Why the Federal Reserve will raise interest rates in two days (on 15 Mar 2017)

[ThePythonicCow]

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I'm expecting the Federal Reserve to raise its short term interest rates, at their scheduled meeting this Wednesday, 15 March 2017.

... mind you ... this is like predicting that the Chicago Cubs baseball team will win the World Series ... you'd have been wrong for over a 100 years running. But not always wrong, as the Cubs finally did win, last year, 2016.

So anyone placing real money on a bet, based on my call here, is a dang fool.

Anyway, three significant events will be happening this Wednesday, 15 March 2017: Federal Reserve announces whether it raises rates or keeps them the same (zero chance they'll lower them),
the moratorium on enforcing the US debt limit expires, and
The party of Geert Wilders, the "Dutch Trump", might win the national elections in Holland.

My guess is that the Fed raises rates, the US national debt turns into months of political theater, and that Geert Wilders wins.

Each of these three events would significantly damage the debt-burdened, fragile, global monetary, financial and economic systems.

I think that just such damage will happen ... deliberately ... as the occult bastards in power finally start setting off the chain reactions of devastation that will lead through our civilization the valley of the shadow of death (http://www.covenantofgrace.com/pilgrims_progress_shadow_of_death.htm) to the shining next new world order.

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The reason I post on this now, besides giving every one a chance for a good chuckle with yet another forecast of mine falls flat, is that "Gail the Actuary" Gail Tverberg has spelled out nicely why she thinks that the Fed will not raise rates. In her latest article, at Raising Interest Rates Can’t End Well! (https://ourfiniteworld.com/2017/03/13/raising-interest-rates-cant-end-well/), Gail lists ten (10) reasons why raising interest rates now would be a disaster.

Gail reasonably figures that the Fed would not be deliberately destructive, so won't raise.

I figure that it's time for the Fed to be just so destructive, so will raise.

But Gail does an excellent job, either way, of spelling out the financial problems that raising rates would aggrevate. She knows her numbers.

Here's just the summary lines from her ten problems with raising rates:

The economy is now incredibly dependent upon rising debt to prop up its spending.
The vast majority of the debt run-up since 1981 seems to have been enabled by falling interest rates. Given how dependent we are now on large increases in debt to produce GDP, it would seem to be dangerous for the Federal Reserve to raise interest rates.
The last time Federal Funds target interest rate was raised, the situation ended very badly.
The pattern the Federal Reserve seems to want to follow is the 1981 model, in which temporary high interest rates seemed to force energy prices down for a long time.
Adjustments made using Quantitative Easing (QE) (a way of producing low interest rates) appear to have had a rapid, significant impact on oil prices.
The way increased lending seems to move the economy along is by using time shifting to provide a “layer” of future goods and services that can be used as incentives for businesses to invest in making goods and services now.
The spending ability of US citizens has been lagging behind, even with the huge amount of debt being added to the economy. If the Federal Reserve raises interest rates, it will tend to make the situation worse.
All income seems to ultimately derive in part from rising debt, and in part from energy consumption. If interest rates are too high, the required interest payment exceeds the benefit of time shifting.
It is relatively easy to make economic growth occur when energy products are becoming more affordable, relative to spendable income. When energy products are becoming less affordable, it becomes virtually impossible for economic growth to occur.
China seems to be cutting back on growth in debt now, at the same time the US is talking about increasing interest rates. Energy products, especially oil, are sold to a world market. If China cuts back on debt at the same time as the US raises interest rates, energy prices could drop dramatically.

If you enjoy reading Gail, this is an excellent description of the nature and impact of debt and interest on our global economy.

If you haven't read her work much yet, give this article (:"https://ourfiniteworld.com/2017/03/13/raising-interest-rates-cant-end-well/") of hers a try. She's good.

[Karma Ninja]

Perhaps the increase will be made to ramp up the pressure on the Trump administration. Trump has made a lot of promises to cut a bunch of taxes and increase spending in other areas, these initiatives will be harder to implement if there is downward pressure on the dollar due to increased borrowing costs. All of Trumps promises to rebuild the manufacturing sector may need to be delayed until there is more stability with the dollar.

Nothing makes people change opinions on leadership faster than economic instability.

[Satori]

If Ms. Tverberg labors under the illusion that the Fed would not be destructive, perhaps it would behoove her to read and understand such books as Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider, or the Creature from Jekyll Island, by G. Edward Griffin, and the opus magnum on the subject of constitutional money, debt and money creation, and the federal reserve by Edwin Vieira, titled Pieces of Eight. It is very apparent from these books alone that economic booms and busts are not the result of some invisible hand of market forces, but rather the visible, but often secret and esoteric, handiwork of central bankers.

