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Wednesday, December 16, 2015

Interest Rate Hike and the Scam of the Century

Contrariologist's picture
What Professor Keen, Janet Yellen, and just about EVERYONE ELSE  is missing: The Fed has no business being in the full employment business, or the price stability business. The supposed "dual mandate" of the Fed is a nothing more than a pie-in-the-sky "dual suggestion" emanating from the toothless 1978 Humphrey Hawkins Act...which, if you take the time to read it, also "mandates" that Congress balance the budget.

We all know the old saying: if the only tool you have is a hammer, every problem looks like a nail. The Fed has two tools, both inter-related: manipulation of interest rates, and manipulation of liquidity. Unemployment inching up? Well, let's just cut some interest rates. Inflation getting a bit weak? Well, let's just pump a little liquidity into the banking system. Any success their ministrations have is anecdotal at best, and purely transitory. It's a parlor trick, nothing more.

And it is also comical, and very reminiscent of the Wizard of Oz...I can see silly little Janet, hiding behind the curtain, pulling Lever A and Lever B, smoke and fire puffing away. At least the Wizard admitted he was a fraud. Mind you, the two tools in Janet's hands are very, very powerful, but they are useless for the tasks at hand. To think that a multi-trillion dollar, dynamic, interactive worldwide economy can be "managed" by the blunt instruments of repo rates and QE...bahhhh, pure folly. It is a dangerous game they are playing, and we will all lose.

Central Banks, if they are even necessary any more in this digital age, serve only ONE legitimate function: Being the lender of last resort for solvent but illiquid banks, upon presentation of GOOD collateral, at a penalty rate of interest. Period. That's  it. Alas, we are so far down the rabbit hole, that the rabbits have given up. No one, absolutely no one, can say how all this ends...but it won't be pretty.
George Washington
George Washington's picture
I agree with everything you say. Also, the Fed is violating its "mandates" left and right:
  • According to Robert D. Auerbach – an economist with the U.S. House
    of Representatives Financial Services Committee for eleven years,
    assisting with oversight of the Federal Reserve, and subsequently
    Professor of Public Affairs at the University of Texas at Austin – the
    Fed had a hand in Watergate and arming Saddam Hussein.  See this and this
  • The Fed threw money at “several billionaires and tens of multi-millionaires”,
    including billionaire businessman H. Wayne Huizenga, billionaire
    Michael Dell of Dell computer, billionaire hedge fund manager John
    Paulson, billionaire private equity honcho J. Christopher Flowers, and
    the wife of Morgan Stanley CEO John Mack
Wed, 12/16/2015 - 23:43 | 6933836 DaveyJones
DaveyJones's picture
  • "the fed is owned by the big banks"
  • "the fed is corrupt"
  • well, one does follow the other

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