I wish I had more confidence in Mr. Williams and the rest of the Fed, but the events of 2007-2008 shattered any belief I had that these folks know what they are doing. They sound sophisticated, but they are really not much better than astrologers. I remember quite clearly the repeated pronouncements of Mr. Bernanke in 2006 and 2007 that latter proved to be disastrously wrong. If these people could not see the largest credit/housing bubble in the history of the world as it was staring them right in the face then why should I listen to them now?
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Larry Summer's is the overrated economist not Williams. Core YOY CPI was 1.7% and that's despite some pretty anti-growth regulatory policies of the Obama administration. I wouldn't be surprised if Summer's is betting on a I-told-you so strategy to replace Yellen as Fed chairman should H. Clinton prevail in the presidential election. He has a lot to gain and absolutely nothing to lose. It's why we see so many outrageous price targets on Wall Street too. That being said, extraordinary measures for rather ordinary times is exactly how excesses develop in an economy. Its why the great recession happened in the first place. The sooner they exist, the better!
The federal deficit is too low and is choking off economic growth. Austerity Lite(tm) is keeping the real economy on life support.
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". . . during the depths of the recovery." What a delightful phrase, and how appropriate for describing economic conditions since the recession "officially" ended in 2009.
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Don't you just love it! I wonder how many caught this Greenspanian slip? In the mean time most of the commenters are blaming the doctor for their illness. Zero bound rates are the payback for decades of income redistribution. And the Fed's idea of democracy is opening the cash window to Goldman-Sacks. Oh sorry, that was the Treasury's idea of democracy. Get a clue folks, the Fed is a part of the economy. Raising rates and tightening the cash spigot will only bring about the next recession. Personally I vote for the idea of throwing cash out of helicopters or drones, if you prefer.
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Pundits and commentators make too much of the FOMC's rate moves--perhaps just fill up word counts and air time. As Yellin and Bernanke, before her, said time and again: the FED is going to modify rates gradually, in due time and, at the same time, they will keep an eye on the results--and job statistics and inflation. They can always move a few steps back, if necessary.
Currently, as Fed Funds hovers around zero, the Fed has no wiggle room in case it wants to tighten--even slightly--in the future. The term used is "virtually out of bullets". Also, when it does adjust rates upward, that means that the economy is getting better.
Remember in 2008, when economists spoke of the patient (economy) being on life support? Well now, the patient has left Recovery, and its on it way back to its room. But, it is still in the hospital.
http://thetruthoncommonsense.com
Currently, as Fed Funds hovers around zero, the Fed has no wiggle room in case it wants to tighten--even slightly--in the future. The term used is "virtually out of bullets". Also, when it does adjust rates upward, that means that the economy is getting better.
Remember in 2008, when economists spoke of the patient (economy) being on life support? Well now, the patient has left Recovery, and its on it way back to its room. But, it is still in the hospital.
http://thetruthoncommonsense.com
4
The single good thing about ultra-low interest rates is that they could have provided the government with the opportunity to borrow cheap money for much-needed national housekeeping; jobs on infrastructure projects would have put money in people’s pockets and really boosted the economy. But thanks to GOP obstruction, the opportunity was missed.
Meanwhile, the insultingly low interest on bank deposits deprive savers of dependable income, driving them to risk their savings on the stock market.
Meanwhile, the insultingly low interest on bank deposits deprive savers of dependable income, driving them to risk their savings on the stock market.
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How can anyone know how the economy is doing really, since interest rates are zero? What would any historical economy have done with zero interest rates? I don't think these people "in charge" have a clue to the potential blowback from their zero interest rate policies, do they really believe that this is going to cycle back to an economy that we will recognize? But it does not seem this man feels there is any sense of urgency, of course, people like him assure us they are monitoring the situation, what a joke, unfortunately it is probably on the rest of us.
1
I trust the professional economists to advise on monetary policy. I don't trust "rexl" from Arizona.
