Rate Hikes: Policy Error or Planned Collapse!?!

Thursday, December 10, 2015
By Paul Martin

SilverDoctors.com
December 10, 2015

The obvious needs to be pointed out here. The last two times we had a recession (and EVERY recession prior), the Fed lowered rates or added liquidity into the system. They did this to aid and jumpstart the economy. Can you imagine the Fed talking about raising rates while ENTERING a recession?
This is exactly what is happening!

Submitted by Bill Holter, JSMineset:

Before getting to the real point of the title “Policy error or on purpose?”, it needs to be pointed out the entire financial system is a “policy error”. We live in a world where even the real economy is increasingly run via central planning. As for the financial side of the coin, central planning has taken on an Alice in Wonderland hue. Whether it be the suspension of mark to market, markets entirely managed and “priced” by force, debt by definition needing to expand or the central banks need for continual asset inflation …they all have ramifications. What I am alluding to is the law of unintended consequences in relation to bad policy.
Now, we hear day after day the Fed will raise rates by a quarter percent and are assured “this is a good thing”. Well yes, in normal times when a central bank raises interest rates it means the underlying economy is strong and inflation (monetary growth) needs to be cooled off. This is obviously not the case today and has not been for most of the last seven years. We have been inundated with “negative surprises” and an economy only limping along.
The obvious needs to be pointed out here. The last two times we had a recession (and EVERY recession prior), the Fed lowered rates or added liquidity into the system. They did this to aid and jumpstart the economy. Can you imagine the Fed talking about raising rates while ENTERING a recession? This is exactly what is happening! The only other time since 1913 where the Fed actually tightened during a business recession was 1937. The tightening collapsed the markets and the economy turned down further. Please keep in mind no matter what Keynesians or Monetarists tell you, the global and U.S. economies were in recession/depression until the first shots of World War II were fired. No one knows what would have happened had there not been a war but I think it is safe to say the real economy would have languished much longer along with the financial markets.
The above said, I am having a hard time understanding what exactly the Fed and Ole Yeller are thinking? Board governors including the chair are continually talking about “how strong” the economy is. Are they looking at the same reports we are? If they are looking at the same data, they are either mentally impaired or flat out lying when they say they “see strength”. Mrs. Yellen made the comment “we need to raise rates now so we will have something to respond with should the need arise”. Really? A quarter point? A quarter point “response” is .22 caliber when a bazooka is needed and will probably fail! However, a quarter point move up is huge in relation to nearly zero, a discussion of what a rate hike can be read here http://www.zerohedge.com/news/2015-12-03/its-just-025-rate-hike-whats-big-deal-here-stunning-answer Please understand this, a solvency problem was treated with massive doses of liquidity. Now, seven years later the solvency problem is far worse and the Fed wants to pull liquidity?

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