Yes and I do not care.
The problems here are different.
Lack of demand
Overcapacity
Too much debt
Overstimulus that created a bond bubble
Credit risks
Balance of trade
Continuous loss of jobs
No matter how much money you throw at a problem it can not cure overcapacity or the nacro trend of loss of jobs to china and asia.
Also look at the housing picture.
You are TOTALLY 100% nuts if you think US housing can stand huge rate hikes. Bankruptcies are already at multi-year highs.
The Refinance boom is OVER.
Just where are people to get money if they can not take it out of their house.
EVERY one of these points is deflationary.
Every damn one of them
Loss of jobs is the biggest.
Now you want HIKES that will kill how many jobs in the housing industry?
carpenters, plumbers, brick layers.
The ONLY thing holding up this economy is housing.
Raising interst rates substantially will KILL it, along with hundreds of thousands of jobs.
Real estate prices will collapse.
You are nuts if you think that is inflationary.
Thus......
Interst rates are not going higher regardless of whether or not you think they should, I think they should or anyone else thinks they should.
Now, truth be said, I think they SHOULD rise.
Why?
Because they do not properly account for credit risk.
But....
How many companies these days are 100% dependenat on short term borrowing? Like TONS?
What happens to their costs and profits if rates rise?
How many go under?
How does the stock market react to that?
By rising or falling?
If the stock market reacts by falling is that defaltionary or inflationary?
Sorry, no matter how you twist or turn it is IMPOSSIBLE for rates to rise more than 1/2 to 3/4 percent. On that last hike (and we will NEVER get there IMO - never means next 3 years or more) Housing will die, jobs will die, no one will have any money to spend, etc etc etc etc.
I did a post somewhere on SI yesterday on this issue.
The two biggest HAWKS on the FED who were calling for hikes reversed position last week and are now doves.
That is an amazing turnaround.
I guarantee you 100% that something is up that spooked them.
I am not sure what that it, but it is probably jobs, consumer spending, a slowdown in housing, or all of those and more. All puting fear of DEFLATION in the minds of INFLATION HAWKS!
you see rising commodities but draw a 100% wrong conclusion. Rising commodities are from Chinese demand. We are not going to control that with hikes in our interest rate. Nor are we going to stop the outflow of jobs no matter how low the dollar falls. It simply is not going to happen with our labor rates at $30 and theirs at $1. Not gonna happen. PERIOD. We can NOT save jobs here. Loss of jobs is EXTREMELY deflationary.
Now, you want to make the job situation and housing worse by RAISING interest rates.
I already have my plan in place. IF they are stupid enough to do this, I am throwing EVERYTHING I have that it will be the last hike for another 4 years cause it will be the death of the US economy.
The problem for the FED is there is no room to cut, not no room to hike. Even IF they are stupid enough to hike I can stand 1/2 by sept of next year.
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