[onawah]

This interview between Win Keech and Jay Pee of Wolf Spirit Radio is mostly about banking, money, barter and what financial changes may be coming soon, as well as Win's new invention that is a new tool in the making for the growing barter market, but then the last half hour becomes a conversation about the Lyran wars and how that conflict shaped what we are experiencing on Earth now.
Many of the people who tune into Jay Pee's shows are recovering memories of those times, the migration of the Lyrans to the Pleiades and our solar system, and how the Reptilians are still creating havoc for the human race at large.
vCUh8_UWbkQ

[ThePythonicCow]

If Ms. Tverberg labors under the illusion that the Fed would not be destructive, perhaps it would behoove her to read and understand such books as Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider, or the Creature from Jekyll Island, by G. Edward Griffin, and the opus magnum on the subject of constitutional money, debt and money creation, and the federal reserve by Edwin Vieira, titled Pieces of Eight. It is very apparent from these books alone that economic booms and busts are not the result of some invisible hand of market forces, but rather the visible, but often secret and esoteric, handiwork of central bankers.

Gail Tverberg is more conventional in her thinking; she's not one of us "tin-foil-conspiracy" types. Her skills are essentially in understanding the "time value of money" and the time varying costs in energy, of obtaining energy, and similar sorts of acturarial work.

[mgray]

Great minds Paul. Although I don't agree on the rate hike. This is what I wrote (https://mgray12.wordpress.com/2017/03/13/ides-of-march-trifecta-may-bring-more-change/) Monday morning.

[ThePythonicCow]

Although I don't agree on the rate hike.
If you get that call right, it will be a feather in your cap :). You and Jim Willie are about the only ones I know of who are saying they won't raise. Jim's been saying the Fed can never raise, because it would blow the system up. He even discounts the raises of 2015 and 2016 as not being real raises, but more smoke and mirrors. Jim, like Gail Tverberg, figures that the Fed wouldn't blow their own game up.

[mgray]

Yellen & Co. will give good reasons for a rate rise: Employment is rising, consumer optimism is up, and yada yada. However GDP is lower QOQ and inflation running weaker with reduced energy prices, which is more important. Fed can't fight deflation and stimulus (infrastructure $) is months away.

So we will hear plenty of "While this ... and this ... However, this... and yet that ..."

[regnak]

Well Obama kicked the can to Trump .

The can is budget crisis which is 20 trillion the problem which is coming soon will be Trump to deal with will he default or pay the money back or try to kick the can well the can will only be kicked so far before chaos .

As to interest rates the higher they go the worse it be for the dollar I think she wait till summer to raise rates mostly because of Europe begging her not to raise rates.

[Helene West]

hike or no hike.
Part of me goes with Paul in that as smart as Gail T. is she probably doesn't have a conspiracy bone in her bod which to me of course puts her at a predictive disadvantage.

However, I think Trump is meant to be the scapegoat of any and everything so if they hike and there are reverberations we can't blame trump, we can then blame the Fed. jim willie can be correct in that if they hike in such a miniscule way no one feels anything it doesn't count, that's a possibility as well. But I tend to be in favor of the central bankers wanting a fall guy so i think I'm going to go with no hike, this way a bad, or stagnant economy can be cleared for blaming trump instead of the fed. I could be confused in my thinking but that is where I'm at.

As far as Wilders, I'm excited waiting to hear... I don't know if the dutch and french have the guts the more sturdy northern englanders had in voting for brexit. People are afraid of real change and whites have been so subjected to mind control with the white guilt thing the globalists just may prevail....

[norman]

In my logic, they will only blow the system when all their ducks are in a row.

One duck that's not quite in place yet is a clear certainty where things are going in the Eurozone. I think a huge amount hangs on the result of the French election.

[mgray]

Two hours prior to the rate decision the Atlanta Fed lower Q1 '17 US GDP to 0.9%. Seems someone is trying to send a message.

[Karma Ninja]

It appears Paul was on to something. They announced another 1/4 point increase.

http://money.cnn.com/2017/03/15/news/economy/fed-march-meeting/index.html

[Satori]

It appears Paul was on to something. They announced another 1/4 point increase.

http://money.cnn.com/2017/03/15/news/economy/fed-march-meeting/index.html

Please correct me if I'm wrong, but I understand that this interest rate hike is what member banks in the federal reserve charge other member banks for a loan. That is the borrower banks' cost of money for such loans. Referred to as the federal funds rate. If so, then that cost will be passed on to the non-bank borrowers in the form of an increase in the rent or cost of money, i .e., a hike in interest by more than 1/4 point. It is not difficult for qualified people to determine what the likely rate hike will be for the person on the street.

[Karma Ninja]

Please correct me if I'm wrong, but I understand that this interest rate hike is what member banks in the federal reserve charge other member banks for a loan. That is the borrower banks' cost of money for such loans. Referred to as the federal funds rate. If so, then that cost will be passed on to the non-bank borrowers in the form of an increase in the rent or cost of money, i .e., a hike in interest by more than 1/4 point. It is not difficult for qualified people to determine what the likely rate hike will be for the person on the street.

