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They cannot raise rates. The banks/brokerages need liquidity. The Fed is putting them first. The Fed will let inflation take over as the cost of propping up the banks.
They really have no choice. To not bail out the banks would send the US into a downward spiral and everything we know would become worthless.
Rates will rise for the masses, but the Fed will have little to do with it. The market will soon be controlled by private lenders who will not lend unless it is worth their while. Lending by Banks and Government institutions will be more concentrated in the business sector, as there is going to be less and less money to lend and business will use the lions share of what there is.
all I can say is when Peter Schiff predicted all this to a T, everyone was laughing at him. Now he is the one laughing since all this predictions look like they are coming true!
When you short the interest rates nearly all the way to zero this is what happens.
When the savings and loan crisis of the late 80s occured we were looking at rates in the high 8 and 9%. Rates could be brought down some to improve liquidity.
Now at a 5% prime we have no real room to move.
All the bank CEOs and senior managers should have their salaries capped at $150,000 until they resolve their balance sheets.
[quote=Lincolnian;4436173]Attention Federal Reserve: It's time to start moving the Fed Funds Rate up to 5%. That should translate into an 8% Prime rate.
Here's the rationale:
Real companies with real products and real earnings do not need cheap money they can borrow in order to stay in business. Companies like General Electric, United Technologies, Exxon, Kellogg, Walmart, McDonalds, etc. have traditionally done just fine with higher costs of capital.
(Does this sound insane to you?)
Savers, like myself, are sick of our substantially less than the real rate of inflation returns that we have been stuck with as money has been passed out like candy by the banks to sketchy businesses, borrowers, and profiteers.
I think worthy financial institutions will agree that this scam has not added longterm value to their organizations as witnessed by the 70% decline in the value of financials and the "sitting-on-the-edge-of-ruin" financial condition of some of our largest and oldest financial institutions like Citibank, Bank of America, Bear Stearns (RIP), etc.
(Since when does a bank refuse free money or a zero borrowing rate with the fed? Longterm? Please.)
... the federal government would spend about a trillion additional dollars each year just to service the national debt with higher interest rates. There is a limit how much it can devalue the dollar. Although it hasn't stopped it yet.
all i can say is when peter schiff predicted all this to a t, everyone was laughing at him. Now he is the one laughing since all this predictions look like they are coming true!
ha ha ha ha ha .. He is the worst! even a blind squirral finds a nut once in a while. you would be quite poor following his predictions.
The higher rates will attract greater foreign investment in our country's banks.[I][/i]
What you fail to illuminate, is that higher interest rates tighten spreads and lower Bank profits. What is the Fed? It is a group of private Banks. Why would the Fed do anything to hurt their own profits? Higher interest rates promote savings, and discourage spending; now how can big business get your last penny if you are not out there spending like a drunken sailor? I believe interest rates will be raised, but it will not be to help the American citizens. The only reason the Fed will raise rates is because inflation will interfere in the Governments ability to borrow the money they need to keep afloat from the Arabs and the Chinese. Rates will rise, after the Fed has created as much debt as it possibly can, and bankrupted as many citizens as possible. We are now seeing for ourselves why Thomas Jefferson warned us that a Central Bank would be our downfall.
Higher rates tighten spreads? Tell me more about this
since most americans carry sizeable debt loads higher rates act as a tax and just pull more money away from savings and merely go to debt service.
the typical american has less than 10k saved and pretty much lives hand to mouth. how is higher rates going to promote savings ?
in fact they are better served by lower rates on debt service and loans than on any lost interest on a tiny savings,.
if they do have money low interest rates would have grown their money nicely in stocks and bonds.
if they did the wrong thing and tried to hide sizeable sums of their money in a bank and no other investments than they chose to own the wrong asset at the wrong time.
the fed did everything but drop leaflets from helicoptors telling the public at least shift from cash to bonds.
that higher rates leads to higher savings is alot of wishful thinking more than reality
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Would be nice but