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I have no intention of advising on monetary policy, I merely ask a few questions, "Hz" from Illinois.
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The self-serving Fed works for the 1% and will resist raising rates as long as it can get away with it. It is irrational to expect unelected private bankers not to act in their own self-interest, i.e. transferring trillions of tax dollars and lost interest on savings from the middle classes and seniors to Wall Street, even if their policy suppresses spending and jobs while increasing income inequality. The country would be much better served by representative decision-making.
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Representative of what and whom?
4
Most interest in this country is collected by the top 1% and most interest is paid by the middle class.
The biggest unreported story about the Fed is that its asset purchase programs invested $1.7 trillion in mortgage lending, almost all of it for owner-occupied one to four family homes that do not exceed the FHFA conforming loan limit (currently $417,000 for a single family home in most places). Almost all of the mortgage backed securities acquired were purchased in the "to-be-announced" forward market so the money went for newly purchased or refinanced homes. Driving down mortgage interest rates has transferred billions from the wealthy to the middle class and homeowners who took advantage will continue to benefit for as long as 30 years.
The biggest unreported story about the Fed is that its asset purchase programs invested $1.7 trillion in mortgage lending, almost all of it for owner-occupied one to four family homes that do not exceed the FHFA conforming loan limit (currently $417,000 for a single family home in most places). Almost all of the mortgage backed securities acquired were purchased in the "to-be-announced" forward market so the money went for newly purchased or refinanced homes. Driving down mortgage interest rates has transferred billions from the wealthy to the middle class and homeowners who took advantage will continue to benefit for as long as 30 years.
3
There is NO end to easy money and Zero Interest rates which make Mega Deficit Spending by the Political Class possible. Cash is confiscated from savings by Zero Interest Rates and a flood of Fiat money creation. This makes investment far more risky and unrewarding. Assets are purchased with soft dollars and can only be sold with even softer dollars. If the Treasury had to pay REAL market rates on Government debt which would be 4% or greater, there would be financial collapse of the Dollar. You can't hide a Weak Dollar and Real Insolvency of the United States Treasury with financial manipulations of the Federal Reserve Bank indefinitely. When the crash comes, it will make 2008 or 1929 look really SMALL by comparison and will invite World War as the 1929 crash did.
2
He speaks somewhat as if he’s merely a student of economic history rather than one whose actions are and will make economic history.
3
It seems that some of the argument at Fed to raise the rate soon is nothing to do with the economy per se, rather it looks more to do with future capability of the Fed in monetary policy so that Fed can maneuver interest rate without limitation at the rate from the higher level. Also, I still see lack of global view at Fed such as how much the deteriorated economy in EU or possible deflation in China would impact on our economy. I am not sure if there are enough international economists at Fed like Krugman that can bring in precious global insights to the entire Fed. I think Fed is a little behind the curve as per consideration of the global impacts. Fed had better to recognize the fact that Fed is not only the central bank of the US but also the central bank of the world in reality. Fed can't be pure domestic minded.
1
Once again, speaking for the "little guy" if interest rates don't go up, the economy is NEVER going to improve. It will be just the same as it is in Japan.
We heard over and over that the interest rates would go up when unemployment reached 6.5% or 6% depending on who was talking. well, we have met that goal, and guess what? We're still waiting.
Just imagine how many small savers there are--let's say 50 million, who were getting a 4-6% interest rate, and that money was being recycled back into the economy. Since 2008, that money has been--thanks to FED policy--shunted into Cayman accounts, and is not even buys yachts. Stores are going under, businesses lack customers, I see lots of "for lease" signs in my neck of the woods, but I'm not bending over backwards to help anyone.
If we are waiting for the folks to recoup their losses from \buying gold at 1700$/oz or silver at 43$ /oz, we are going to be waiting a very long time. It was nearly 30 years after the Hunt Bros before silver went up only to fall back down to earth when the wax melted off the inflationary increase in value.
