Don’t Be Fooled – The Federal Reserve Will Continue Rate Hikes Despite Crisis

Wednesday, July 19, 2017
By Paul Martin

Brandon Smith
Alt-Market.com
Wednesday, 19 July 2017

Though stock markets in general are meaningless and indicate nothing in terms of the health of the economy they still function as a form of hypnosis, or a kind of Pavlovian mechanism; a tool that central bankers can use to keep a population servile and salivating at the ring of a bell. As I have mentioned in the past, the only two elements of the economy that the average person pays attention to in the slightest are the unemployment rate and the Dow. As long as the first is down and the second is up, they aren’t going to take a second look at the health of our financial system.

Historians and economists often wonder after the fact how it was possible for so many “experts” and others to miss the flashing red lights leading into market implosions like that which occurred in 2008. Well, this is exactly how; within any casino there is an inherent bias towards false hope. Meaning, many people will invariably ignore all negative factors and past experience because positivism is more pleasant. Central bankers are keen to take advantage of this condition.

When observing from the outside-in, this attitude rings of desperation. Investors, with no positive fundamental data to turn to in the economy, have now been relegated to scouring press releases and speeches for ANY indication that the central bank might not take the punch bowl away as they have been doing slowly over the past few years. In fact, in most cases negative data has actually triggered spikes in equities because the assumption on the part of investors is that bad data will cause the Fed to second-guess its stimulus reduction policies. In this way, central bankers can, at least for now, fake-out investors with a simple word or phrase released in a strategic manner.

An example of this occurred last week as Fed Chair Janet Yellen threw investors and aglo-trading computers a bone with an admission (finally) that inflation (as the Fed measures it) may not be as strong as the Fed had hoped. Investors cheered. Their assumption now is that the Fed will not continue with its steady interest rate increases. But, if one examines the central bank’s past behavior this is a foolish assumption.

The Fed will indeed continue its interest rate hikes unabated, and here’s why…

The tone set by the central bank on interest rates has been overwhelmingly “hawkish” over the past six months. Minutes from the Fed’s June meeting mention a concern over stocks being “too high,” and the potential for “market risks.” Fed officials also cite concerns that markets have been ignoring rate hikes with blind exuberance. The Fed has continued rate hikes through 2017 despite a constant barrage of negative data, causing confusion in the financial world.

I covered elements of this deluge of bad data in my article ‘Peak Economic Delusion Signals Coming Crisis’.

First, it is important to understand that everything the Fed does and says publicly is highly calculated. When there is confusion surrounding Fed rhetoric, it is often strategic, not random. Yellen’s admission to the U.S. House Financial Services Committee that low inflation is a concern conflicts with numerous Fed statements made previously.

The Rest…HERE

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