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We should have begun slowly raising rates in 2001, limiting debt after the business cycle ended. High interest rates do many good things for a society. We fear high interest rates because we think our economy needs to grow all the time, to avoid pain -- and we know that growth and high interest rates can't go together. This is true. But growth is always periodical. We must plan for this reality, not for the fantasy of perennial growth, which makes the interest rate cycle a potential monster instead of the savior that it is. Yes, the perpetual growth model is a fallacy, a fantasy. Time to wake up.
We have been on (the monetary equivalent of) morphine since 2001. We are mostly addicts. Our entire way of life is wrapped up in the morphiine lie being protected by the FED-mafia -- they are protecting us and themselves -- if the wall of water hits, our lives unwind, but so do the lives of many of those at the top also. How much pain can we endure; and how much chaos can they endure? If the tsunami hits, the FED is out.
If the FED continues to walk the path they are walking, we go into negative interest rates, and then all hell breaks loose and we are drowned in a tide of defaults and debt destruction. If the FED raises interest rates now, then the tsunami comes more quickly. I see no way out of this tsunami. 2001 was the time to confront the end of expansion -- and we lied to ourselves, and cheated, and tricked, and usurped, and deviled, and devaluated and que'd and zirp'ed and did whatever we could to (steal) borrow money from the future so we could continue to lie to ourselves and avoid the TRUTH which is quite simply: in a boom and bust economy you have to have the courage to take the bust (the DEFLATION) if you want to have the joy of the boom (the iNFLATION). Inflation is not a statistic of monetary abberation. INFLATION is the Boom Cycle, the Business Cycle, whether it is drive by salary and price inflation (which shows up in the CPI) or by DEBT growth (which does not show up in the CPI). The economy INFLATED from 1983-2001. It was supposed to start DEFLATING from 2001 (getting rid of our debt so we could inflate again) -- but we tricked it. But now look at us. We're not looking so good, with all our tricks. We have egg on our faces. And we have a LOT MORE DEBT now than we did in 2001, when we were supposed to start emptying out.
Helicopter drops won't work. Nothing will work except a massive deflation that will threaten our very existence, as it did 1929-1947. We have to impode out (global) debt bubble. That is the only thing that will fix the problem. But, it will create new problems, won't it?
The lesson: don't trick yourself as a nation, as a globe. If it sounds too good (debt is not a problem, debt is good, there is no such thing as too much debt), then it is too good. Don't lie to yourself unless you want the devil to appear and take everything away from you.
Sorry. It's long and dark. But I do think that more and more Americans are starting to realize how much trouble we are in.
The near-zero rates have served their purpose--to artificially prop up the stock market and steal from the middle class, especially seniors who have a long history of being conservative with their money.
The near-zero rates have served their purpose--to artificially prop up the stock market and steal from the middle class, especially seniors who have a long history of being conservative with their money.
The middle class--and seniors--lose. Again.
most seniors have little money to get interest on and count heavily on social security . those who do have assets would be pretty foolish stuffing it all in cash . that is the riskiest bet of all .
if they had any in bonds or equity's they did well . most seniors saved more money just because of the low rates then they gave up . rents , refinancing mortgages and lower prices on many goods and services helped them more .
but hey , why let facts get in the way of a good story line ... the middle class did very nicely the last 7 years in their 401k's and ira's . many are getting pensions at this point just because the low rates and markets let bonds and equity's do well or the pension funds would have cut benefits .
i guess the middle class has not been buying new cars at insanely low financing either. my sister refinanced and her total monthly expenses are less than they were years ago .
low rates and low inflation has 1/2 of nyc housing stock getting no increase in rent for the 2nd year in a row . that effects millions of people at all income levels .
Last edited by mathjak107; 08-29-2016 at 07:30 AM..
I many are missing the real point about interest rates: the creation of the Fed and their power of the prime rate.
