For the past two years, the Federal Reserve has incessantly teased the public with the idea of raising interest rates. Yet here we stand today on September 21st, 2016, and the Federal Reserve has once again announced that it will not be raising interest rates, and will continue to keep them artificially low.
The Fed has kept interest rates close to 0% over the past 8 years, in an attempt to jumpstart a “recovery” after the 2008 financial crisis. Yes, you read that right. Interest rates have been close to 0% since 2009.
This is problematic for a number reasons. The most obvious one is that businesses borrowing money at 0% will have a greater incentive to make risky investments. This causes malinvestment, which creates artificial bubbles and distorts the market.
Once you also factor in the Fed’s never ending rounds of quantitative easing, you got a real problem. The Federal Reserve is not only encouraging Americans to make poor investments, but is in effect paying banks to borrow their newly created money, which will then be spent poorly, further misallocating resources in the economy.
The Federal Reserve’s irresponsible behavior has created so many artificial bubbles that the market has become increasingly volatile. Every time the Fed threatens to raise interest rates, we are given a glimpse of just how bad the economy truly is. The stock market is a sea of peaks and valleys every time Janet Yellen says she’s thinking of raising rates.
The market has become so distorted and volatile that if the Federal Reserve were to raise interest rates, the stock market would plummet, and the illusion of central banking would come tumbling down. A recession is inevitable, and the longer the Fed keeps up its charades, the worse the crash will be.
But for now, the Fed wants to maintain the illusion of economic prosperity so they can have a helping hand in rigging the presidential election. So don’t be surprised if the economy comes tumbling down after our next president is sworn into office in January.