why can't the Federal reserve raise rates?

[lamboguy]

last year the United States took in just over $3 trillion in revenue while having a debt of $18 trillion. they paid out $430 billion in interest or 14% of revenues if the rates rose from 2.4% to 4.5% they would be paying over 25% in interest payments if their revenue remained constant. that does not the include the increase in debt that might be as high as $20 billion within 2 years.

[ultracapper]

Basically, however worthless our money becomes, we aren't going to be able to keep it anyhow because the guv needs to pay our debts. So the funny money gets printed by the ton, and the IRS takes as much as the guv needs to at least make maintenance payments.

Bad picture we're painting in this country. Bad picture. The only reason this country is in such incredible debt is because it makes payments to international criminals and thieves on a daily basis. There is no way running this country costs as much as this country is spending. I would bet every service that the US guv is providing could be done on about a quarter of what is being spent. The Fed Res is a pig trough that every sow on the planet can shove his head into if he knows the right people.

[Marshall Bennett]

The very fact that interest rates haven't risen is a symbol that the economy continues to struggle.

[Clocker]

The very fact that interest rates haven't risen is a symbol that the economy continues to struggle.

Bend over, here it comes again.

U.S. economic growth nearly stalled in the first quarter as harsh weather dampened consumer spending and energy companies struggling with low prices slashed spending.

Gross domestic product expanded at an only 0.2 percent annual rate, the Commerce Department said on Wednesday. That was a big step down from the fourth quarter's 2.2 percent pace and marked the weakest reading in a year.

http://www.reuters.com/article/2015/04/29/us-usa-economy-idUSKBN0NK08520150429

[Robert Goren]

The very fact that interest rates haven't risen is a symbol that the economy continues to struggle. That is true. We are basically stuck in neutral and have been for the last 4 years. At least we are not going backward. The real corrupt is the strong dollar. We just can not export very much made in this country. I know the right like to say our dollar isn't worth much, but it is worth more than almost anybody else's currency. Raising interest rates will just make it worse.
What I really don't get is how the right came to embrace the preachings of Clinton's sec. of the treasury, Robert Ruben, one of most liberal economists I know of. There is nor has there been a stronger advocate of the strong dollar than Rubin.

[classhandicapper]

What I really don't get is how the right came to embrace the preachings of Clinton's sec. of the treasury, Robert Ruben, one of most liberal economists I know of. There is nor has there been a stronger advocate of the strong dollar than Rubin.

Rubin came from Goldman Sachs. He may be a liberal in some areas, but he knows how to make money. He especially knows how to make money using the institutions of government to his advantage. ;)

A strong dollar can hurt the economy in the short term, but it's the correct policy over the long term. Most conservatives think long term. So they want a strong currency.

We do not have a strong dollar. We have a weak dollar. It's only strong because other currencies are even worse in this snapshot of time. We have halted our QE for the time being and Europe and Japan are now busy printing. We are the tallest pygmy right now.

[Valuist]

And once again, no rate hike.

[ReplayRandall]

And once again, no rate hike.

Plain and simple, Yellen doesn't want even the hint of responsibility by raising rates, due to the mountainous correction that is coming in October. If the correction is bad enough(and it will be), expect a possible implementation of QE4.....All economic indicators are far worse than they're being reported, IMO.

[onefast99]

Plain and simple, Yellen doesn't want even the hint of responsibility by raising rates, due to the mountainous correction that is coming in October. If the correction is bad enough(and it will be), expect a possible implementation of QE4.....All economic indicators are far worse than they're being reported, IMO.
She strongly hinted October will be the month the feds look to increase. Back in the day Greenspan was the man who pulled the rate lever he offered so much more then Janet does, he was embraced and accepted by the financial markets. I find it hard to watch or listen to Janet. My take on all of this is eventually the feds will start to increase rates and that will put the economy into a tailspin, the boy who cried wolf scenario.

[ReplayRandall]

She strongly hinted October will be the month the feds look to increase. Back in the day Greenspan was the man who pulled the rate lever he offered so much more then Janet does, he was embraced and accepted by the financial markets. I find it hard to watch or listen to Janet. My take on all of this is eventually the feds will start to increase rates and that will put the economy into a tailspin, the boy who cried wolf scenario.

Yellen strongly hinted at a rate increase in the 1st quarter of 2015, then the same in June, again in September and now October. A .25% rate increase is nothing but symbolic, however it will be perceived as THE catalyst for a steep market drop, thus it will continually be postponed as the economy continues to flounder.....This non-hike is a harbinger of very dire economic conditions that will finally surface and come into view for all to see in October....The Fed has no cards left to play except for the nightmare of a QE4.

[Saratoga_Mike]

Too much leverage in the system. Google "Ned Davis and total US debt to GDP." As for Alan Greenspan, he's partially responsible for the leverage...so no need to pine for him.

[Valuist]

Plain and simple, Yellen doesn't want even the hint of responsibility by raising rates, due to the mountainous correction that is coming in October. If the correction is bad enough(and it will be), expect a possible implementation of QE4.....All economic indicators are far worse than they're being reported, IMO.

Agreed.

The Fed has been clueless for awhile. Remember they denied there was any bubbles at the peak of the housing bubble? Watching Yellen speak, she inspires no confidence whatsoever that she knows what she is doing.

[LottaKash]

http://i405.photobucket.com/albums/pp137/lottakash/brokers_and_bankers_zpsuzadi9ay.jpg (http://s405.photobucket.com/user/lottakash/media/brokers_and_bankers_zpsuzadi9ay.jpg.html)

[classhandicapper]

And once again, no rate hike.

They painted themselves into a corner and are praying for a way out.

