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Palouser
Senior Advisor

Fed keeps backing up on interest hike

First it was 'anytime' then April, then towards the end of the year, and now the Chicago Fed President says the middle of next year before a rate hike should be considered. Maybe it will be 5 year from now. 10? Who knows. I still don't understand the Yellen/journalist stance that a rate hike was a 'goal' in itself. Only the state of the economy can support a rate hike. End of story. Then there were those that fervently believed that a drop in oil prices would stimulate consumer spending. Hasn't happened so far.

 

Either way, the lack of consumer response is a warning. Either they are fearful and digging in - or tapped out. Or both. I think both.

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13 Replies
wglassfo
Veteran Contributor

Re: Fed keeps backing up on interest hike

It used to be, that I would give warning to my son about our problems in the 80's when ultra high int rates caused our farm to fail

Lucky for us I refusd to accept failure and the 2nd time was successful

Then my son joined the family farm and shortly there after, by a combination of events, land purchase became possible for him to have his own land. Instead of all rented ground, he had some owned and some rented

I remember how I cautioned him about the dangers of floating vs. fixed int rates

Now  some time has passed since his 1st land purchase and look at how low int rates remain

I am beginning to think I sound like my father

The only difference is: him telling me about the depression

I think each generation will have their tough times, and some may not succeed

However, to try and relive the past, and think it will repeat in one generation to the very next, is likely false

If hard times do come to a family farm, I think the problem will most likely be a different one than the previous

My solution has been, to stop giving my son any advice unless he asks for it 1st

Even then I am not sure if my advice is corect and try to tell him, I don't have many good answers

As for int rates, I think it will be many yrs before int rates are the number one concern for my son

He is more apt to be hit with an unforseen problem, that none of us saw coming

Palouser
Senior Advisor

Re: Fed keeps backing up on interest hike

You sound like my FIL, who I've always respected. After I took over there were a few times I asked what he thought about something having to do with the farm operation. I never really got an answer. He DID give me several examples from his past, usually relating what happened to others, with various outcomes. I think what he was afraid of was giving me bad advice. You never do know exactly what will be critical for an outcome sometimes. Anyway, I figured it out soon enough and complications never seemed to multiply. It was often a matter of being fairly conservative financially but still trying something new.

timetippingpt
Honored Advisor

Re: Fed keeps backing up on interest hike

Great comments.

 

I would point out that the Fed doesn't have to raise rates until the market forces them too. They

have been a follower of market forces for a great percentage of their existence. The flow of

funds is so manipulated internationally into the multiple trillions that what the FED says is

practically meaningless as well..

 

Sometime in 2015 it is TIME for long rates to bottom from the market perspective. Lets wait and see if

the market leads the FED again. All the commodities will stop going down soon, so the pretense that

inflation is not happening will soon shift the wind away from the FED's sails.

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BA Deere
Honored Advisor

Re: Fed keeps backing up on interest hike

Here`s a chart of Fed Funds rate since 1960, it`s just been at that "zero" rate since 2009.  Supposedly we`re in a "recovery" and things are going swimmingly, yet this rate hike is a diffcult decision.  ...If it was up to me, I`d just give them permission to do QE IV, that`s all they want anyway, drop the charade.

 

http://research.stlouisfed.org/fred2/graph/?g=H2E   

 

*you might have to click on "max" to go back to 1960

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juliedavis91849
Veteran Contributor

Re: Fed keeps backing up on interest hike

What about Bullard, ja ?  He just maneuvered a 180..

Went all the way to Frankfurt, Germany, too and in a speech THERE say.. it might be time to start raising rates..

He's a non-voting member of the Fed currently and it would all be humerous if it wasn't for the fact that this whole ponzi scheme is riding on every syllable (remember pa-tience)  being spewed from them.

Exhibit A

http://finance.yahoo.com/news/feds-bullard-now-may-good-090119563.html

 

over and out

Gottlieb

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juliedavis91849
Veteran Contributor

Re: Fed keeps backing up on interest hike

See yet another Fed Head chiming in on rates rising...

http://finance.yahoo.com/news/feds-lockhart-economy-first-quarter-121910018.html

 

that makes two this morning screeching higher rates..suppose they didn't read their own statements a few weeks ago that say lower GDP... ? ? <shrug, ja>

 

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BA Deere
Honored Advisor

Re: Fed keeps backing up on interest hike

Gotti, from your link "the economy isn`t reliant on exports"  Smiley Very Happy

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Palouser
Senior Advisor

Re: Fed keeps backing up on interest hike

The market SHOULD lead the Fed. Any interest rate increase MUST be forced by the economy because we still sit on the edge of a deflationary spiral. QE was a reaction to a poor economy with no economic leadership, and justified by a mandate to reduce unemployment.

 

The Fed has the tools to ease high inflation, but few for deflation. Volcker demonstrated that in 1980 under Reagan though he was hired by Carter for that very reason. For deflation the Fed is just the boy with a finger in the hole in the dike.

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BA Deere
Honored Advisor

Re: Fed keeps backing up on interest hike

Hey Pal, it`s just like correcting low Ph soil, that`s easy put Lime on or possibly Potash if it`s low in that and voila it`s fixed.  But if you gotta bring down a high Ph soil, it`s a long expensive haul..put on 1000 lbs of sulphur maybe do a bunch more tiling and still sulfer is a free agent and might leach in a big rain. It`s best to not get behind the 8-ball on high Ph or deflation.

 

but yah, rates are "zero" to raise them is 'deflationary'.  If we are Keyesians and we have to ride that horse, all I can see is another QE but this time funnel it onto mainstreet. It`s a Hail Mary, but it`s the only monkey wrench that I can see.

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