I expect my life and my money to run out about the same time but the economy at large can't depend on that from everybody. Good luck with the American version of Japan INC.
We heard over and over that the interest rates would go up when unemployment reached 6.5% or 6% depending on who was talking. well, we have met that goal, and guess what? We're still waiting.
Just imagine how many small savers there are--let's say 50 million, who were getting a 4-6% interest rate, and that money was being recycled back into the economy. Since 2008, that money has been--thanks to FED policy--shunted into Cayman accounts, and is not even buys yachts. Stores are going under, businesses lack customers, I see lots of "for lease" signs in my neck of the woods, but I'm not bending over backwards to help anyone.
If we are waiting for the folks to recoup their losses from \buying gold at 1700$/oz or silver at 43$ /oz, we are going to be waiting a very long time. It was nearly 30 years after the Hunt Bros before silver went up only to fall back down to earth when the wax melted off the inflationary increase in value.
I expect my life and my money to run out about the same time but the economy at large can't depend on that from everybody. Good luck with the American version of Japan INC.
4
This is wholly incorrect. The economy is suffering from a shortfall of demand. Less than 5% of people make any real money off of interest paid on bank deposits. And the fed doesn't control those it only controls the fed funds rate.
9
Back in the boom period of the '50's and 60's, assuming 4-6% would have been amazing. Think 3% pass book savings. Lots of people used to have savings accounts, and lots of them owned Savings Bonds. Interest rates have rarely been fixed, they have always been subject to market forces.
Your memories of high interest rates are holding back your thinking. They were high for one reason - because inflation was elevated and rising. Time has moved on.
Your memories of high interest rates are holding back your thinking. They were high for one reason - because inflation was elevated and rising. Time has moved on.
1
Mr. Williams pays no attention to the central bankers in the rest of the world, as if the U. S. economy is not intricately tied to the rest of the world. In the past, that worked, because of the dominant position of the U. S. But the natural long-term trend is for the U. S. to determine a shrinking percentage of the world economy.
The Federal Reserve must not ignore European and Japanese deflation and the extreme measures taken by the world's other central bankers. Already the dollar has climbed too much, with evitable damage to exports and balance of trade. Raising of interest rates in 2015 will drive exporters out of business with long-term consequences to the U. S. economy. The repatriation of manufacturing will be halted just as it has begun to show strength.
The Federal Reserve must not ignore European and Japanese deflation and the extreme measures taken by the world's other central bankers. Already the dollar has climbed too much, with evitable damage to exports and balance of trade. Raising of interest rates in 2015 will drive exporters out of business with long-term consequences to the U. S. economy. The repatriation of manufacturing will be halted just as it has begun to show strength.
1
I tend to believe former Federal Reserve chairpersons Alan Greenspan and Ben Bernanke over John Williams. Bernanke says he does not expect interest rates to normalize within his lifetime. Since he has just started advising a hedge fund then chances are the fed won't raise rates. He seems to be in good health so the party will go on with nearly zero interest rates. Sorry savers they are trying to drive you into the market. The Federal Reserve believes no one has the right to avoid risk-no matter what your age. Senior Citizens included.
As for Alan Greenspan he has said there is no currency that can compete with gold including the dollar. This remark was made at a Council on Foreign Relations gathering. In fact there is a meeting being held this Friday to discuss the possibilities of gold joining a basket of currencies. I forget the particulars but they too seem to be listening to Mr. Greenspan.
It seems that after leaving the Federal Reserve both of these former chairpersons feel liberated enough to tell it like they see it and not play games with Fed Speak (circular logic using specialized vernacular that creates an illusion of control.)
As for Alan Greenspan he has said there is no currency that can compete with gold including the dollar. This remark was made at a Council on Foreign Relations gathering. In fact there is a meeting being held this Friday to discuss the possibilities of gold joining a basket of currencies. I forget the particulars but they too seem to be listening to Mr. Greenspan.
