at least 2 ways out. 1) give every taxpayer cash or 2) cut tax rates significantly (basically the same thing, just difference of degree and progression).
Lies and damned lies unemployment? Economic growth? Who the heck are they kidding
Many of us have been saying for years that all of this can not continue. It appears the powers that be have messed things up so badly that when it does blow, it is absolutely going to ruin the country for the rest of our lives, anyway.
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