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Top Ten Reasons The Fed Raises Interest Rates When There Is No Inflation

By Gary Anderson follow Gary Anderson   2017 Jan 8, 8:39pm 6,850 views   23 comments   watch   nsfw   quote   share    


While I think the Federal Reserve Bank is premature, it won't let Trump destroy its playground and the collateral buried deep beneath it:

http://www.talkmarkets.com/content/us-markets/top-ten-reasons-the-fed-raises-interest-rates-when-there-is-no-inflation?post=117992&uid=4798

#investing #economics #recession

1   anonymous   ignore (null)   2017 Jan 8, 8:44pm     ↓ dislike (0)   quote   flag      

gary, you dog you - destroying that el moussa family by bangin' the MILF.

2   Gary Anderson   ignore (0)   2017 Jan 8, 8:50pm     ↓ dislike (1)   quote   flag      

You guys are economic cretins. Both of you. I nailed it about the Fed and why Trump is toast.

3   anonymous   ignore (null)   2017 Jan 8, 8:51pm     ↓ dislike (0)   quote   flag      

Gary Anderson says

I nailed it

we know, you fuckin' home wrecker.

4   Gary Anderson   ignore (0)   2017 Jan 8, 9:01pm     ↓ dislike (1)   quote   flag      

Ironman says

Gary Anderson says

Trump is toast.

With butter or jelly?

Or maybe even French.

Check out my post on your thread, Ironman, you know about the gun in the hands of the guy in Alaska. Be shocked and saddened for your nation, Trump or no Trump.

As for economics, it makes no sense that the Fed would raise rates when there is no inflation unless it prefers recession over inflation. And that it does.

5   Bellingham Bill   ignore (5)   2017 Jan 8, 9:01pm     ↓ dislike (0)   quote   flag      

higher rates also create a stronger dollar, too, yes?

(blue is CPI and red is the Fed rate)

https://fred.stlouisfed.org/graph/?g=cjwP

To the point, I think the Fed would be happy to see a 2001-style recession hit later this decade, but who the hell really knows what they want.

I do know that both household and gov't debt levels are still 2X over the happy zone:

6   Gary Anderson   ignore (0)   2017 Jan 8, 9:02pm     ↓ dislike (1)   quote   flag      

Yes Bill, a strong dollar would help the American consumer but he is broke, but it will crater world trade. GDP could be destroyed. The Fed wants a recession because it hates and fears inflation even if it is not present!

There will be a recession anyway, Trump or no Trump. But the deepening of it will be because of Trump. He will make a recession worse. And then he will be gone in one term.

7   Bellingham Bill   ignore (5)   2017 Jan 8, 9:05pm     ↓ dislike (0)   quote   flag      

hmm, looking at that first graph above I do see a possible pattern we could follow, how the 1960s went from the ZLB after the '58 recession to 10% in Nixon's first term.

I think a 2001-scale recession is callable for 2022 or so. There's going to be too much LSD in the punchbowl for a serious recession to hit this decade I think.

8   Gary Anderson   ignore (0)   2017 Jan 8, 9:10pm     ↓ dislike (0)   quote   flag      

According to this indicator, effective demand limit, the recession is near. Now, can Trump do anything to stop it when the Fed is raising rates? I don't think so. In the 1960's there were not trillions of dollars of derivatives that require collateral. If you read the article you will see how collateral is treated these days and how screwed we are as to growth when we have these weapons of mass destruction and their sensitive collateral, mostly treasury bonds.

9   anonymous   ignore (null)   2017 Jan 9, 9:44am     ↓ dislike (0)   quote   flag      

Gary Anderson says

Does this graph have anything to do with demographics? You must be one of Logan's Heroes.

10   Gary Anderson   ignore (0)   2017 Jan 9, 11:52pm     ↓ dislike (0)   quote   flag      

The red dots represent capacity utitlization which is now at 75 percent. That is low. The effective demand limit, the blue line, is based upon an equation that economist Edward Lambert created. It is a legitimate equation and this chart is based upon the equation. Since labor has bounced off effective demand a recession could be soon.