It sort of works like that but with a bunch of other pitstops for the money along the way. What I mean is that the transfer of responsibility for this new higher interest rate gets absorbed by the people making the payments but not always in a direct manner yet still following an indirect path to the same destination/people. If it is a landlord who is still paying off a loan for the rental property than the trickle down will eventually be partially absorbed by the tenant. People paying mortgages will be asked to pay higher amounts of interest on their loans when they renew the terms. Companies borrowing money to purchase or invest will need to allocate a larger amount of their earnings to paying off the interest on their loans. It's a small increase but it can have a large affect on small margin deals. The effects of the trickle down will vary for each example.

Not sure if that helps but it's the best I can do to slightly clarify.

In the end, it is all a shell game and none of the money actually exists so it can be said that it doesn't matter what the effect will be to the people on the street. It's about control.

[mgray]

It appears Paul was on to something. They announced another 1/4 point increase.

http://money.cnn.com/2017/03/15/news/economy/fed-march-meeting/index.html

Please correct me if I'm wrong, but I understand that this interest rate hike is what member banks in the federal reserve charge other member banks for a loan. That is the borrower banks' cost of money for such loans. Referred to as the federal funds rate. If so, then that cost will be passed on to the non-bank borrowers in the form of an increase in the rent or cost of money, i .e., a hike in interest by more than 1/4 point. It is not difficult for qualified people to determine what the likely rate hike will be for the person on the street.

Yes that's it in a nut shell. Fed Funds Rate is the overnight rate for intrabank and at the Fed's window operations.

All consumer rates will rise as a result.

Ironically the debt you already accrued on your credit card will have a higher interest rate now as well.

[ThePythonicCow]

It appears Paul was on to something ...
That ... or I was on something :).

I only got two out of three of my calls - the Fed and the (easy call) debt ceiling. Far-Right Dutch MP Geert Wilders FAILED to make inroads in general election (http://www.dailymail.co.uk/news/article-4315374/Europe-braced-NEXIT.html).

[Helene West]

It appears Paul was on to something. They announced another 1/4 point increase.

http://money.cnn.com/2017/03/15/news/economy/fed-march-meeting/index.html

Please correct me if I'm wrong, but I understand that this interest rate hike is what member banks in the federal reserve charge other member banks for a loan. That is the borrower banks' cost of money for such loans. Referred to as the federal funds rate. If so, then that cost will be passed on to the non-bank borrowers in the form of an increase in the rent or cost of money, i .e., a hike in interest by more than 1/4 point. It is not difficult for qualified people to determine what the likely rate hike will be for the person on the street.

Yes that's it in a nut shell. Fed Funds Rate is the overnight rate for intrabank and at the Fed's window operations.

All consumer rates will rise as a result.

Ironically the debt you already accrued on your credit card will have a higher interest rate now as well.

Just to clarify - will the interest on my savings account go up? :Party:

[mgray]

Not likely anytime soon.

[Kano]

So it's interesting that the Fed raised the Funds rate on the same day that the US Government's debt ceiling was reached (again). I thought this article from Zerohedge was an interesting read.

http://www.zerohedge.com/news/2017-03-15/june-1st-deep-state-will-move-overthrow-trump

[ThePythonicCow]

It appears Paul was on to something ...
That ... or I was on something :).

I only got two out of three of my calls - the Fed and the (easy call) debt ceiling. Far-Right Dutch MP Geert Wilders FAILED to make inroads in general election (http://www.dailymail.co.uk/news/article-4315374/Europe-braced-NEXIT.html).
It seems that whatever initial report I had read about the Dutch election was misleading. Dutch MP Geert Wilders party did gain some seats, and the leading party lost quite a few seats.

[ThePythonicCow]

It seems that whatever initial report I had read about the Dutch election was misleading. Dutch MP Geert Wilders party did gain some seats, and the leading party lost quite a few seats.
This quote, from the Brietbart article Analysts: Geert Wilders Force to be Reckoned With After Dutch Elections (http://www.breitbart.com/london/2017/03/18/analysts-geert-wilders-force-reckoned-dutch-elections/) seems to do a good job of explaining what happened in the Dutch election:

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THE HAGUE (AFP) – Geert Wilders may have been beaten into second place in the Dutch elections but the far-right MP will enjoy a magnified role in parliament and remain a force to be reckoned with, analysts said.

While he failed in his aim of starting a “patriotic revolution,” Wilders has already succeeded in shifting the debate and the tone in Dutch politics on immigration and integration, observers said.

Campaigning on an anti-Islam ticket, the peroxide-haired politician saw his hopes wilt from an all-time high in January when opinion polls had said he could win as many as 37 seats in the 150-seat Dutch lower chamber.

Instead, he captured a more sobering 20 seats in Wednesday’s general elections, behind the 33 won by the Liberal party of Prime Minister Mark Rutte, but enough to place his Freedom Party (PVV) second.

“It would have been great if we were the largest, but we’re willing to talk and help govern. That’s my hope,” Wilders told journalists Thursday.

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There's more detail in this article (http://www.breitbart.com/london/2017/03/18/analysts-geert-wilders-force-reckoned-dutch-elections/).