FYI - Fox in the Hen House: Why Interest Rates Are Rising

ellenbrown.com...

Just today, a line of business credit that I over see (and which is never used - it's just in case...) notified us that the APR was being raised over a percentage point. If memory serves, from something like 2.1 percent per annum to over 3 percent.

And I just ran across the above blog entry by Ellen Brown.

The Fed is aggressively raising interest rates, although inflation is contained, private debt is already at 150% of GDP, and rising variable rates could push borrowers into insolvency.

So what is driving the Fed’s push to “tighten”? On March 31st the Federal Reserve raised its benchmark interest rate for the sixth time in 3 years and signaled its intention to raise rates twice more in 2018, aiming for a fed funds target of 3.5% by 2020. LIBOR (the London Interbank Offered Rate) has risen even faster than the fed funds rate, up to 2.3% from just 0.3% 2-1/2 years ago. LIBOR is set in London by private agreement of the biggest banks, and the interest on $3.5 trillion globally is linked to it, including $1.2 trillion in consumer mortgages.

She speaks of this in economic terms, the big picture but it will effect every single area of our individual lives.

Ms. Brown (a vocal advocate of Public Banking - look it up) goes on....

If the Fed follows through with its plans, projections are that by 2027, US taxpayers will owe $1 trillion annually just in interest on the federal debt.

That is enough to fund President Trump’s original trillion dollar infrastructure plan every year. And it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds.

Where will this money come from? Even crippling taxes, wholesale privatization of public assets, and elimination of social services will not cover the bill.

She goes on to explain the ....

“Faith-Based” Monetary Policy

used in setting interest rates and why she called it 'faith based' (i.e. not based on reality)...

... In setting interest rates, the Fed relies on a policy tool called the “Phillips curve,” which allegedly shows that as the economy nears full employment, prices rise.

The presumption is that workers with good job prospects will demand higher wages, driving prices up. But the Phillips curve has proven virtually useless in predicting inflation, according to the Fed’s own data.

Former Fed Chairman Janet Yellen has admitted that the data fails to support the thesis, and so has Fed Governor Lael Brainard. Minneapolis Fed President Neel Kashkari calls the continued reliance on the Phillips curve “faith-based” monetary policy. But the Federal Open Market Committee (FOMC), which sets monetary policy, is undeterred.

There is a lot of valuable information to be gleaned from this blog post.

ellenbrown.com...

They put the rate down and now people are more in debt than they ever have been. Sure, the stock market rose up, but that is just money on paper, you have to cash it in and get the money before it is real money. Pay off your debt and you will not have to worry what the interest rates are.

a reply to: FyreByrd

Interest rates have got to go up to sustain/save the failing pensions across the US. And for everyone not in the US, who has debts in US dollars, they are going to get killed by us. Our rates should have gone up long ago, but international pressure was put, and the rates were kept too low. But now they must rise. And it is going to suck for a lot of people. I personally think it is too late to save all the pensions that have been promised, especially in California. The rates were too low for too long and the pension funds were not managed correctly. Hold onto your butts.

a reply to: Ameilia

Pensions they have promised? People pay into their pension funds through their careers in the U. S don't they?

originally posted by: hopenotfeariswhatweneed
a reply to: Ameilia

Pensions they have promised? People pay into their pension funds through their careers in the U. S don't they?

They do! See the problem? It has been a Ponzi scheme. But since the government is doing it, it is of course, totally legal. Do you think that pension contributions are just set aside and held for the person who paid in the contribution? Nope, those funds are used to pay someone currently drawing their pension. Eventually you run out of money this way. Especially when you don't manage the funds properly. California has been especially bad at theirs, but there are plenty of other examples.

California’s public employee pension systems have immense gaps – called “unfunded liabilities” – between what they have in assets and what they will need to meet their obligations to retirees. The California Public Employees Retirement System, the nation’s largest pension trust fund, and other state and local systems are desperately trying to close those shortfalls

California's Pension Crisis

a reply to: Ameilia

Heads need to roll for that kind of ineptitude.

