In Thrall to the Federal Reserve

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Mises
In Thrall to the Federal Reserve

SEPTEMBER 17, 2015 Jeff Deist

Perhaps no economic pronouncement in history has been anticipated, discussed, predicted, dissected, and reported like the Federal Reserve’s momentous decision today not to raise interest rates.

 

The outpouring of relief witnessed today by the financial press is nothing short of cathartic. Fear and anxiety, built up over months, is replaced by relief, even euphoria.

This is not to say the hype is unwarranted. On the contrary, the decision to raise interest rates even just 25 basis points would have represented nothing less than the end of an era, as one Bank of American analyst described (courtesy of Zerohedge):

 

On Wall Street only 2 things matter: interest rates and earnings. Everything else is noise unless it impacts rates and earnings. No one impacts interest rates more than the Fed. So the … rate hike decision is a big deal. https://mises.org/library/thrall-federal-reserve

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MISES WIRE

 

Time to Raise Interest Rates

 

SEPTEMBER 17, 2015

 

The Fed has decided to maintain their excessively low interest policy yet again in their Open Market Committee meeting today. Anyone who understands Austrian economics will know that the Fed's manipulation of interests at all causes a misallocation of resources and destabilizes the economy. The Fed's interest rate policy is a price control, pure and simple, which removes vital information from economic decision-makers.

 

As long as the Fed manipulates interest rates, no information is available to determine what the market interest rate would be, but we can be certain that it is above the near-zero rate the Fed has maintained for years. This distorts price signals to investors and throughout the economy more generally, and is one reason the economic recovery has been so slow. Given that the Fed is manipulating interest rates, it is an easy call to conclude that it should raise rates now to help put the economy on track.

https://mises.org/blog/time-raise-interest-rates

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The Blink in Janet’s Eye

 

King Banaian September 18, 2015 9 COMMENTS

In the end, it was no contest. The global markets looked the Fed in the eye, the Fed blinked, and — in so doing — has created the real possibility of higher inflation. The blink showed up in the statement the Fed made at the end of its meetings:

 

Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. https://ricochet.com/blink-janets-eye/