The entire structure of the economy, including asset prices, is built on artificially low and manipulated interest rates from the Fed. At this point, even the Keynesians have to understand that they've painted themselves into a corner. They have tiger by the tail and they have no idea what to do. Of course, a bloke like me could have told them this was going to happen soon after they started down this path because it's really not so difficult to understand. But there is a lesson in it. You have can have 20-30 IQ points and a lot of degrees that someone else doesn't have (which many of them do relative to me), but if you are using the wrong intellectual model of thinking, you are totally screwed.

It can get worse though.

The deficit is set to start rising again next year despite being well into this business cycle because of out of control spending. If the economy should slow or even worse go back into recession due to an external shock, the deficit could explode to 1.5 trillion or 2 trillion at the trough.

I feel sorry for whoever inherits this mess from Obama. He (or she) is going to get the blame for Obama's disastrous policies.

With real interest rates already very negative, the Fed's balance sheet already ballooned, and the debt relative to GDP higher than historical levels, exactly what economically insane thing are these Keynesians going to do for an encore just to kick the can down the road some more. Sooner or later markets are going to call BS and the money is going to start heading for the exits.

[classhandicapper]

http://i405.photobucket.com/albums/pp137/lottakash/brokers_and_bankers_zpsuzadi9ay.jpg (http://s405.photobucket.com/user/lottakash/media/brokers_and_bankers_zpsuzadi9ay.jpg.html)

Exactly!

When it hits the fan do you think Goldman Sachs is going to go under?

No way.

You are I are going to suffer from what was done over the last 7 years. The demons at Goldman have been giving themselves huge bonuses on the back of all these easy money and when it blows up eventually they will either be positioned to profit or get bailed out again.

[classhandicapper]

Too much leverage in the system. Google "Ned Davis and total US debt to GDP." As for Alan Greenspan, he's partially responsible for the leverage...so no need to pine for him.

Thank you. You are correct.

[Saratoga_Mike]

Thank you. You are correct.

I know you get it. You'd prick the leverage bubble. Such actions would scare the hell out of me --- Yellen's in a tough spot.

[Tom]

If they do raise interest rates, don't we then pay a lot more on loans and credit cards?

[bks]

Yellen strongly hinted at a rate increase in the 1st quarter of 2015, then the same in June, again in September and now October. A .25% rate increase is nothing but symbolic, however it will be perceived as THE catalyst for a steep market drop, thus it will continually be postponed as the economy continues to flounder.....This non-hike is a harbinger of very dire economic conditions that will finally surface and come into view for all to see in October....The Fed has no cards left to play except for the nightmare of a QE4.

Randall,

I trust you're not referring here to expected disappointing 3Q earnings (or not ONLY to them), as the reason for the dire conditions to come. Would you care to be more specific?

It's been my position that so long as we remain in a ZIRP or a close-to ZIRP environment, and so long as the Fed can (essentially) print money and undertake paper-buying programs, any substantial drop in the market will simply be bought back up since the money to reinflate it effectively costs nothing.

I really don't get how the dollar has remained so strong, but it has, so it's hard to worry about hyperinflationary scenarios in the short run. What's special about this October? What am I missing (which may be a lot)?

[Saratoga_Mike]

If they do raise interest rates, don't we then pay a lot more on loans and credit cards?

In normal times, the across-the-board answer would be a simple yes.

In the current environment (overleveraged world, i.e., way too much debt), I suspect LIBOR-linked debt costs would increase, but 15 and 30-yr mortgage rates would most likely fall. Why? Because a rate increase, even 25 bps (0.25%), would slow the economy. I know that sounds crazy, but moving from 0% to 0.25% is radically different than moving rates from 3% to 3.25%. Japan (2000), Sweden (2010) and the US (1937) all back this assertion.

If you're thinking the Fed will eventually move short rates up by 150 to 200 bps (1.5 to 2 percentage points), it just isn't going to happen. It would annihilate the economy. Some would disagree with me, but I have no agenda.

Google the chart I referenced earlier (use the search terms "Ned Davis and US total debt to GDP"). Ned Davis is a stock market/economic research firm out of the Florida. The chart will show all debt in the US (govt/consumer/business) from 1950 to today. You will see it inflecting radically higher starting in the early 1980s. That chart and that chart alone explain why the economy is lousy. I voted for Romney and I will vote for the next GOP candidate (unless it's Trump - I won't vote), but Republican policies will only help the economy on the margin.

[Robert Goren]

If they do raise interest rates, don't we then pay a lot more on loans and credit cards?In the past a raise of quarter point in interest rates has meant about 0.6 % raise in credit card rates. I would expect it to be close to 1% for the first few raises this time because the credit card issuers have scream so long about how these low interest rates have hurt their bottom line. I am guessing a quarter point raise will increase mortgage rates about 0.35% and small business loan rates about 0.4%. however in the past you could expect to get only 0.15-0.2% raise if you get a CD. Anybody who expects to get a big boost on the interest paid on CDs is in for a rude awakening. It may well take a raise of 1% or more this time before you see any rise in interest rates on CDs.
The thing that gets me the most about this debate is the study stream of rich people coming on CNBC saying how these low interest rate have not helped the average person and greatly benefitted the rich, yet want the Fed to raise interest rates. Something does not add up there.

[Robert Goren]

Randall,

I trust you're not referring here to expected disappointing 3Q earnings (or not ONLY to them), as the reason for the dire conditions to come. Would you care to be more specific?

It's been my position that so long as we remain in a ZIRP or a close-to ZIRP environment, and so long as the Fed can (essentially) print money and undertake paper-buying programs, any substantial drop in the market will simply be bought back up since the money to reinflate it effectively costs nothing.

I really don't get how the dollar has remained so strong, but it has, so it's hard to worry about hyperinflationary scenarios in the short run. What's special about this October? What am I missing (which may be a lot)?History