Here is his blog: http://www.effectivedemand.typepad.com/

12   _   ignore (0)   2017 Jan 10, 1:09pm     ↓ dislike (0)   quote   flag      

You can make a great case that rates should be higher now but was too high in other cycles too

With trillions in negative rates out there a demographic deflationary at hand.. to expect too much from the Fed and rates

13   Gary Anderson   ignore (0)   2017 Jan 10, 9:29pm     ↓ dislike (0)   quote   flag      

So, Logan Mohtashami says

With trillions in negative rates out there a demographic deflationary at hand.. to expect too much from the Fed and rates

I agree with that. I think there is a cap on rates. Lambert would say inflation is no threat. Logan, it appears that receipts from taxes are declining right now. That bodes ill.

Keep in mind that rates have declined in good and bad times, before, during, and after QE. I am concerned that Trump could make this coming recession worse.

14   anonymous   ignore (null)   2017 Jan 11, 2:40pm     ↓ dislike (0)   quote   flag      

Debt is no longer able to sustain the global economy, no matter how cheap we make borrowing. This could be the beginning of a long, nasty deflationary cycle.

15   _   ignore (0)   2017 Jan 11, 2:48pm     ↓ dislike (1)   quote   flag      

just any guy says

nasty deflationary cycle.

Older demographics are deflationary for sure, Japan and Germany ...

But not a U.S. story line yet

90 Million plus reasons why

Let our American people break down all the bears with furious passion! :-) #USA

16   Gary Anderson   ignore (0)   2017 Jan 11, 6:58pm     ↓ dislike (0)   quote   flag      

Logan Mohtashami says

Older demographics are deflationary for sure, Japan and Germany ...

But not a U.S. story line yet

I would be careful. Walmart is laying off many employees. Other layoffs are accelerating. Poor working people who don't get insurance will be hit with a massive Obamacare penalty this year. I talked to an H and R Block guy and he said many families are being penalized this year. Last year they were forgiven. Shock could drive us into recession.

17   anonymous   ignore (null)   2017 Jan 11, 7:08pm     ↓ dislike (0)   quote   flag      

Logan Mohtashami says

just any guy says

nasty deflationary cycle.

Older demographics are deflationary for sure, Japan and Germany ...

But not a U.S. story line yet

90 Million plus reasons why

Let our American people break down all the bears with furious passion! :-) #USA

I hear you on the reasons why not given your charts, but that could be changing as we speak. Data takes a few months to get, and I think since the election it feels like a change for the worse is happening.

18   Strategist   ignore (2)   2017 Jan 11, 7:29pm     ↓ dislike (0)   quote   flag      

just any guy says

Debt is no longer able to sustain the global economy, no matter how cheap we make borrowing.

Why do you say that? I don't see massive defaults.

19   _   ignore (0)   2017 Jan 11, 7:31pm     ↓ dislike (1)   quote   flag      

Gary Anderson says

Walmart is laying off many employees.

How many they over 2 million people working for them

20   Strategist   ignore (2)   2017 Jan 11, 7:37pm     ↓ dislike (0)   quote   flag      

Gary Anderson says

I would be careful. Walmart is laying off many employees. Other layoffs are accelerating.

Unemployment rate has been falling. After Jan 20, it will fall further.
Those without skills, education, or a little bit of intelligence won't find jobs. They have nothing to offer.

21   anonymous   ignore (null)   2017 Jan 11, 8:22pm     ↓ dislike (0)   quote   flag      

Strategist says

just any guy says

Debt is no longer able to sustain the global economy, no matter how cheap we make borrowing.

Why do you say that? I don't see massive defaults.

Not yet, but they will absolutely start happening if interest rates begin a long term upward trajectory. Besides, you don't need defaults to cause a deflationary spiral...you just need people to stop spending and start paying down debt and/or saving. Then, the defaults start happening because people start losing jobs.

22   Gary Anderson   ignore (0)   2017 Jan 12, 11:17am     ↓ dislike (0)   quote   flag      

Ironman says

Yep, because those people move to the Not In The Labor Force, and are no longer counted.... Eventually, we'll get to a 1% UE Rate, and NILF of 150 million.

That may be true. But they are likely sustaining themselves somehow. They won't move to where projects are funded temporarily, because they live with relatives. It isn't like when the Michiganders moved to Texas where the jobs were. People are less mobile now because wages have fallen behind and there are multigenerational households. Wages decreased after the Great Recession, some just recently where I live.

It isn't that assets have risen abruptly although over time they have. It is that wages that were a little sticky, are declining for many manufacturing industries. Wages that paid 25 dollars an hour are paying 10 to 15 dollars per hour.

Also, companies like Disney are paying 9 dollars an hour through work at home companies. This is a disaster.


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