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American Power
Decline that Never Quite Becomes a Fall
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  • Anthony

    Domestically the FED mission is to stabilize inflation and unemployment – official unemployment rate 5.1234% and inflation rate below Fed target (2%). Logically, a rise of 25 basis points make economic sense but as WRM infers FED recognizes global dis-ease, especially vis-a-vis China. So, here we are until Dec. meeting.

  • Fat_Man

    A rate increase would cause the USDollar to rise against all other currencies. It would decrease US exports and increase US imports.

    Fear of that problem, not knock on effects, is what stymied the Fed.

    • circleglider

      Exactly.

      And the subsequent drop in corporate earnings would accelerate declines in the equity markets, obliterating the Fed’s — and their silent partner, the Obama Administration’s — seven year experiment in trickle-down economics.

      Poof.

  • Andrew Allison

    Einstein’s definition of insanity was doing the same thing over and over again and expecting different results. The Fed, apparently oblivious to the Japanese experience, has been doing this for over a decade. The result has been the slowest recovery on record, a real unemployment rate (including those who have dropped out of the labor market) of close to 10%, and real wages are where they were 50 years ago, and a ridiculously over-valued stock market. Misallocation on a titanic scale, and there are icebergs on the horizon. There will be tears before bedtime.

  • FriendlyGoat

    Soooo, hold the rate at zero and watch the market drop because NOW the traders think the Fed believes the economy is weak.

    The Fed needs to lead, not follow. The idea that you CANNOT move an inch toward normalization after six years is getting really, really stupid. Even today’s market knows it’s stupid.

  • Bankotsu

    “Even with all its flaws, the U.S. still looks like the fastest runner in a slow field.”

    In your wet dreams maybe.

  • Jacksonian_Libertarian

    “The Federal Reserve System of the United States is the world’s de facto central bank.”

    No it’s not. The only reason for raising rates is to fight inflation, of which there isn’t any. The US is 7 years into deflationary “Great Depression 2.0”, which $1 Trillion per year in Quantitative easing has had no effect on. This means the Federal Reserve can’t raise rates without crushing economic activity.

  • Jerome Ogden

    Ben introduced ZIRP in 2009 as an emergency response to a crisis.

    The Fed actually admitted in their minutes that we are now out of the emergency. We can only conclude that Janet has now made ZIRP a tool for long-term manipulation and management of future business cycles.

    That does not bode well for future market stability, especially since ZIRP makes it unlikely that the Fed can keep secular tides of inflation and deflation at bay. They have no politically acceptable way to reduce rates below zero. NIRP would get even Obama and the Democrats to join Rand Paul’s rampage to rein in the Fed.

    The next president should appoint King Canute’s ghost to the FOMC, to remind them at every meeting that they cannot stop the tides. They should let markets determine rates again ASAP.

  • circleglider

    From Michael A. Gated, Chief Investment Strategist at Pension Partners, LLC:

    Of course, the endless debate over when the Fed will raise rates will continue month after month. When will Yellen act? October? December? Next year? These questions are pointless to ask. The real question is what in the world is so broken in the system which is preventing them from increasing rates yesterday. The implications are clear – as the Last Great Bubble (faith in central banks) begins to pop, average volatility will likely be higher in the next cycle than it was in the prior one, and US stocks likely won’t be the “cleanest dirty shirt” on the equity stage.

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