No, the US involvement in Syria created the refugees. Regime change efforts in the middle east created the refugees. However, it is true that Merkel bit off more than she could chew, as the planners know Europe is aging and needs young people from anywhere it can get them.

Yellen is counting on neoFisherism but without actually getting banks to lend, raising rates is a risky proposition. And then, the banks and counterparties are betting on low rates for their collateral for these derivatives markets. I wonder if rising rates would offset a decline in price of those bonds. Clearly they would have to supply more bonds as collateral to offset the decline in prices of those bonds. Raising rates will not put an end to the hoarding of bonds, that is for sure.

And then, of course, banks want a raise in their welfare checks otherwise known as interest on reserves.

Will Rogers said, in the Great Depression, something to the effect that banks must be really broke if the Fed could not raise rates by 1 percent. Now the Fed is afraid to raise rates by.25 percent, which must mean the banks are more broke than in the Great Depression. But they just reported record profits.

Perhaps it is the counterparties that are now the ones that are broke or at risk, the hedge funds, etc, who incurred the risk banks once had through the creation of structured finance. That is the way Greenspan wanted it. He got what he wanted, too big to fail.

I quoted Greenspan in an article I wrote on Talkmarkets, Jeffrey:

"Derivatives have permitted the unbundling of financial risks. Because risks can be unbundled, individual financial instruments now can be analyzed in terms of their common underlying risk factors, and risks can be managed on a portfolio basis. Partly because of the proposed Basel II capital requirements, the sophisticated risk-management approaches that derivatives have facilitated are being employed more widely and systematically in the banking and financial services industries.

To be sure, the benefits of derivatives, both to individual institutions and to the financial system and the economy as a whole, could be diminished, and financial instability could result, if the risks associated with their use are not managed effectively. Of particular importance is the management of counterparty credit risks. Risk transfer through derivatives is effective only if the parties to whom risk is transferred can perform their contractual obligations. These parties include both derivatives dealers that act as intermediaries in these markets and hedge funds and other nonbank financial entities that increasingly are the ultimate bearers of risk."

www.talkmarkets.com/.../hoarding-the-new-gold-early-history-about-structured-finance

With rents exploding, reasonably well underwritten subprime can work.

But then, Jim, the Fed killed all the subprime. It all didn't deserve to die. And if banks are zombies, it is partly because the Fed killed all of subprime. Now they get welfare checks in the form of interest on reserves and they want a raise on that too.

This makes total sense since structured finance was devised as a way for banks to place risk off themselves onto hedge funds and other investors.

People save more in order to offset the negative rates. And doesn't it look like, Jeffrey, that negative rates are being pushed down no matter what the risk? So, it is all about demand for the bonds as collateral for this and that, and that demand must be massive. I hope you and others comment.

Jesse, you said: "To act as though 'wage inflation' would be the most serious problem we might encounter, while the top ten percent have been just rolling in the profits thanks to deregulation and the Fed's absurd monetary catering to the banks, is beneath contempt."

That was well said. But I don't think Stanley has said the economy is going forward. He said he didn't know. I think the Fed members know that slow growth is the new normal, so Stanley could have lied by saying he didn't know how the economy would do.

The Fed is afraid of inflation, and of deflation, and of its own shadow. That is because there is too much bond hoarding for collateral in the derivatives markets.

There is still massive demand for US long bonds and the yields prove it. It now is about bonds as collateral, bonds as the new gold, not about hedging.

The Fed's goal, and it is not part of the government, technically, was to protect the bonds. Bonds are gold these days. Structured finance began the process of bond hoarding. It continues as yields go down. So, the Fed protected the bonds, except for the MBSs, which were not good, and which were mispriced by the Fed in the very beginning. Basel 2 made that happen.

So, the Fed could have protected the banks earlier, by backing the commercial paper market which was connected to the subprime real estate market, but it chose to watch as it disintegrated.

Thanks for taking the time to share his response.