The Fed needs to start raising rates!

Discussion in 'Economics' started by Kicking, Sep 30, 2009.

  1. I am here sitting at my desk trying to make a buck in the market
    and I have no Phd in economics no master in finance, nothing and I am thinking it doesn't take a Phd to realize that the Fed is already behind the curve if the recovery scenario they embrace is really materialzing . What in the world are these guys doing ?
    They must be a bunch of total incompetents to allow the creation of a new bubble in stocks. We have a huge bubble developing in stocks and if they don't start talking tough about future rate hikes, commodities, crude oil, are going to take off and there will be another big ramp up in gas prices which combined with high unemployment will destroy the middle class.

    They have to signal rate hikes now by mid 2010, otherwise things could get out of hand, I just listened to Kohn on CNBC, these guys are incompetent, as long as inflation remains low which he says means slack in the economy he thinks they can afford to do nothing and leave rates at 0 ! So what we need high inflation so they can decide there is no slack in the economy ?!

    I am asking why they couldn't take FF to 2% , wind down some of their programs while perhaps continuing to support the mortgage market but at least show that they are very determined to avoid another bubble .

    These guys have to be removed otherwise they will destroy what's left of social fabric in America and in the world !
  2. Daal


    Go read the Fed's mandate, they have no obligation to target stock prices. Stocks are not in a bubble too. Both inflation is low and unemployment high, its pretty much textbook to keep rates low as a long that is the case
  3. 1) stocks are in a bubble , no question about it, P/E's and especially forward PE's don't tell the whole story. We had a asset bubble in 06-07, prices are back there for some stocks that were poster child of the bubble, but the environment is not the same, thus we have a bigger bubble in some segments of the market. And I would hope they learned a thing or two about "not targeting asset prices".

    2) it's clear that if they wait for inflation to show up in CPI , crude could be past $100 again. Funny how $70 a barrel is no longer "elevated" nowadays ! The problem is once commodities take off, the move will create even more economic hardship for a large share of the population, and it will be more difficult to stop since they won't be willing to jack up rates at 1 percentage point a clip as they should do to stop a breakout in crude and raw material prices. Hence they have to start communicating they are hiking rates in the first half of 2010, just to prevent a bubble that will get out of hand and much more difficult to stop later on if they wait.
  4. I agree that they should definitely address the current liquidity glut by scaling back/discontinuing the various 'special' measures and programs. The amount of extra liquidity they (and the other CBs) have injected into the system is truly staggering.

    I disagree with the rates view. Mainly, because so far there's been no sign that the achilles' heel of the US economy, the housing mkt, has properly recovered. If they signal that rates will be raised, guess what happens to mtge rates and the housing mkt? I agree that, in this aspect, they're truly between the rock and the hard place and it's just a decision which is the lesser evil.
  5. 4XQs


    They're still seeing the deflationary pressure and are not worried about inflation. Trying to avoid another recession. It's going to be nine months before they hike...
  6. Common sense says : 0 % was an emergency measure, the situation has vastly improved if we listen to most of these PhD's so if they want to be consistent with what they say , they need to start talking tough and take rates to 0.5% , then 1% by mid 2010, then wait to see how the economy recovers while still maintaining an appearance of being committed to avoid new bubbles.
  7. jjj1000


    In my opinion, definitely the stock market is in a bubble right now, a bubble created by our government, either on purpose, or as a collateral effect of the liquidity they injected in the economy.

    The stock market indexes growth is not sustainable, nor is anchored on realistic assessment of the facts. 2 things here:

    1) Unemployment is very high and stubborn; likely to remain very high for years, hampering consumer consumption (70% of the economy) and confidence
    2) Tons of foreclosures still to happen (don't forget the gigantic shadow inventory held by banks) and all the losses and problems that it will create (including tight credit)

    If I were a FED decision maker, I would be very worried about this price increase (and uncanny lack of corrections) in the stock market. When this bubble explodes we will be much worse off, so I hope that they do something (like cancel stimulus programs and/or raise rates) soon before the bubble grows even more.

    Just my 2 cents.
  8. I blamed Obama when the markets went down, so now I will have to give him credit or not blame him when the market goes down.
  9. The Fed won't do anything until the front-month, fed funds futures contracts trade below 99.50. Until then, relax. :cool:
  10. as sad as it is true
    #10     Sep 30, 2009