Reminds me of the statement that drug dealers and prostitutes are more trustworthy than elected officials.

originally posted by: hopenotfeariswhatweneed
a reply to: Ameilia

Heads need to roll for that kind of ineptitude.

Reminds me of the statement that drug dealers and prostitutes are more trustworthy than elected officials.

Yeah. You read in history books about people being dragged out of their homes and strung up in the streets. I worry about it happening again. Not enough people are aware of the terrible state of pensions in the US and how terribly underfunded they are. Not enough people see this coming. They just think there will be a solution made, if they even see the problem to begin with.

There are going to be two groups of very angry people: the ones who are supposed to be getting a pension which is either cancelled or they end up with less than they were promised, and the ones who are currently employed and paying into the pension funds who are going to be told they need to contribute even more to this failing plan to pay off the current pensioners.

Then what happens?

originally posted by: Ameilia

originally posted by: hopenotfeariswhatweneed
a reply to: Ameilia

Heads need to roll for that kind of ineptitude.

Reminds me of the statement that drug dealers and prostitutes are more trustworthy than elected officials.

Yeah. You read in history books about people being dragged out of their homes and strung up in the streets. I worry about it happening again. Not enough people are aware of the terrible state of pensions in the US and how terribly underfunded they are. Not enough people see this coming. They just think there will be a solution made, if they even see the problem to begin with.

There are going to be two groups of very angry people: the ones who are supposed to be getting a pension which is either cancelled or they end up with less than they were promised, and the ones who are currently employed and paying into the pension funds who are going to be told they need to contribute even more to this failing plan to pay off the current pensioners.

Then what happens?

Nothing. Business as usual. Pension holders get what you deserve in the end.

originally posted by: rickymouse
They put the rate down and now people are more in debt than they ever have been. Sure, the stock market rose up, but that is just money on paper, you have to cash it in and get the money before it is real money. Pay off your debt and you will not have to worry what the interest rates are.

Good advice!

The not have to worry part could not be more wrong. Your income buys you now a certain amount of goods and services. In exchange for your fiat FRN's you live in a house, drive a car, obtain petrol, food, clothing, electricity and so on.

Interest rates have a tendency to allow for prices to rise.

The difficulty in this is corporations are also in debt, as investments are predominantly not done as a result of excess cash in terms of savings, but debt.
Add to this, that the FRN also has a function in international trade. And given the fact that the US runs a trade deficit of gargantuan proportions, the demand for FRN forces the exportation of inflation.

By raising the interest rate, the FRN can try to keep up with other currencies and economies. Should all FRN 's in the world come home to roost, your income would not be enough to buy a gallon of milk, as there are way too many FRN's chasing the same goods and services.

So, paying of debt is just one of the things you should do the lower the worry. There are other things you might consider to enhance your decency on the fiat currency system.

a reply to: Ameilia

I'm not sure what will happen, my bets are on civil unrest, we can be sure of one thing whatever does happen will not be pretty.

a reply to: FyreByrd

The Phillips Curve is especially useless when wages are stagnant... the Fed tries to justify their policies, but 99% of the time it is just jawboning and trying to confuse the general populous in an attempt to make us think "they" know what they're doing and WE couldn't possibly understand.

The Fed is a criminal organization

originally posted by: Ameilia
a reply to: FyreByrd

Interest rates have got to go up to sustain/save the failing pensions across the US. And for everyone not in the US, who has debts in US dollars, they are going to get killed by us. Our rates should have gone up long ago, but international pressure was put, and the rates were kept too low. But now they must rise. And it is going to suck for a lot of people. I personally think it is too late to save all the pensions that have been promised, especially in California. The rates were too low for too long and the pension funds were not managed correctly. Hold onto your butts.

Do you have any support for this assertion?

a reply to: FyreByrd

If memory serves, from something like 2.1 percent per annum to over 3 percent.

And deposit rates have also increased. From less than 0.5% now up to something like 1.2% and greater.

a reply to: Ameilia

Unfunded liabilities - interesting use of the terms.

It reminds me of this piece of 'lovely' federal legislation pushed by Republican's (in order to destroy and privatize the USPS) - as a step it their 'privatizing everything' and extracting all PUBLIC wealth:

In 2006, the United States Congress passed the Postal Accountability and Enhancement Act of 2006 (PAEA).

