Authored by Paul Craig Roberts,
What Does Today’s “Rate Hike” Mean?
The Federal Reserve raised the interbank borrowing rate today by one quarter of one percent or 25 basis points. Readers are asking, “what does that mean?”
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The inescapable conclusion is that Fed policies have effectively crashed the velocity of money.
That the velocity of money has been crashing while the money supply has been exploding doesn't seem to bother the mainstream pundits. There is always a fancy-footwork explanation of why whatever is crashing no longer matters.
Heading into the Fed's first "dovish" rate hike in nearly a decade, the consensus was two-fold: as a result of relentless telegraphing of the Fed's intentions, the hike is priced in, and it will be a "dovish" hike, with the Fed lowering its forecast for the number of hikes over the next year.
Yesterday, in a carbon-copy response to what happened in December 2013 when the Fed announced the Tapering of QE, stocks first sold off then, as if to validate the Fed's decision as being accurate, saw a dramatic buying surge which pushed them to close just off the highs. With bonds and gold selling off while the dollar rebounded, the Fed could not have asked for - or engineered - a better reaction, while markets, as Bloomberg's Richard Breslow points out, 'chose to hear the parts of the statement and press conference that they wanted to."
by Keith Weiner
Unless you’re living under a rock, you know that we have an administered interest rate. This means that the bureaucrats at the Federal Reserve decide what’s good for the little people. Then they impose it on us.
In trying to return to freedom, many people wonder why couldn’t we let the market set the interest rate. After all, we don’t have a Corn Control Agency or a Lumber Board (pun intended). So why do we have a Federal Open Market Committee? It’s a very good question.