Should we be anticipating this
major change predicted by so many with the looming Federal Open Market Committee
(FOMC) meetings that will be taking place this week? The fear of the FED’s decision to raise rates
has the market bouncing out of control. We
see much volatility on Wall Street, there is just no room for the FED to raise
rates while the market is acting like it is.
We seem to be so influenced with even the threat of the FED’s decision
to raise or not. I get it, it is a big
deal and some kind of change has to take place, I just do not think they really
will raise those rates, if you look at the FED’s past history they do not really
seem to have a clue what to do.
The FED thought adding a Zero
Interest-Rate Policy (ZIRP) was going to be a “fix-all-solution” and became a
major liquidity problem. The FED thought
that cheap money would entice big business to invest, thus strengthening growth
with hope of refinancing and creating more fiat to spend or invest in the
market, lifting asset prices knowing that only about half of Americans even
hold mutual funds or stocks and wanted to follow in the footprints of the ever-emerging
1989 Japan. We are now seeing how that worked out for Japan,
and we should be taking notes. The ZIRP
has created a mass of bailouts and left people who had been saving their whole
life with nothing, pensions and funds undervalued and many unable to even think
about retirement. This caused mass miscalculations
of capital and distorted the market for so many. The worst thing about it is that it gave the government
lead way to borrow and spend in to the hundreds of trillions and produced a
large amount of Quantitative Easing (QE).
This has been a conscious decision that the FED has made knowing what
was to come, so what makes you think they will really raise rates and fully
quit QE?
The FED will not raise those rates
and so far, they have an excuse for everything.
They have blamed the financial crises, inflation, GDP growth,
employment, then China then Europe, Wall Street, volatility, then wage growth or lack
of. Now they blame the fact that the dollar
is too strong, energy too low, at one point they even blamed the weather. It is ridiculous that we base our trading on their
actions or lack there of, but we do, or should I say we base it more on the predictions
of how the market can and will move. All
this meeting will really be about is who will have to clean up this awful mess
they have created and maybe they will have a new bank welfare system that can
assist in the clean up of all the miss-priced assets of high yield returns and
piles of crap numbers and fake balance sheets.
The FED has a big hole to climb out of, and the boomers are not going to
just stand by as the FED makes it impossible to gain, soon we will see the
affects of them pulling their money out of the market and banks, to invest in precious
metals and physical holdings a more grounded investment. This causes major bubbles and we know what bubbles’
do, don’t we. Soon we will see what real
inflation looks like and real volatility.
For now with how things are going, they are not going to change too much
and even if they did, it will not sway the strength of the USD anytime soon not
with the holidays right around the corner and the skepticism of every other
currency.