This bill required that the USPS prefund its future health care benefit payments to retirees for the next 75 years in an astonishing ten-year time span.

Under the PAEA, USPS is required to make $103.7 billion in payments by 2016 to a fund that will pay for future health benefits of retirees of the next 75 years. This health benefit prefunding mandate covers not only current employees that will retire in the future, but employees yet to be hired who will eventually retire.

On top of this, none of the money that the USPS contributes to this fund can be used to pay for current retiree health benefits. So the USPS must make payments for current retirees’ health benefits in addition to its required health benefit prepayments for future retirees.

This is something that no other government or private corporation is required to do and is an incredibly unreasonable burden.

Posted by Ralph Nader:

mronline.org...




To which the Inspector General responded:

What if your credit card company told you: “You will charge a million dollars on your credit card during your life; please enclose the million dollars in your next bill payment. It’s the responsible thing to do.” Doesn’t seem quite right, does it?

Well, that’s what the U.S. Postal Service’s requirement to prefund its long-term pension and healthcare liabilities is like. The Postal Service is required to pay the full estimate of its liabilities, currently estimated at nearly $404 billion, even as that estimate moves around and is based on assumptions that are highly uncertain and can frequently change over the life of the liability.

www.uspsoig.gov...

a reply to: Phage

Which does nothing for 99.99% of citizens.

Remember all the QE? All the cash the Fed printed out of nowhere and injected into the system?

One of the ways to remove it again is to raise interest rates.

You didn't think it was just going to be floating around out there forever did you?

a reply to: FyreByrd

It's helping me. A bit. My 4% mortgage will continue to help me no matter what the fed does.

Did you think that your credit line had a fixed rate or did you select a variable rate because it was cheaper, at the time. Did you think that variable means it would stay the same?

Sounds like you may have made the same mistake as those who took out adjustable rate, interest only mortgages.

originally posted by: Phage
a reply to: FyreByrd

It's helping me. A bit. My 4% mortgage will continue to help me no matter what the fed does.

Did you think that your credit line had a fixed rate or did you select a variable rate because it was cheaper, at the time. Did you think that variable means it would stay the same?

Sounds like you may have made the same mistake as those who took out adjustable rate, interest only mortgages.

I am happy for you but it's not about you. I am happy for your fixed mortgage rate.

Yes I knew the interest rate on the line of credit was variable and it won't effect me as that line is not used.

Raising the basic rates will raise the prices of everything we use, it will effect the cost of any government service as the government relies on money borrowed from PRIVATE BANKS to provide those services. Small and median size business (some large as well) also used borrowed money to finance their operation and so those services and products we use will raise in price. And so forth....

The return on 'passbook' accounts is irrelevant to the discussion as in general it benefits the PUBLIC only if the PUBLIC entities are holding PUBLIC debt instruments as a hedge.

Great Minds Discuss Ideas; Average Minds Discuss Events; Small Minds Discuss People

quoteinvestigator.com...

to which I would add, "smaller yet minds, discuss themselves."

a reply to: FyreByrd

Raising the basic rates will raise the prices of everything we use, it will effect the cost of any government service as the government relies on money borrowed from PRIVATE BANKS to provide those services.

No. Government debt is in the form of bonds which means they are borrowing from those who buy those bonds (you, me, and yes, banks). So guess where the interest on those bonds goes? To the bond holders (you, me, and yes, banks). But bond rates are not tied to the fed's rate so the point is moot.

Business debt is usually acquired in order to expand operations (if it is a well run business, or to meet short term cash flow requirements) so, if interest from that debt is being passed on to the consumer it is going to be quite insignificant in comparison to the capital cost. But doing so (passing interest and capital costs on to the consumer) would put a business at a competitive disadvantage. Normally it would just show as a loss in net revenue (it is also tax deductible). A business that is in good enough shape to get the loan can absorb the cost of that loan.


There. Ideas. Happy?

Trump said he wanted to raise them before the election and I posted about it and warned people. It will make billions for the banks while taking even more money out of our pockets, if we have any left.