Debt Rattle Aug 29 2014: This Is Why The Fed Will Raise Interest Rates
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Esther Bubley Greyhound bus driver off duty, Columbus, Ohio Sep 1943 Given recent developments in Ukraine, and the accompanying PR, spin and accusatio
[See the full post at: Debt Rattle Aug 29 2014: This Is Why The Fed Will Raise Interest Rates]Have to disagree here. Any additional interest income from higher rates will be wiped out by greater defaults. I don’t think the US economy can grow with a 10Y UST much above 3%. If the economy isn’t perceived to be growing, the big banks won’t be very profitable. Low rates and deflation is TAE’s position, right?
To keep the US, EU, Japan, China, etc. going, interest rates have to be low. Maybe Ms. Yellen thinks a higher interest rate will aid her constituency, but she does have a history of being pretty clueless.
Setting aside the real motivation for raising rates the fact is that well advertised incremental short term interests rate increases have a nominal impact. The Fed Funds rate rose from 1% in mid 04 to 5+% by mid 06 and GDP continued to climb. It isn’t the rate which matters but the rate of increase in total debt which counts. The current conventional wisdom holds that credit is expanding slowly but this is false. It is above Doug Noland’s line in the sand number of $2tn/yr despite ever slowing Treasury borrowing.
For our situation what counts is QE and its almost end. It won’t really end totally by year end because the Fed will continue to buy MBS to replace retiring paper but that will be a far cry from the $100+bn/month when this round started and the current $40bn or so now.
Personally I think they are going to end, almost, QE because the stock, bond and asset bubbles are becoming a huge political risk, from below. They know the score, some of it anyway,that QE is just aiding the asset and income nualtes.d The elites would prefer QE forever.That and they have been saying they will for some time now and not doing so is a credibility issue. I could be wrong but finding true motive is usually impossible for any actor is liable to lie about their motivation.
You’re in ga ga land if you think raising interest rates will increase bank profits. I can’t speak for Wall Street but here in the UK if the BOE dares to raise interest rates, mortgage defaults will crumble the retail banks like a stack of dominos.
Hell will freeze over before interest rates go up in the UK. Monetary policy is in bullshit mode and well and truly cornered.
The Fed isn’t going to give up and stop pushing on the string. In fact, in my view, the Fed has cornered itself politically, and will do as incumbent pols direct,,,or, it will be disposed of.
On being asked about TPTB strategy, some time ago, I think it was Kyle Bass who answered “They are going to kill the dollar.” ‘Cause, see, that’s what all the debt is denominated in, so it must be the problem.
Be looking for the New-New Deal, by Executive Order and popular demand, both barrels, and all that it entails.
Book it.
It’s all in the Yard Gnomes speech on who owns a printing press, and who isn’t afraid to use it.
Janet might try a “Firing for Effect” move in the FF Rate, (what her jawboning has been about) just to see if it stirs the “Quick, borrow and buy before it gets away forever” crowd.
But I’m not sure she understands, that in addition to insane levels of debt, we are in a different demographic aging stage than we have been during past reset operations. That, and robotics and other technology are in the process of displacing human labor.
Another thing different about “this time” is, a .25 increase in the FF rate is a doubling. The Fed has most likely found another way to pump trillions of newly created currency into the system, to even suggest such thing. If not, they might be surprised.
Any additional interest income from higher rates will be wiped out by greater defaults.
The banks won’t wait for interest income, they have much more lucrative sources.
I don’t think the US economy can grow with a 10Y UST much above 3%.
It’s not growing now, so what’s the difference? Besides, everyone knows ultra low rates can’t last forever. Pensions funds have been getting murdered. And will be finished off by lower stock markets.
If the economy isn’t perceived to be growing, the big banks won’t be very profitable.
They can bet against the economy, and the markets, and get filthy stinking rich. All they really need to do is pull their stock portfolio’s.
I see little reason why Goldman would prefer a booming economy to a plunging one. There’s money to be made in either case. Their income from QE and low rates is now subject to diminishing returns. So higher rates is what it will be. it’s just a matter of fine tuning the timing.
Low rates and deflation is TAE’s position, right?
Deflation is. Low rates are temporary inventions.
Ilargi – I agree, it’s not growing now, so what’s the difference. This cow has been milked.
Sheeple, you’re there to be fleeced.
Hi All,
Defining terms as exactly as possible is a requirement.
“Wall Street” is too vague a term. There are Debt Money Monopoly assets on Wall Street and the Fed works for them. AND ONLY THEM. Everyone else, whether on Wall Street or not, is on the dinner table, NOT sitting at the dinner table.
As for triggering defaults… SOCIETY ALREADY HAS BOUGHT INTO TOO BIG TO FAIL AND JAIL! That’s game over as the incentive for companies that CAN’T FAIL is TO MAKE EVERYONE ELSE FAIL AND ROLL THE BANKRUPTED COLLATERAL UNDER TBTF&J BALANCE SHEETS!
When the time is right, they bust the bond market, hyperinflate match assets to liabilities and call it even after they’ve bankrupted and asset stripped most of society through prima facie debt money fraud.
Professor, Janet knows all that and a bag of chips. And a whole lot more on top of that. Feigning stupidity and inferiority is a Sun Tzu Art of War tactic. We have to stop falling for it.
If these people were so dumb, they wouldn’t gain power and wealth with every single “mistake” they make and society wouldn’t lose power and become more impoverished with every single “mistake” they make.
Really – think it through all the way. They’ve flipped the coin 20 times and it keeps coming up heads. The coin has two heads… the game is rigged, the table is tilted… and they want you to think they didn’t jack you on purpose.They.
Jacked.
You.
On.
Purpose.
And your loved one’s, too.@ TheTrivium4TW
“Defining terms as exactly as possible is a requirement”A requirement – to get a proper understanding of how our socio/economic system function?
Those who are interested in knowing, are not the same people who can change what is going to happen. You said it, ” The coin has two heads…”
“They” are not going to let you or anyone else change the coin or to change the game.The web is spreading knowledge.
If a person is alone on a desert island, what kind of ism will s/he practice?
What does that person need for any ism to function?
I’ll start off your thinking by saying “the most pressing problems facing capitalism is that there are way too many knowledgeable, smart people to make any ism work.”The comments and quotes in the attached video support Trivium4TW’s observations. Throughout America’s past, prominent insiders have lamented the immense, criminal power exerted by banking cartels over governments (and by extension, the media).
@Illargi
re: TAE’s position on Deflation and low Treasury rates
My understanding from reading TAE was that you (at least Nicole) saying d/t Deflation “Cash is King” and Treasury rates would fall, even go negative on the shorter end, because of (perceived) safety and demand for cash or cash equivalents.
You saying Treasury rates will rise is a big switch from what I’ve read on this site in the past. Please address – thank you.
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