Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (22548)	2/1/2005 8:49:13 AM
From: Elroy Jetson	Read Replies (4) of 116555

This morning a CNBC talking-head and make-believe economist asked, "Why has the interest rate, on 2 year loans from a commercial bank, risen only 0.04% over the same period that the Fed has allegedly 'increased rates by 1.5%'." Once again, the real answer is the Fed is not really raising rates. Although they have increased their "Discount Rate" by 1.5%, a rate which applies to absolutely no one, they have not restricted the growth of the money supply. The Fed has very few mechanisms for actually raising interest rates apart from restricting the growth of the money supply, aka the creation of new debt. CNBC chat came close to the answer when a couple of people mentioned there seemed to be "a large amount of available funds floating around in the banking system." The *real question* is, why does the Fed want to appear to be raising rates - when in fact they are not? .

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