What do the interest rate hikes mean?

Exactly! Well said.

Steve

 

I get it. But if inflation is kept in check then does that reverse what has been happening?

 

The rates are artificially low, but it is not because of the Fed … it is mostly because of a handful of Asian nations and their willingness to loan us unimaginable huge piles of money, while getting basically nothing in return. I figure Japan and China are aiming to destroy the U.S. by wrecking our economy … economic warfare? It is the only thing that makes sense to me … why else would they keep loaning us money, when they know we cannot possibly pay it back (in kind).

 

That's still on us as Americans. We did this to ourselves.

 

inflation is happening..but if you pretend it isn't real then the people won't know..most people never read the news anymore..just look at headlines and photos..the l
ow interest rates weakens the dollar so has they go up the dollar will get stronger..

 

So we've had an ever weakening dollar. People need to realize that.

 

This interest rate hike (by the U.S. banking system) is nothing, everything is under control. If things go bad they can quickly lower them and even start new stimulus.

The interest rate hike I am worried about is the one that will come when our foreign creditors cut us off. That will have the potential to get wildly out of control, because it will be driven by uncontrollable inflationary pressure, caused by a collapse of available consumer goods.When this foreign induced interest rate hike happens, our children will literally be running around wearing nothing but dirty old rags, and shoes made out of duct tape, because we haven't sewn clothes in this country in such a long time that we have forgotten how to do it. They used to teach sewing, woodworking, mechanic work in junior and high school, but when we became a “consumer nation” (AKA a debtor nation) all of that was tossed out of the curriculum.

 

The FED is probably trying to head off future inflation because the rates have been at 0 which indicates money has become quite cheap. Productivity has been much lower than typical levels which could cause a decrease in goods and services resulting in inflated prices. It is really a balancing act by the Fed and it is typically done over years IF they (The FED) thinks the economy is on an upward trend overall.

One wonders how much politics plays into their decisions though.

 

Absolutely. We cannot blame them, or attack them for their past generosity … That is the beauty of their plan of attack, when we fall, we will have no one but ourselves to blame. They have gutted our industrial base, without dropping a single bomb.

 

The fed is the driver of the so called “presidential cycle”. The latter half of Clinton's second term and the latter half of Bush's second term started the last two bear markets. The fed will probably try to stabilize any corrections right around election time, so they don't get blamed for influencing the results.

George Bush senior was torpedoed by the fed at the end of his first term … they must not have liked him for some reason (I can't remember what the friction was between the two).

 

Good stuff. We can't last just being consumers. On an individual level or a nation. Folks didn't get that. All we do is buy. We don't sell much of anything. We are just consumers. And when our line of credit runs out it's done. Just like layaway. Funny how we the people never understood this and let ourselves get conditioned for this. The reasons housewives of doctors can sit back and just spend money is because the hubby is brining in all types of money from his great job. When we don't produce money then we are just living on credit. O value is created.

 

A relatively stronger dollar discourages exports and encourages imports. That can be both economic and political. Lower energy costs, lower taxation and more government assistance in the US could also combine with a stronger dollar to encourage more european investment in the US. That too can be political and economic.

 

It is because they need to sell their cheap stuff to someone. For every net exporter there must be net importers. China and Germany, for example, are net exporters. Their economies depend on these exports. Without net importers (US), they wouldn't be able to function, just as every creditor needs debtors. Thus, China knows that when they cut off the debt spigot to the US, their economy will crash as well, which is why they won't do it.

 

No, decreased productivity is a result of low demand. There is no shortage of goods. In fact, you will see that most companies could easily ramp up production, if demand would increase. However, with wages depressed, there is a fat chance of that.

 

It's hard to say how much politics is involved in their decisions. They are currently a private banking organization intended to be non-political, tasked with ensuring economic health not only for their own member banks' health but also the U.S. economic health. Both go hand in hand according to their original mandate.

However, if Rand Paul or BERNIE SANDERS had their way then they would be brought under the U.S. government bureaucratic control, and it's highly likely their decisions would become political based upon recent evidence of other such organizations like the IRS.

I admit though, it's really about people and corruption of their system whether it is bureaucratic or a private organization.

Steve

 

It's a dominoe affect.

 

Considering that inflation was more than .25% prior to the rate hike, it's a psychological move.

I think most investors know that this is just a meaningless move.

 

psychological move for what? everybody says that but what does it mean?

 

I don't understand this line of reasoning … why can't they (Chinese, Japanese, Korean) simply learn to consume their own production? Why do they NEED us to consume their production?

Why would their economy crash? They know how to make their own housing, grow their own food, manufacture automobiles, electronic goods, tools, etc. Seems all they have to learn is how to work less and enjoy life more.

 

It means higher return on investment but borrowing is more expensive, so growth has to be sustained by consumption. Shouldnt be a problem, but Wall St. will (*)(*)(*)(*)(*) to no end and the Fed rarely has the wherewithal to spite them.

 

Why would Wall Street be upset?

 

The market is driven short term by feelings. Do you think things are going to do better? If so, then you're looking at a bull market. Is it going to do worse? Then it is a bear market. In the end, market principles win out, and you end up with what the actual market is doing.

But short term is key in today's world of short term investments.

As an example, I have a few shekels tied up in gold. I know that it's going to go up and down with the mood of the market for years, yet I also know that the value of real gold in hand is being hidden because of paper gold securities, which are far in excess of real gold assets. That's a bubble and it will collapse, but until people realize that a piece of paper that says you own an ounce of gold is only a piece of paper, it's wealth is purely psychological. You might think it represents gold, but in the end, it's just paper.

 

So the rate hike was to make the public feel good. but not enough of a hike to make any market corrections?

 

When I was younger back, I was earning 7% to 8% interest. So now the rate has increased from basically nothing to 0.25%.

Tell me this. If it was your money you were loaning, would you accept a 0.25% rate of return?

 

So there will be less loans given out? If true they can harm the economy.