Rise Rates Rise
When I asked an old NYC beat cop how I could do some effective research into local borough level corruption throughout the city's history, he gave me a good suggestion.
Take three sources. The two that sound alike...toss'em out the window. The one that tells a whole different story. That's your winner.
Now clearly, we cannot simply take that approach to everything in life but anyone who suggests repeated measurements prior to the snip would have made (or already is) a great tailor. I go off on this tangent prior to getting to my point for a simple reason... Finance is as much a trade and a craft as the garment and textile industry. Becoming a master takes years and what convenience is won from the assembly line approach is lost in overall product quality and client relations.
The reality of succeeding on the Street or anywhere in life is knowing how to thread the needle and sew the sweater yourself. We often give ourselves way too many pats on the back for simply hooking up the sewing machine and letting the sweatshop laborers do most of the grunt work. No wonder we want to blame it on them when the shit hits the fan.
This is sort of what I see when looking at the Federal Reserve and the way it does business. The logic of "hell...I've been doing this forever...I know exactly what I am doing" seems to trump the reality of the product being sold, not being worth a fraction of the way it is being told.
Take the old cop's strategy and check out what a sophisticated information source like Seeking Alpha has to say. It is always great to get such detailed logic and data. It really makes it so much easier to arrive at a conclusion.
On the flip side a more typical layman's source: Yahoo Finance. Though told in different language to and for different audiences, the message in the end is simple.
The Fed won't raise interest rates. It may not ever if not forced at the barrel of an Abrams tank. Though one author gets decidedly more passionate than the other, they are both correct. I wonder if finding a third party who claims that The Bernank and Co. are just swell would prove my old cop's theorem?
I have done plenty Bernanke character assassinations over the past few years so I will give it a rest. I do, however, feel the need to repeat that zero interest rates equal eternal dwelling in the state called now. Props to anyone who can make a chart to represent that sad reality.
When will interest rates finally be allowed to rise?
I asked the question three years ago and I have a sinking feeling that I will be asking the same question three years from now...
LOL, relative to foreign equities, commodities, and the US consumer basket, the USD has been doing great. Why should the fed raise interest rates?
I suggest the Fed start buying up oil, timber, and mining companies. When inflation starts to set in, they start selling the stock until they have a good idea of the equilibrium, and adjust the cost of goods to an appropriate level.
Or better yet, increase the cost of foreign labor by increasing grain export taxes (The US exports 1/3 of the world's supply of food- throw in west-friendly Canada and Australia in a similar bind, and you've got more like 55-60%). If foreign food prices go up, the floor on foreign labor costs (ex Canada and Australia) go up, and the US worker becomes more competitive. This is not to starve the rest of the world, just to help raise their wages too.
That picture is absolut-ly fitting for this article; never since William Gross have I seen so much written yet so little said.
Just got an update on my phone: Yield on the 10-year T-note fell to 2.24% this week and had its biggest decline since December 2008. FNMA 30-yr 100.97, up 47 bps.
Yeah, I would guess around 3 years from now we'll still be at relatively low rates. Good for my business.
interest rates will never go up(as long as the fed is in control of the money supply), no way that they can. In order for growth to be realized, there needs to be inflation and sad to say the US is entering into(or is already in) a liquidity trap. Addtional liquidity has no effect on employment and growth. They know this, but they arent willing to say it, i mean how much more obvious can it get? A liquidity trap is the ABYSS, the end ,a signal of a completely failed economic system. The best thing America could do right now is to start over before it is too late, default on debt obs, transition away from fractional reserve banking system, and revalue and back the currency by gold.
....and american workers real wages will continue to fall till they reach zero. Nothing will change, this is a debt based inflation growth economy. The only time things will change is when there is a force revolution in the US after 290 million people loose everything but their lives, then and only then will they risk their lives to take back what was stolen from them. The American public, sad to say, is dumb as fuck and cant see what is happening, but they will realize it one day when they cant feed their families on their wages. Just look at the chart of number of americans on food stamps(currently 44mio or 15% of pop), pretty obvious that number will continue to increase dramatically. I mean where is the end? 50 mio? 100mio? 200mio? Unless there are DRAMATIC changes in the fundamentals of American economy, political system and culture, the rape of the public will continue. My grandfather today said to me, "This country is really heading down the wrong path".....he is 84 and senile. If he sees it then why cant the majority of Americans? This country really needs to wake up.
You personally buying properties right now VT? I am going to start buying in next 6 months. The debt levels are just to good to pass up
Liquidity trap, the government should borrow at the extremely low rates and invest in positive npv projects, like infrastructure, that puts people to work, new-deal-like, that is the answer. Then tax and inflate your way out of debt when private demand improves. Period, that is the answer and you know it.
Now, that moral stupidity, party allegiances and economic ignorance gets in the way - tea party for example - is another thing. Raising rates would just give you a double dip recession.
ok so your saying X will put people tp work, but then you say tax and inflate your way out of debt? this makes no sense whatsoever......those workers real wages will be driven to zero if this is your case. So how is this the answer? This is the same shit that is going on right now lol and its not working. The only true solution is to START OVER by defaulting on debt, end fractional reserve banking, and back the currency by gold.
Hey look at the value of all assets relatively priced in their underlying currency(usd). This growth is all a big illusion. There is no real growth because the currency has lost 95% of its value since the 20's. Sure nominal prices may have grown substantially over the past 50 years, but it means shit when the currency looses value by equal or greater amount every year.
So your answer is defaulting is the way to go?. I am so out of this discussion, already got my weekly being-right-but-goes-against-my-political-beliefs deserved monkey shit.
Every time I think I've heard or read the stupidest comment of my life I come across something that sets the record. This is the most ignorant, idiotic statement I've heard at least in 2011. I'd be happy to write you a book pointing out your mouth-breathing ignorance, but I leave it at this: if you believe one word that you just wrote then you truly have the intelligence of an ape and are perhaps the living missing link between man and homo habilis. May God have mercy on your soul.
VTech, the problem is that our currency isn't backed by anything but air.
What if the federal reserve were to at least back it with (intelligent) infrastructure investments? I know that congress is run by buffoons, but the federal reserve is run by some pretty smart economists. What if they started buying up a couple of oilfields, railroads, timberlands, and dams to be used effectively as reserves. Ideally, when inflation starts going up, the oilfields start gaining value and we can sell them off to take $$$ out of the market.
Obviously, currencyholder confidence is very path-dependent, but everything else acts as a conservative force with the infrastructure investments roughly tracking inflation- the treasury can back out of the infrastructure if we start getting lots of inflation.
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