Every economist, financial analyst, and Wall Street trader is asking, “Why is the Fed desperate to raise rates?”
The Fed has been expressing worries over the past month that it may have inflated yet another enormous market bubble which is destined to rupture- resulting in another recession. That’s what the Fed says anyway, but some are concerned that they are really just trying to cover for the fact that they may have fallen behind the curve and are cannot regain control over the economy after inflation spikes.
Bank of America’s chief economist Ethan Harris said, “From 2013 to 16 the Fed appeared to have a “dove-like bias” indicating a sluggish exit from a very easy pecuniary policy, but slowing at even the slightest sign of difficulty. This year they appear to have changed their attitude to a more hawkish bias signaling a slow withdrawal- pausing only when the outlook changes to a significant degree. That’s what is most apparent when they hiked rates and indicated balance shrinkage at the June meeting in spite of weak inflation and growth data.”
According to BofA, the Fed’s worries are threefold;
One, they are concerned that stability is low and that certain markets are getting too hot. But the bank places little credence in this argument. The bank’s chair and allies have expressed little confidence in the Fed’s volatile appraisal as an excuse for losing control of “the bubble.”
Two, the Fed is encouraged by how readily the markets have vindicated its forecasts. In other words, perhaps they think their speculations are quite influential- as speculations sometimes are- and hope to create a culture of caution to pad its future fortunes.
Finally, BofA also speculates that the Fed may have shifted their risk rankings. The focus has been to get inflation back to where it needs to be for years. The Fed did not want to see a recession take place and has shifted to underscoring the unemployment rate.
Several Fed officials have said that undershooting full employment is dangerous, as well as cynical.
A BofA spokesperson said, “If we don’t withdraw accommodation, the problem would be that the economy would collapse into a very low unemployment rate, and create a massive amount of inflation. Then we would risk having to put on the brakes and create another recession.”
Chiming in with this sentiment, the president of Boston Fed said, “there have been no occasions in which unemployment rose, and then remained stable at its natural rate. A recession has always followed. “Policymakers should avoid overshooting their estimates of the rate of unemployment to avoid creating this problem.”
But some experts have even darker fears than the suspicions that are being bandied about at Bank of America. Long term prognosticators at Financial Argument are saying that the market is breaking down one market at a time and that the Federal Reserve is doing it intentionally. The Secretary-General of the CDU, the German Economic Council, Wolfgang Stieger has highlighted the growing economic crisis in Europe and the fact that it is getting worse.
The negative interest rates there he says, have totally failed- and the same thing is happening in the United States. The stress tests that are used when a recession is approaching, Stieger says, are totally phony- meant only to boost confidence and prevent people from pulling their money out of the banks.
Meanwhile, the retail sector of the economy is in the midst of an absolute calamity. Department stores are getting hit very hard, and many are failing.
The problem remains hidden, due in part to the fact that the media largely reports that sales are shifting to the online venues- which is true, but customers are not going to the Macy’s online shop- they are going elsewhere- and this is the same thing that is going on in many sectors of the economy. Big Legacy merchants are being replaced by smaller competitors who are new to the scene- and who don’t have to maintain massive assets like shopping malls.
The result of this is, naturally, a shift of the wealth from the traditionally well-to-do to larger amounts of private citizens. A mirror image of this phenomenon is going on in the media- where small Internet channels are replacing the mainstream media- a phenomenon that can be seen in the flailing of CNN and the New York Times.
The media is fighting back by trying to control the belief systems of the public, and the financial elites are panicking as well. And chances are, this panic will trigger another artificial recession.
~ American Liberty Report