QUESTION:
Rates in US going high.
Reasons? (right reasons?)
Margin calls when markets melt down
Fed stops QE
It can´t be so simple, can it?
Could you please explain more about this?
Thanks for all.
G.G.
ANSWER: A central Bank is never really in charge of the interest rate. It get the credit for being in charge, but it actually is not. Nor is a Central Bank actually in charge of the money supply. Here too, if a building is sold between two domestic citizens, nothing happens to the money supply. But if a foreign buyer comes in, the money supply increases in size and velocity. The money they bring in goes into the pocket of a citizen to be spent and they have a DEAD asset that is outside the money supply.
The theory that the central bank can intervene and influence the economy by raising interest rates or pushing them lower and thus remain in control is a Keynesian theory that has proven to be completely invalid. Keep rates low as the Fed has done, wiped out pensions and the elderly. They are actually driven into shares and other investments even overseas to earn income. Consequently, artificially low rates set the stage for shortages in cash that manifest is rising interest rates. What we will see going into 2015 will be that the Fed raises rates trying to stop what they have set in motion the next inflationary bubble.
Part of the whole shift in confidence from PUBLIC to PRIVATE is also a change in the thinking process. In the Greatest Bull Market I provided the press articles all along so you could see what I saw. The commentary going into 1929 was that the rising interest rates PROVED there was a bull market because there was a DEMAND for money. When interest rates declined, it was always a RECESSION or DEPRESSION – entirely opposite of what they tout on TV today. After the collapse and we entered a PUBLIC WAVE, that is when this mindset changed. We entered the Age of Keynesianism and with that the assumption that the Fed/Central Bank was actually in control.
In truth, Bernanke is leaving because he knows the truth. The Fed boasts a lot but it knows it is not in control and that rates are starting to tick up. He did not direct that change, but it is unfolding as capital moves. The Flight to Quality shifts and with it cash just on deposit declines forcing banks to pay more at last.
So it is simply time. We need to see RISING rates and that will show there is a rise in demand for money/borrowing and that will be the start of INFLATION. This was the trend into 1929. When rates decline, stocks collapse with commodities. That is an economic decline. This whole nonsense spouted out on TV is opposite of reality. These are people putting out the government propaganda. Government is NOT in control and behind closed doors they KNOW that. Why would our firm get called in to EVERY crisis since the 1970s if they were in full control? Even Paul Volcker conceded that the Fed was not in charge of the economy in his Rediscovery of the Business Cycle. The previous Fed Chairman said the same thing as did the British Politician. The talking head just talk to each other – that’s it. Rising rates will be bullish unto 2015.