It seems that after leaving the Federal Reserve both of these former chairpersons feel liberated enough to tell it like they see it and not play games with Fed Speak (circular logic using specialized vernacular that creates an illusion of control.)
1
Nobody is going to make gold a currency again.. How can you have a deflationary currency and an inflationary economy? The two don't work together. If gold is going to be worth more tomorrow than it is today, nobody will give out loans, everybody will hoard their stash and the economy will tank into the ground.
I get it, people don't like the idea of inflation, but let's face it, every other option (deflation, stagflation, etc.) is horrible for how the world works now. And let's not forget that we left the gold standard 40 years ago because it wreaked havoc on currency stability. So before we get all willy-nilly again for gold let's step back and look at how that's worked out in the past.
I get it, people don't like the idea of inflation, but let's face it, every other option (deflation, stagflation, etc.) is horrible for how the world works now. And let's not forget that we left the gold standard 40 years ago because it wreaked havoc on currency stability. So before we get all willy-nilly again for gold let's step back and look at how that's worked out in the past.
4
"people don't like the idea of inflation,"
We have been living on "inflation" for as long as I can remember. Gas used to 19 cents a gallon, cigarettes about 19 cents a pack, my mother used to tell me bologna was 5 cents a pound, and I paid 3500$ for a brand new MGB. everything goes up--that's inflation, because the cost of making stuff is less now despite what we are told.
in 1980 "inflation" was re-adjusted again back to 100 and we are climbing ever higher. Every time I go to the store, the cost of goods is on the rise because the bottom line somewhere has to be growing--that's what it is all about. Look back into the 60's newspaper with stories of inflation. They were claiming at the "current rate" a loaf of bread was going to sot 200$. Well, it has gone up, the quality has gone down, but we haven't reached 200$ --yet. How high would wages have to be? When the minimum wage hits 15$ universally, just watch the "inflation" rise. The minute a worker makes a buck to get ahead, someone wants to take it away. Never fails, and I've seen it happen, I've been around the block A LOT.
We have been living on "inflation" for as long as I can remember. Gas used to 19 cents a gallon, cigarettes about 19 cents a pack, my mother used to tell me bologna was 5 cents a pound, and I paid 3500$ for a brand new MGB. everything goes up--that's inflation, because the cost of making stuff is less now despite what we are told.
in 1980 "inflation" was re-adjusted again back to 100 and we are climbing ever higher. Every time I go to the store, the cost of goods is on the rise because the bottom line somewhere has to be growing--that's what it is all about. Look back into the 60's newspaper with stories of inflation. They were claiming at the "current rate" a loaf of bread was going to sot 200$. Well, it has gone up, the quality has gone down, but we haven't reached 200$ --yet. How high would wages have to be? When the minimum wage hits 15$ universally, just watch the "inflation" rise. The minute a worker makes a buck to get ahead, someone wants to take it away. Never fails, and I've seen it happen, I've been around the block A LOT.
How about we look at who has benefitted since we abandoned the gold standard in 71'? Has it been the average worker? No- wages in the private sector have stagnated. Government workers' wages have kept pace with inflation because the U.S. government has went into debt to the tune of $18 trillion. How about CEOs since 71'? Let's see their wages are linked with the price of stock and what has happened to those wages? Well, during gold standard days they made about 40 times what an employee made and now it is upwards of 400 times. How about the banking sector- how has that industry faired since 71'? It has grown beyond belief. Economists have noted the economy has been financialized. What do they actually provide to society? Well, they crashed the system in 08' because they cannot be satisfied and in the end fees on loans were more important than safe guarding the system. Maybe you can take up your argument with Greenspan but for me it seems that those who are in charge of the world's reserve currency have done a poor job. They create money with keystrokes and cannot rein in the banks they regulate. After subprime loans in housing they move to autos. The Federal Reserve has done the world no favors and Nixon was foolish to think they would operate without constraints.
1