All of the world's significant economies either have or utilize a central bank. The Fed in this country meanwhile uses open-market operations to influence the federal funds rate. This is the rate that financial institutions charge each other on unsecured overnight loans of reserve balances. The so-called prime rate is set for their best customers by individual private sector commercial banks and it may differ between them at any given point in time.
forget the parade . i want to know why with his talents he is not hired by wall street for a few billion since he knows what is next or where is the phd since he has all the solutions for the ailing economy . .
but hey , why let facts get in the way of a good story line
As they tend to demonstrate quite regularly, heterodox people have little actual use for facts. Most live on the other side of the looking glass after all. Anything goes over there.
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Originally Posted by mathjak107
... the middle class did very nicely the last 7 years in their 401k's and ira's
Probably depends on where you draw the lines defining "the middle class", but there would in any case remain a very good argument that the gains that the middle class has seen since 2009 have been but the crumbs under the table as those above them on the wealth and income scales were gobbling up most of the recovery goodies. The economic playing field has only become less and less level ever since Reagan.
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Originally Posted by mathjak107
... many are getting pensions at this point just because the low rates and markets let bonds and equity's do well or the pension funds would have cut benefits .
Very true. And many who are not yet retirees owe their current jobs and incomes to those same programs. Recovery would have been quicker and easier if both fiscal and monetary policy could have been brought to bear on our problems, but left by Congress to go it alone, the Fed has done a nice job of getting us going in the right direction again. There will of course be those who will NEVER admit to how well the programs they mocked and opposed so stridently have actually worked, but that does not alter the simple fact of their success at all.
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Originally Posted by mathjak107
i guess the middle class has not been buying new cars at insanely low financing either. my sister refinanced and her total monthly expenses are less than they were years ago .
Absolutely. Mortgage refinancing and OPEC's obliteration of high energy prices have each been significant pluses for many people. If receipts are kind of sticky at the household level, reductions in outlays will be very welcome things indeed.
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Originally Posted by mathjak107
low rates and low inflation has 1/2 of nyc housing stock getting no increase in rent for the 2nd year in a row . that effects millions of people at all income levels .
Inflation risk is a significant component of interest rates, so the two in some sense go hand in hand. The problem with simple COLA's meanwhile is that not everyone gets them. In an individual case, they should be a wash over time -- if prices go up, income goes up to offset that. This means of course that if prices do not go up, you do not get a COLA, and there is no basis on which to complain about that. But the equity issue here is that some folks have quite a bit of inflation protection and others simply do not. Times of low inflation would be good ones in which to improve upon that situation.
If they raise rates full blown deflation and depression will follow, the tsunami comes more quickly. It may bring down the entire system with it. So what? We created this mess and this zombie economy, we lied and cheated, we deluded ourselves that we can avoid pain, that all those monetary tricks and artificial low interest rates can work. We are 16 years late raising interest rates.
Our only medicine is higher interest rates and massive defaults and bankruptcies. That is the only way out of this mess that we have created for ourselves. Only way that can bring normal and organic economic growth one day, nothing else will work and can't work.
I know, most of you live in denial and can't accept this fact. What is next, should we try QE4 after QE1, QE2, Q3 didn't work. Should we try NIRP after ZIRP didn't work? How long our insanity will last.......until we self destroy ourselves and our country?
No easy and painless way out of our mess. The Fed has been staling since 2001, staling and lying for 16 years, stealing our public money, taxpayer money and plundering our country leaving us with massive debts. How long are we going to live in denial??????????
A lot of pain may mean revolution and civil war in America. It does not just mean a high unemployment rate. We are going to pay a huge price, all of us will, for this debt orgy and insanity since 2001.
And yet you are like a child Christmas morning, anxious and excited to the point of distraction NEEDING that apocalypse to come RIGHT NOW!
Why are you so desperate for economic and political Armageddon?
I guess it's true that some men just want to watch the world burn.
i know nothing about c2bp but in general those here who envision this collapse do so because they failed financially up to now themselves .
pessimists have ended up committing their own financial suicide for just about forever in this country .
so if everyone fails then at least they feel it wasn't just them.
then they get to say they were right and all the blaming they did on others was correct.
successful people are not usually found griping to each other on an internet forum blaming others for their own lack of success .
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