• Notorious DGB

Yellen more of a whisperer


Since the terrorist attacks of September 11, 2001, the Federal Reserve has set interest rates at artificially low levels. Their policy of near-zero interest rateshas continued through the financial crisis of 2008, and the housing crisis which accompanied (some would say precipitated) the financial crisis. Ever since making a fire sale deal that allowed JP Morgan Chase to acquire Bear Stearns for $2/share, they have allowed the too-big-to-fail banking institutions to borrow for the Fed's discount banking window, at a ridiculous 1 percent-plus rate. Quantitative Easing 3 finally ended of October 31, 2014, but it was a long time coming as they had been hinting at the end of the program since at least 2011.

I suspect that a much larger agenda is at play. The Fed basically haven't done anything expect prop up the US bond market for a decade. Fannie Mae & Freddie Mac failed; banks imploded; all the Fed did was force Bush to pass the Troubled Asset Relief Program, which expanded its balance sheet with no guidance how to eventually reduce it.They haven't provided much guidance on how to tackle student debt or Social Security. (If I'm wrong, tell me in the comments) I guess they're content to leave the heavy lifting to a gridlocked Congress. ["Give us $740 billion to prop up Wall Street!"] They are only beholding to the Wall Street Banks and the US Treasury, in that order. Everyone else can eat cake.

My conspiracy theory is that Chair Yellen will not announce an increase in interest rates until the first quarter of 2016. This will give them ample time to ostensibly consider the effects that the sustained job growth the US has experienced for the last 22 consecutive months. They will also have a full year of data to analyze the impact of the current oil shock, which has seen prices drop by 40% in the last eight months. At this point the field of presidential candidates will be further winnowed by this announcement. The money will begin to flow towards the candidates best able to navigate a fluctuating interest rate environment.

Maybe Fed inactivity is for the best, since their best policies over the years have been the ones that reversed mistakes they shouldn't have implemented in the first place.

Need a second opinion? Holler at the folks at ZeroHedge.

#federalreserve #centralbanking

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