The Fed Will Not Raise Rates This Week – Here’s Why

The eight-times-per year Fed circus is about to begin this week (Wednesday), for a two-day  freak show that will be accompanied by rumor-dependent market volatility and the appearance ad-nauseum of “experts” on the financial media propaganda conduits.  Their mouths always seem to be moving but nothing meaningful ever comes out.

Perhaps one of the comedic highlights is watching Steve Liesman grunting over the policy statement, sweat pouring from his navel orange some might call a bald head, as he strains to look for any punctuation marks that might have been added or removed from previous policy statement released in July.  The whole spectacle epitomizes theatre of the absurd.

I still believe that the Fed will find some reason to defer raising the Fed funds rate even just one-quarter of one percent off the zero-bound, to which it’s been anchored since December 2008.  The economy continues to show all the signs of contraction.  Today, for instance, the retail sales report for August showed a meager .2% rise from July, which means that, after adjusting for inflation, real retail sales declined.  What happened to the “bump” retail sales used get from “back-to-school” shopping?

In addition, the NY Fed manufacturing index literally collapsed to -14.67 vs. the -0.5 expected.  It is the worst reading on the index since August 2009.  Employment and number of hours worked plunged.  The new orders sub-index continues to show a greater level of contraction than the overall index.

So what’s the Fed to do.  In reality QE and ZIRP were never about a Keynesian attempt to stimulate economic growth and create jobs for the masses.  The massive money printing and trillions in Government banking industry subsidies were always about keeping the big banks from collapsing.  Everything else was straight out of the “textbooks” given to us by George Orwell and Ayn Rand.

I wrote an article for Seeking Alpha explaining my rationale for yet another deferral on moving the interest rate needle just one millimeter off zero, once again:

ROFLMAOIf the Fed were to increase the cost of borrowing by raising the Fed funds rate, in all likelihood private sector borrowing, which is about 71% of the systemic debt outstanding, would contract. It is my assertion that this would cause a severe economic contraction. In this scenario, I believe the Fed would be forced sometime in the near future to address the economic contraction caused by hiking interest rates with more QE.

You can read the rest of this article here:  No Interest Raise Hike This Month

6 thoughts on “The Fed Will Not Raise Rates This Week – Here’s Why

  1. Dave, Thanks for your website and all you do. You are part of my daily read and I always look forward to your insights. I would like your comment on the weekly posting from Stewart Thomson which appears on 321gold. He seems to be one of the few alternative weekly posts that goes against the main view of most of what I read. This week for example he is talking about the need for Janet to raise rates to at least start to increase money velocity and bank lending and limit the endless increase in the size of the US govt. He seems to be saying that if Janet continues with the same old ZIRP we will continue to get the same results but only worse. Its time to at least (however small) try and help the real economy by enticing the banks to make real loans again. He says a lot more but I hope you get the picture. Go back to his other articles and they all have the same flavour. He seems to not buy into to the common view of most of what I read (and agree with). So I certainly see your point but I see his as well. I guess I don’t understand the economics of it as well as I would like. So what am I missing in my understanding?

    Thanks for any comments you wish to share!!

    joe

    1. Raising rates won’t increase the velocity of money. The velocity is approaching zero for two reasons: The supply of money and “credit money” has gone parabolic AND systemic organic economic demand is declining.

      Thompson is making the classic “push on string” argument. You can force money into the real economy. The real economy is contracting and it doesn’t need more money.

      The only solution to the problem at this point is to let the system collapse and reset.

  2. The Fed is waiting for a big false flag event to save them from being discovered as frauds who can do absolutely nothing to prevent the system from total collapse.

    1. The quotient> debt> the objective of central banks’ is not to reduce debt for that is the function that keeps’ all enslaved, the objective is stopping the system from collapsing ala Japan and maintaining the consumptive lifestyle of those whom benefit. They know full well what they are doing. Their claim of the fear of “deflation” is a bullshit notion, they love it , it keeps them in power. George Carlin “they got cha by the balls’ folks'” artificial scarcity of currency is completely manufactured.

  3. “Steve Liesman, sweat pouring from his navel orange some may call a bald
    head”. Oh please such graphic detail, I’m never reading you blog after lunch
    again. That just made me hurl. Now I have a Chipotle salad wallpaper.

  4. I didn’t think the Fed would raise rates, The fools at the fed would rather commit hari kari than upset the markets.

    One final note-I am Sorry if I made you mad, Dave, from a proior post, it is I have just grown cynical after all these years from the war on silver, didn’t mean to get on your bad side, just getting pissed off with this long drawn out war on silver, that’s all.

    I said I was skeptical because I had heard about silver shortages were on their way for so many months and years that my skeptical/didn’t want to set myself up for disappointment/ ‘Ill believe it when I see it’ part of me made me cynical. It was only when it was in my face/can’t deny the reality that I finally believed in a silver shortage-I’m stupid and stubborn that way I’ll admit it.

    As for eBay, they have turned into the biggest den of thieves the world wide web has ever seen. I ended my dealings with eBay a few years ago and will never go back to those uber crooks.

    Again, no offence intended from my lack of clarity and or small thinking on my part.

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.