Federal Reserve Debates On Next Rate Hike- Never vs. The End Of Time
Here we go again. In what became American tradition years ago, the Federal Reserve released minutes from its most recent policy meeting, lending the masses to think there is some real discussion on just how close the next rate hike will be. Taken at face value, we are supposed to think that it’s going to happen very soon, just as soon as they can get their hands on “more economic data” to confirm. It’s unbelievable- to paraphrase the show Archer- in the sense that I do not believe any of this.
The Federal Reserve, while never truly “independent” as their mandate claims, now spin things more shamelessly than elected officials- and given the insanity that we currently find ourselves in, that’s really saying something. What “more economic data” do these people need? We live in an era where we have more data than most of us know what to do with! For those not old enough to remember a pre-zero interest rate environment, or for those who have simply forgotten- seriously, it’s been one-third of a generation already- this was initially supposed to be a temporary response to the economic crisis of 2008. The crisis, at least on the surface, abated within 2 or 3 years. Then Fed-chairmen Ben Bernanke said the rates would be “normalized”, once unemployment fell below 6.5%. When we actually reached that point, though, the Fed changed their tune, stating there were other factors that went into consideration, even though 6.5% was the benchmark THEY STATED THEMSELVES!
But okay, let’s do it their way. If they want “more economic data”, how about the fact that the stock market has been skyrocketing almost nonstop the past 7 years? (The Dot.com bubble and subsequent real estate bubble, both viewed in hindsight as pinnacles of investment madness, each lasted about 5 years apiece.) How about the fact that in most real estate markets, prices have approached or even exceeded levels that in the previous decade, most people now claim- again, in hindsight- were clearly ridiculous? I was no fan of Alan Greenspan, but he was absolutely lambasted for leaving rates at 1% for 1 year, allowing the markets to overheat and ultimately crash. What in the world is the fallout going to be from having ~0% rates for 8 years- and counting?! Plus, even the watered down version of today’s CPI is running at 2%. By leaving rates at almost nothing, the Federal Reserve continues to punish savers, while rewarding those who pile on the riskiest, most overpriced assets. The hope is that they can continue to keep this thing going juuuust a little bit longer, assuring us that the case to raise rates is “slowly building”, to a point where they can finally return to normal- if anyone can recall what that even looks like anymore.
The idea seems to be that so long as the game keeps going, The Powers That Be can hold the whole thing together- a great idea from their point of view, so long as the endgame is nowhere in sight. Rest assured, though, there IS an endgame, regardless of whether anyone can see it or not. It just won’t be the Fed who comes up with it, because they will have lost all control of it at that point. But until that elusive day of reckoning when Wile E Coyote finally looks down? Happy “investing” to all!