To Hike or Not to Hike

by James Corbett, The International Forecaster The Fed will make a decision next week that will either be world-historical in nature or just another waypoint on the way to the largest bubble in history. If they decide to hike the Federal funds rate target from its current 0% – 0.25% range, there is the very real possibility of a market-breaking spectacle the likes of which we haven’t seen since the 2008 meltdown. On the other hand, they might simple hold rates where they are, in which case every market analyst will be studying and dissecting every word of Janet Yellen’s post-meeting press conference for indications of when the long-telegraphed hike might occur. The majority of analysts see a rate hike as inevitable, the only question being when, not if, the Fed will raise rates. For this crowd, the hike is likely to occur at this meeting or the next one and will be relatively small – 0.25% to start – but will increase more steeply next year as inflationary pressures hit. On the other hand a vocal minority (including Goldman Sachs, whose chief economist just released a list of seven reasons why Yellen won’t raise rates next week) believe the hike is going to be put off for now. These commentators look at the data and see no indicators that the market is heating up at all, let alone that it needs the Fed to cool it off with a rising interest rate. Both sides of this mainstream debate seem to think that the Fed is being stewarded by rational and benevolent elders who have the best interests of Americans (and, by extension, the rest of the world) at heart. I don’t think regular readers of this column will need to be told how off-base such thinking is. There is a debate happening amongst alternative commentators now, too. In this debate there is an emerging consensus that recent market troubles (and perhaps another scare like we had two weeks ago) will be used to justify QE4, whether under the “quantitative easing” banner or some other moniker. Opposed to them are those who think the Fed might just pull the plug on the QE bathtub and raise rates, not because they are trying to help ward off inflationary pressures, but because they want to bring about a global market collapse. Both sides can make a convincing case. After all, the bubble has been working just fine for the banksters and their cronies for the past 7 years, hasn’t it? Equities have just backed off their all-time record highs, but they’re still massively inflated from where they were when the Lehman shock hit. A lot of executives have made a lot of money in this bubble, even if it’s mostly paper promise money, so why not keep the party going with more easing? Continue Reading>>>

Sharing is caring!