Are Central Banks Really Planning To Raise Interest Rates?
Here’s the skinny on this…
Any signigicant rise in effective interest rates by central banks will cause an instant market crash that will make 2008 look like a cake walk.
You see the Fed and other Central Banks have put themselves in a catch 22, we’ve been in a chronically low interest rate environment with almost non-existant economic growth for so long it is killing any market bumping lifespan for Quantative Easing Announcements, thereby reducing the power of Central Banks over monetary and economic conditions, and it’s having a real dampening effect on fixed income people, and therefore the economy as a whole. But here’s the Catch 22, if they raise interest rates, the markets instantly crash. This is all just another sign the economic/debt cycle is almost near its end.
The Fed’s tool box is virtually empty now, except for The Nuclear Option, but that is not uncommon at the end of an economic cycle. Bernanke knows where he’s at here, he’s not stupid despite the role he plays on TV, he’s just working within the system as it has been designed, but there are some differences between this cycle and the cycle that preceeded the Great Depression. World population and the sheer amount of debt and currency in the system come springing to mind, but also one of the things they did during the Great Depression was basically tax every man woman and child holding gold backed paper currency 40% overnight by increasing the value of the gold used to back that currency, or devaluing the currency.
But in the current cycle we are dealing with entirely fiat currencies, So Here Is The Nuclear Option, they only way they will be able to pull a version of the same stunt they pulled in the Great Depression is by de-valuing the currency everyone is holding after a hyperinlationary event (which is not growth but rather a loss of confidence in the currency) and then returning backing to said currency with a basket of commodities approach specific to each currency/country but also pegging all backed currencies together, and also taking much of the old currency out of circulation in the process (this will be true for both paper and electronic currency).
In other words, when they return backing to the currency, you will either have your bank accounts (electronic credits and debits) cut by a percentage with a keystroke on a computer, or you will have to bring in any actual paper currency you’re holding and exchange it for the new backed currency, at a percentage deduction of course (just as an example, $200 old for $100 new). This will also apply to loans – loan principal will be cut by a percentage (including sovereign debt). But make no mistake, the commodities backing the currency will skyrocket in value, and the elite already own 90% of those commodities around the world, so they will gain despite any reduction in the value of the currency they currently hold.
This Keynesian Econimic system we find ourselves with has always been designed to funnel money from the bottom to the top, then have it trickle back down to the bottom (after a percentage is retained by the top of course), but the Trickle Down effect has been broken through repealing the Glass-Steagall act, Accounting Regulations, and outright greed that have essentially stopped the banks from loaning out money to consumers or small business’. And make no mistake, the breaking of that system has been quite intentional. These guys are not stupid, they recognize where we are in the bigger scheme of cyclical Keynesian Economics and, world cycles such as population, energy, and food, and they would rather break it themselves, then rebuild it, than lose control entirely, though they will certainly appear too…
Don’t be fooled, remember, Ordo ab chao, no matter how much chaos you see unfolding around the world when this finally happens, it is all part of the bigger plan…the plan to soak you for half of your net worth overnight!
Not saying we are at this point yet, but if you’re not ready for this, you might want to consider getting ready for this…
Credit Suisse: This is when the Federal Reserve’s super-low interest rates could rise
The Fed’s new approach to targeting a specific unemployment rate (called the “Evans’ Rule”) may shed some light on how long the monetary easing may continue.
Credit Suisse did a simple linear extrapolation from the peak unemployment rate in 2009. Such approach sets the end of the program for late 2014.
That of course assumes the unemployment rate will continue declining in a linear fashion (which may be unrealistic given the structural shift in employment). It also assumes…