Peter Spence, The Telegraph: Why the coming US interest rate hike is like none ever witnessed before
Central bank watchers believe the Federal Reserve is finally ready to pull the trigger on an interest rate hike.
It is hard to overstate the significance of the decision that Janet Yellen, the US Federal Reserve chairman, and the rest of the Federal Open Market Committee (FOMC) will take later this week.
America’s central bank is expected to start raising interest rates, in the first such move since the summer of 2006. The anticipated economic shift has been described as “momentous” and a hugely significant milestone of progress in the repairing of the US economy since the damage done by the Great Recession.
WNU Editor: Quoting the Telegraph .... "Wednesday's interest rates decision has been described as the most anticipated in living memory" . Here is a different take .... Hilsenrath Just Reset Market Expectations: "Fed Is Worried Rates Will End Up Right Back At Zero" (Zero Hedge). What's my take .... an interest rate hike and the unforeseen consequences from such a hike will probably damage the legacy of President Obama .... and that is something that many do not want to happen. My predication .... everything that President Obama is doing right now is to maintain the status quo and to leave all the big problems (and consequences) to his predecessor. I suspect that there is a lot of pressure on the US Fed to maintain interest rates where they are right now .... and/or if there is raise, to be a small as possible.
3 comments:
WNU Editor,
Every quarter some "pundits" predict a rate hike, yet it keeps just going down, and down and down. Canada's just went to the edge of negative.
There won't be any rate hikes until there is an economic recovery, beyond Wall Street, the Banks and the Traders.
McJobs in replace of real job's isn't the answer.
I am very lucky Jay .... I have no debts. But I know many people who do .... and when I bring up the topic of interest rates going up a few points .... I just see fear in a lot of faces. Bottom line .... everyone has gotten use to low rates .... they are not ready for 6%, 7%, or higher rates on their mortgages. And yes .... there definitely is no real economic recovery in play right now.
WNU Editor,
It's not just households:
"Take away the cheap credit… and the buybacks on Wall Street dry up. That means earnings per share – the ultimate driver of stock prices – fall, too.
With falling corporate earnings and stagnant household incomes, the inevitable direction for stock prices is also down.
As we discussed in last Friday’s Diary, we’ve already seen that today’s stock prices are not the result of sober reflection on the part of investors.
They do not sit down with a yellow pad and a No. 2 pencil and calculate streams of income over the next 10 years. Instead, they count on the cronies to rig the market for their benefit.
As regular readers know, corporate execs have been borrowing at ultra-low rates and using the money to buy and cancel shares in their own companies. This clever piece of financial engineering reduces the count of outstanding shares and pushes up their value.
The insiders get bonuses… by looting the company’s capital and replacing it with debt. And shareholders get a nice bump in their portfolios."
http://dailyreckoning.com/the-fed-is-bluffing-interest-rates-wont-rise-in-2015/
In the absence of a real economy, cheap credit has become a new Corporate Ponzi scheme,
http://dailyreckoning.com/the-fed-is-bluffing-interest-rates-wont-rise-in-2015/
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