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When will the fed stop raising the interest rates? Aren't the interest rates high enough already?

By   Follow Me on Twitter     Message Jerry Lobdill       (Page 1 of 1 pages)     Permalink    (# of views)   10 comments

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The federal funds target rate is the interest rate set by the Fed's monetary policymaking body, the Federal Reserve Open Market Committee (FOMC), at its eight annual policy meetings. The federal funds effective rate (the discount rate) is the actual rate of interest banks charge each other for loans to meet reserve requirements. Why do depository institutions need federal funds? They are required to balance their books every night at COB, and they must borrow if their outstanding loan balance exceeds the the required fractional reserve rate (established by the FR). This is intended to temper demand for commercial loans in the economy. And this is where the flaw lies.

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[The Board of Governors of the FR and 5 of the the presidents of the 12 FR banks form the body of the Federal Reserve Open Market Committee (FOMC). These officials are bankers first and (perhaps) "top rated economists" (TRE) second. The body of TREs is like a self-licking ice cream cone. They are all card-carrying adherents to the apparently omnipotent "Chicago school" of economics established by Milton Friedman. This school of economics is designed to drive the society into two segments--the haves and the have-nots. And it works!]

Back to the flaw" In 2008 it was painfully revealed that banks were not lending much into the real economy (where goods and services make the market). They were lending into a much more lucrative and very crooked casino for rentier speculation. Like all Ponzi schemes, this one crashed in 2008. The corruption extended beyond Wall Street into the US Treasury Dept., and to the useful dunce in the Presidency, who rubber-stamped the raid on the Treasury that began with TARP and ended with QE. This raid created more than $26 trillion from thin air and distributed it strictly to the perps. The "loan", actually a gift, was added to the US National Debt. [It is unpayable. No? Just try to set up a feasible payment schedule by which to pay off $26T in a reasonable time period.]

But I digress" Since the fed, in actuality, no longer is trying to keep the real economy functioning without inflation, we are headed for a repeat of 2008, and the real economy be damned. (See Michael Hudson's book "Killing the Host")

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I am a retired physicist and hold a B.S. in Ch. E. as well. I have been an environmental activist since the early 1970s. I was a founding member of the Save Barton Creek Association in Austin, TX. In 2006 I was a member of a select committee (more...)
 

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Jerry Lobdill

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I answer questions about macroeconomics on Quora. This one was especially interesting to me. It gave me a chance to succinctly expose the fraudulent claim that the FR tries to protect us from devastating Ponzi schemes like that which caused the crash of 2008.

I hope you enjoy it. Chime in if you are so moved.

Submitted on Sunday, Oct 28, 2018 at 4:50:00 PM

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watchpocket

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Reply to Jerry Lobdill:   New Content

State Banks?

Submitted on Sunday, Oct 28, 2018 at 9:03:53 PM

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State Banks are members of the FR too. They must abide by the same rules the "national" banks do.

Submitted on Sunday, Oct 28, 2018 at 10:57:57 PM

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State Banks?

Submitted on Sunday, Oct 28, 2018 at 9:05:25 PM

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Lance Ciepiela

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If Donald Trump truly wants to fix the economy, he must shut down the Federal Reserve and 'start issuing debt-free money'. If he just tries to patch up our current system he will fail because it has been fundamentally flawed from the very beginning. "Every time you go up they want to raise rates again."

Submitted on Sunday, Oct 28, 2018 at 9:57:48 PM

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Well, of course Trump has no such plan

Submitted on Sunday, Oct 28, 2018 at 10:58:58 PM

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Lance Ciepiela

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Yes, indeed, Trump needs #theFed "now more than ever" - a reincarnation of #Reaganomics, Trump has decided on "borrowing" more money from the Fed, in lieu of direct Treasury financing (switching to #PublicCentralBank) by issuing debt-free money.

The Fed = The Rothschild Bank of London et.al "just loves" a President that keeps on "borrowing" the money that they issue charging interest, fees, and expenses, and raising the national debt levels and keeping the wealthy and corporations, and the MIC "well fed" at the "public trough".

Submitted on Monday, Oct 29, 2018 at 6:19:17 PM

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John Peebles

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Concur with everything Jerry's saying.

"Why do depository institutions need federal funds?" A reason you might not have considered is the need to have someone buy the government's debt. I think of the monetary system as a closed triangle where the Federal Reserve feeds easy money to the banks that buy US Treasuries. Interesting isn't it how the Fed funds rate must be lower than the interest provided on US Treasuries?

So the Fed enables banks to make profits on the difference between the cost of borrowing and the interest they earn. The Fed itself can't take profits; they must be returned to the Treasury. They can facilitate banking profits though as the Fed's member banks are allowed to borrow infinitely. Having a printing press in the back yard sure helps fund stock buybacks and rich valuations.

Low cost debt is the basis of the Ponzi and inevitably fiat money collapses in value. Endless wars--the Fed's system is built to finance government deficits--allows the bankers to control more and more of the government's debt.

Should mention the Fed's dual mandates though it's the third mandate--the unacknowledged one--that's taken precedence over the original two. Market stability is #1 but we're told fighting inflation and reduce unemployment are the only two. The Fed finances the Plunge Protection Team (which might be better called the Protection Team as Fed interventions don't need justification or transparency.) Not a big leap to start buying stocks with the digital printing press.

Some say this next collapse is a deferred resumption of the 2008-9 collapse. The size of the debt pool now makes devaluation of the bubble--the popping--far bigger and thus the cry for help from the Fed's cronies that much more urgent.

Recovery never happened. Main Street is in trouble and the pensions are way underfunded. We need the printing press back under Treasury control so interest rates can be dropped to zero (for us) and loans paid off with US Treasury notes.

Submitted on Monday, Oct 29, 2018 at 2:37:10 AM

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911TRUTH

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When the CD savings rates are back up to 5% to 6% they can stop raising the rates.


Is it just my imagination that when the interest rates are raised they only raise the interest on what you pay on credit cards, mortgages, etc and not on CD savings rates?


I'm sure that's just a coincidence. NOT.

Submitted on Monday, Oct 29, 2018 at 5:07:31 PM

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Thanks for reading and commenting, 911T. They (the Fed) only adjust the federal funds rate--the rate Fed member banks pay when they borrow at the discount window to balance their books at COB each day. When that rate increases, the lore is that the Fed member banks then become more conservative about their "lending", and when the rate decreases it supposedly results in increased "lending".


The rates the public pay on debt are controlled by the "l enders" based on what the market will bear.

Submitted on Saturday, Nov 17, 2018 at 11:54:18 AM

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