The Danger Of The Fed's Tall Tales

Those two charts kill any hope of a rate hike in July, despite what some econo types are now saying, and despite the incessant ramblings of certain Fed governors who simply don’t know when to stop crying “Wolf!” (Honestly, the fact that some Fed governors continually prattle about the health of the U.S. economy warranting a rate hike raises questions about the quality of the economics education some of these governors possess.)

The Fed has no business raising interest rates in a jobs market and an economy that are clearly in decline.

And it won’t.

So don’t believe anything you read or hear that says a rate hike is on the table in July. It’s not.

Nor is a rate hike a possibility for the September or November meetings (no meetings in August or October) because those two meetings are much too close to the presidential election, and the Fed has no interest in facing blame for, theoretically, swaying voters.

That means December is the next possibility for the Fed to raise interest rates.

The Long Wait for Higher Interest Rates

Whether the Fed actually does nudge rates higher in December is increasingly meaningless, except for the Fed’s credibility, which has been shot full of holes because the Fed continually tells us a rate hike is coming but then nothing happens.

The investment world is coming round to the view I’ve been espousing since early 2012: The U.S. won’t see meaningfully higher rates for many years, probably not until late this decade or into the 2020s (for reasons I’ve written about here). And we probably won’t see the next rate hike until next year or later because there’s simply too much frailty in Western economies as a result of the overload of debt. Higher rates lead to higher debt payments, which, when you’re already burdened by too much debt, only makes your problems worse.

In fact, there’s a very good chance we see negative interest rates in America before we see anything that resembles normalized rates.

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As a lifelong world traveler, Jeff ...

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