Well, the “big” day has finally arrived. Since Bernanke’s infamous “taper” speech, there’s been an absurd amount of time, energy and resources spent by analysts, financial news television mannequins and bloggers discussing when and if the FOMC would take the unimaginably bold step of raising the Fed funds rate by 25 basis points. Into how much money does this translate? 25 basis points on $1 million is $2500. Laughable.
After the Fed deferred the life-shattering decision to nudge rates up slightly at the November meeting, the threats issued by various Fed officials became a daily occurrence. Given that the “bar” that was set to trigger the massive nudge up in rates was a 5% unemployment rate, the non-farm payroll report for November seemingly calcified the decision. The die is cast, the Rubicon has been crossed.
Meanwhile, every possible economic report, index and indicator originating from private sector sources show that U.S. economic activity is plunging at a rate last experienced in 2008-2009. Notwithstanding the fact that monetary policy implemented by the Fed since 2008 will be looked upon by history as Bernanke’s Waterloo, certainly any move to redirect this disaster by raising rates even a small fraction right now will only serve to throw the economy into the abyss.
The entire episode between the November and December meetings has been nothing short of one big Hollywood production. Theatre of the Absurd in its purest form. Like it really matters whether or not the Fed raises the Fed funds target rate by 25 basis points. Since 2009, the effective Fed funds rate has averaged around .13 percent. In reality, even if the Fed does hike the Fed funds target range by 25 basis points to .25-.50 from 0-.25, and removes enough banking system liquidity to enforce minimally the lower bound, the effective funds rate might go up less than 12 basis points. All this “hoopla” over what will likely amount to raising the big bank borrowing rate from the Fed by 12 basis points. That would be $1200 on $1 million.
There is, of course, an insidious Orwellian aspect to this entire charade. By focusing the entire market’s attention on what amounts to a completely meaningless hike in the Fed funds rate, the Federal Reserve/Government hand-puppet operators have effectively deflected the debate and focus away from the real issues plaguing our system.
Lost in the discussion has been the fact that the Government-reported employment, inflation and GDP statistics are entirely fraudulent. The true unemployment is closer to 25% than 5%; the cost of everything that matters has been escalating at 5-10% per year for several years; the upper .1% of the wealth strata in this country has sucked an enormous amount of wealth away from a middle class that is shrinking into oblivion; and the entire political system has become dysfunctional to the point at which a confirmed criminal is one of the leading candidates to become the next President.
Other than that, Mrs. Lincoln, did you enjoy the production of “Our American Cousin?”