Reality Or Pixie-Dust?

So, the Fed has opted to abandon the real US economy for the Tinkerbell and pixie-dust delusions of the Wall Street markets by raising official interest rates overnight.

The move was not justified, being merely a face-saver after so many months of ‘will we, won’t we’ dithering.

This post inspired by: Federal Reserve announces first rise in US interest rates since 2006

Now we wait for the fallout.  No, not the immediate reaction of the markets.  Nothing can be read into anything that happens on that particular roller-coaster fun ride.  But what happens in the real economy over the next few months.  Even yesterday there were commenters questioning how long it would take the rate to fall back to zero again.

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“Economic Winter Is Finally Upon Us” – JHK

I just couldn’t go past this timely article by the erudite Jim Kunstler: Fedpocalypse Now.  Excellent stuff.

“Welcome to the successor to the global economy: the yard sale economy, with all the previously-bought stuff going back into circulation on its way to the dump,” says JHK.

I’m not sure he hasn’t stepped over the fence of good taste in his depiction of a naked Janet Yellen trying to step out of the corner she has boxed herself into, but she is probably fair game for that …and I remember doing exactly the same myself recently, so it must be all right.

His description of the things Yellen “and her cortege of necromancers” have to consider, is spot on:

Despite her well-broadcasted insistence that the economic skies are blue, storm clouds scud through every realm and quarter.  Equities barfed nearly four percent just last week, credit is crumbling (nobody wants to lend), junk bonds are tanking (as defaults loom), currencies all around the world are crashing, hedge funds can’t give investors their money back, “liquidity” is AWOL (no buyers for janky securities), commodities are in freefall, oil is going so deep into the sub-basement of value that the industry may never recover, international trade is evaporating, the president is doing everything possible in Syria to start World War Three, and the monster called globalism is lying in its coffin with a stake pointed over its heart.

And, how’s this for a summation of modern America and the possibility of that nation being led by Donald Trump:

…is he the best we can come up with under the circumstances?  Is there not one decent, capable, eligible adult out there in America who can string two coherent thoughts together that comport with reality?  Apparently not.

Warms my heart to read such insightful stuff.  Thanks JHK.

It’s A Mystery

So, it’s a mystery.  Well, not really.  The more jobs, the more money is in the economy and the more inflation there should be.  It hasn’t happened.  What’s wrong?

This post inspired by: The Mystery of Missing Inflation Weighs on Fed Rate Move

bn-lr280_inflat_m_20151211170156Photo: Scott Eisen/Bloomberg News

 

It can only be the jobs figures, or more correctly what they hide.  And they are designed to hide the fact that the US economy, the real economy not the fictitious one manufactured for Wall Street’s benefit, is on the rocks.

So, I continue to predict, against most other sources anticipating the move, that the Fed will not raise interest rates tomorrow (US time).  In all honesty, they can’t take that risk.  The banks wouldn’t like it anyway, as they will lose their risk-free, do-nothing, profit money.