Central Banks Are Now Ready To Launch Their “Brave New World”
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The latest Federal Reserve meeting in Jackson Hole, Wyoming, is over and so far it would seem that the general investment world is not too happy about Janet Yellen’s statements as well as those of other Fed officials. In fact, many people are looking for some simple clarity as to what the central bank is actually planning.
Most importantly, investors want to know why the Fed is suddenly so adamant about continued interest rate hikes in 2016. Only a couple months ago, almost everyone (including alternative economic analysts) was arguing that the Fed would “never dare” to raise rates again so soon, and that there was no chance of a rate hike so close to the presidential elections.
Instead, investors have been greeted with surging rate-hike odds as Fed officials openly hint of another boost, probably in September.
As I have been saying for years, if you think the Fed’s motivation is to protect or prolong the U.S. economy, then you will never understand why they do the things that they do. Only when people are willing to accept the reality that the Fed’s job is to undermine the U.S. economy can they grasp central bank behavior.
Here is the issue that scares mainstream markets — many day traders are greedy, but not necessarily dumb. They KNOW full well that the only pillar holding up stocks at record highs has been central bank intervention. A vital part of this intervention has been the use of near-zero interest rates. That is to say, cheap and free overnight loans through the Fed have allowed banks and other corporations to remain “solvent,” and these loans have been the fuel companies have used for corporate buybacks of stocks.
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