Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates

Interest-Rates / UK Interest Rates Dec 17, 2014 - 12:06 PM GMT

By: EconMatters


Reasons or Excuses?
The reasons for the Fed not raising rates keep getting more bizarre and outside the scope of what used to constitute the Fed`s purview. First it was the financial crisis, then it was GDP growth not being up to par, then it was inflation not being robust enough, then it was employment being too soft, next it became China is slowing, then it became Europe is slowing, then it was Wall Street will sell off and there will be too much volatility, then it became lack of wage growth, next it was the Dollar was too strong, and now it is that Energy is too cheap. I am sure I missed at least 5 other reasons that have come and gone for the Fed not raising rates over the last 7 plus years of this ZIRP Fed Wall Street Welfare program.

7 Years is almost a Decade – The US Should Learn from the Japan Model

Remember we are not discussing whether or not the Fed Funds Rate should be 5% or 6 %, we are talking about basically 0% Wall Street Financing Handouts for 7 plus years. If Wall Street cannot get their act together in 7 plus years of essentially 0% financing, then they will never be able to get their house and structural holdings in order and stand on their own two feet.

We said it first: Oil is the Next Major Commodity to Crash (June 28, 2013)

Risk-Taking & Leverage are at Financial Crisis Proportions – Bubbles Galore

The risks to the financial system are off the charts, there are asset bubbles all over the place, directly correlated to 7 plus years of ZIRP, and the bubbles and complacency are getting worse by the month. The overzealous chasing of yield at any cost incentivized by ZIRP in the bond markets is the most dangerous bubble the Fed needs to get real concerned about, price and yield return relative to risk of any of these bonds being remotely in the same ‘Value Stratosphere” over 10 and 30 year duration periods, and the fact that all the major banks (which are the purview of the Federal Reserve) have balance sheets filled to the gills with these mispriced assets due primarily to ZIRP Handouts by the Federal Reserve should be their only concern right now!

Read More: Some Interesting Facts Regarding US Oil Supplies

ZIRP was never intended to be Permanent – it was intended for 1-2 Years Max

Forget how cheap energy becomes, or Wall Street selling off before every Fed meeting to show the Fed look to much volatility, can’t raise rates now, or there is not enough multiple expansion in the Dow, or the Baby Boomers are going to start pulling money out of the market, or a myriad of other reasons. Just set a target date, a rate hike schedule for 2015, and stick to it regardless of the individual noise and micro events that take place every day in the world. If one looks hard enough there will always be a reason why the Federal Reserve has to continue these Wall Street Handouts which ultimately cause more harm than good by creating massive, systemic risk bubbles that always negate all the good intentions in one fell swoop of unintended consequences.

If the Fed cannot Raise Rates Now, almost a Full Business Cycle Wasted

After the latest economic data for the last three months if the Fed cannot stand up and set out a rate hiking schedule for 2015 starting by my calculations in March of 2015 with a 25 basis point rate hike, and ending 2015 at the 1.75% to 2% area for the Fed Funds Rate, then just abolish the Federal Reserve because they obviously serve no purpose except for show. Just make ZIRP Economic Law, and all debt is ultimately Null and Void, canceled in the end. This may seem like an attractive option to the Paul Krugman`s of the world, but the end game has nasty consequences that make adopting a simple rate hiking schedule the preferable option even for these folks when push comes to shove. And my point is that push has come to shove and the global labor markets are getting tighter and we are starting to experience wage inflation in the third quarter Bloomberg Article on Rising Wages and once wage inflation starts spiking, it oftentimes really spikes, comes out of nowhere, and all the sudden Central Banks get more than they bargained for because this means instead of progressive 25 basis point rate hikes spread out over several months, they are forced to raise rates in 50 basis point increments over a much shorter time period, and then markets will show the Fed what real volatility looks like.

Deferred Gratification in Reverse Equation

There used to be an Oil Product Commercial that vehicle owners can change their oil and update their filter according to the maintenance schedule or pay a much bigger price down the line in the form of the cost of a blown engine. The Fed can pay a little now, or a whole lot later on, and the risks versus benefits of ‘Can-Kicking’ Rate Hikes down the line any further have reached their breaking point as the spike in wages is sending clear cut signals that the US labor market is getting tighter by the month with an additional 200k new jobs added to the economy each month.

Read More: December FOMC Meeting to Provide Clarity on 2015 Rate Hikes

Complete 2015 Rate Hiking Schedule in Detail – Wall Street Needs Concrete Dates to Finally Realize the Inevitable at this FOMC Meeting

It is time to raise rates, deal with it Wall Street there will never be a perfect time to raise rates based upon Wall Street`s criteria. Lower energy prices are a good thing, how often do we say if we could just find a cheaper energy source, the global productivity would take off to the next level, it would really be a game changer. We finally get cheaper global energy costs, and now everybody is complaining; these same people were probably complaining about too high of energy costs just 6 months ago. A normalized rate curve is a good thing, CD`s that actually have a more normalized return for saving money is a good thing, normalizing financial markets are a good thing, reducing financial risks to the system in terms of asset bubbles is a good thing, and it is time for the Federal Reserve to stop this ‘data dependent nonsense’ and lay out an actual full rate hiking schedule in interest rates for 2015, and the place to do it is this FOMC Meeting as the financial markets are going to need ‘considerable time’ to adjust to this change in Fed policy after 7 plus years of ZIRP.

By EconMatters

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2014 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

EconMatters Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in