Federal Reserve doesn't raise interest rates (again) and 82% of economists are wrong.

[Basil II the B.S]

A few days ago the Federal Reserve officials met and for the 55th time in a row they decided not to raise interest rates, which is bad news if you are American and want to save money.

The motivation is that the outlook of the global economy isn't stable enough:

http://www.theguardian.com/business/...street-workers

It took them a day to absorb the news but by Friday investors across the world had decided that the Federal Reserve’s decision not to increase interest rates was bad news. Stock markets dropped as investors absorbed the Fed’s cautious tone about the world economy. But while Wall Street may not be happy, this weekend most workers should be breathing a sigh of relief.

Now, the Wall Street Journal has been regularly interviewing US economists on when the Fed would finally, if ever raise rates, and the almost unanimous answer in the July Survey was September. It didn't happen.



http://blogs.wsj.com/economics/2015/...-in-september/

By now, from the January survey to the July one, the overwhelming majority expected an increase within the year, few next year and that segment actually disappeared.
Nonetheless, events proved them all wrong and might prove wrong even that remaining 18%, who still expects the hike within the end of the year.
As the following article points out however, some members the Federal Reserve are actually considering negative interest rates.

http://uk.businessinsider.com/fed-do...15-9?r=US&IR=T

On Thursday, the Federal Open Markets Committee, which sets the Fed's monetary policy, announced its decision to leave the federal funds rate at 0%-0.25%, maintaining a seven-year era of interest rates near 0%.
The FOMC also updated its "dot plot," which shows every member's view on where the Fed funds rate should be at the end of the next few years and over the longer run. Curiously, two of them were negative.

In short, 82% of economists were wrong, but it's most likely soon to be 100%.

What do you do when the mainstream fails you so miserably? You look for alternatives.

One of the few people (literally 4) to accurately predict the 2007-8 housing bubble popping was Libertarian investor Peter Schiff, whose name has become rather popular since then, thanks to the youtube video ''Peter Schiff was Right''. (for those who are interested : https://www.youtube.com/watch?v=sgRGBNekFIw)
Here's in summary his prediction: ''the fed cannot raise interest rates, markets have become addicted to quantitative easing, like a drug. Quantitative easing and cheap access to credit have inflated stocks, not fixed the real economy. What happens when you take a drug away from a drug addict? Everything crashes down''.
And here's a long, 1 hour and half explanation, about the state of the US economy, that you aren't going to hear at Harvard or similar places, but I believe nonetheless incredibly accurate and worthy listening, giving how poorly mainstream economists are doing.


Now, you can skip the first 10-15 mins where he talks about his book on the fin. crisis, but save for a very short libertarian tangents, his analysis is the best I've found.
What do you guys think? Is Peter Schiff right, again? Ever heard or read other quality analysis from other people?

[mrmouth]

They all went to the same schools, that recycle the same people back into the schools as professors. It's the same with the elite business schools. Fail at a company and then go teach bad ideas about gouging the middle class.

It's really no surprise that the most successful companies of the late 20th and early 21st century were born from minds not stained by either. Problem is, these companies have trouble keeping those people out of the boardroom as stockholders like the comfort of a guy with a name they know, even if he has failed before.

Although silicon valley is still bucking that tend somewhat. The new hirings from India are interesting.

[Platon]

If we have tried the libertarian route in the latest financial crisis, or in any economic crisis really, we would be in a deflationary spiral with no end in sight. It would lead to a severe recession, very high unemployment, lower investments because of a plunge in demand, and so on. We could see that it was happening in the 30:s so the governments had to greatly stimulate the economy. Keynesianism has ruled since then.
You don't have to look far to see a libertarian approach to solving an economic crisis - Greece since 2010. Slash the deficits and balance the budget - a true depression. This is according to Schiff a good way to cleanse the system so it can start growing again, but in a more healthy way. Oh and Greece also lacks the ability to print money since they have the Euro, which is basically similar to a gold standard Schiff so much fancies.
Leave Capitalism to handle the economy itself and we will have constant booms and busts. As spectacular the capitalists are at innovation and entrepreneurship, failures are equally spectacular with severe consequences to the society as a whole.

On the other hand, Schiff is correct about the debt bubble. That is why I think we are stuck with zero interest rates for a long time. The Fed have tried to 'talk' up the economy ever since the 'recovery' started in 2009 and warned for rent hikes every year, but nothing have happened so far.

Tip: Skip Schiff and follow Steve Keen

[Basil II the B.S]

They all went to the same schools, that recycle the same people back into the schools as professors. It's the same with the elite business schools. Fail at a company and then go teach bad ideas about gouging the middle class.

It's really no surprise that the most successful companies of the late 20th and early 21st century were born from minds not stained by either. Problem is, these companies have trouble keeping those people out of the boardroom as stockholders like the comfort of a guy with a name they know, even if he has failed before.

Although silicon valley is still bucking that tend somewhat. The new hirings from India are interesting.

Kind of true and this is a whidespread problem. In the ''Peter Schiff was Right'' video, the first person he confronts his ideas with, is Arthur Laffer. If you took a couple of courses of economics, you know he's a rather big deal and indeed he teaches at Stamford. He goes on, few weeks before the crash, saying how the US economy had never been in a better shape and he had no idea what Schiff was talking about. Indeed he did not, he was and he probably still is a clueless moron.

What I'm finding increasingly true, reading articles but also from personal experience from university, is that most Western universities are stuck in the same circle of ideas, while ideas that criticize the status quo are ostracized. Platon that has posted after you, linked Steve Keen whose blog contains the same criticism: elite universities have reached a consensus over certain ideas and refuse to take in consideration that they might be wrong even when reality clearly shows that, as in the thread case: 82% are wrong but that might be as well 100% economists who work in leading corporations, banks and universities have no clue about the state of the US economy. And that's their job.
Good luck.

If we have tried the libertarian route in the latest financial crisis, or in any economic crisis really, we would be in a deflationary spiral with no end in sight. It would lead to a severe recession, very high unemployment, lower investments because of a plunge in demand, and so on. We could see that it was happening in the 30:s so the governments had to greatly stimulate the economy. Keynesianism has ruled since then.
You don't have to look far to see a libertarian approach to solving an economic crisis - Greece since 2010. Slash the deficits and balance the budget - a true depression. This is according to Schiff a good way to cleanse the system so it can start growing again, but in a more healthy way. Oh and Greece also lacks the ability to print money since they have the Euro, which is basically similar to a gold standard Schiff so much fancies.
Leave Capitalism to handle the economy itself and we will have constant booms and busts. As spectacular the capitalists are at innovation and entrepreneurship, failures are equally spectacular with severe consequences to the society as a whole.

On the other hand, Schiff is correct about the debt bubble. That is why I think we are stuck with zero interest rates for a long time. The Fed have tried to 'talk' up the economy ever since the 'recovery' started in 2009 and warned for rent hikes every year, but nothing have happened so far.

Tip: Skip Schiff and follow Steve Keen

I'm not here to discuss the merits of libertarianism. Schiff makes a couple of remarks during his presentation and I honestly disagree with them; what I'm interested in, is his analysis and that's sound.
If he's correct, then the ''solution'' to the crisis wasn't a real solution, it was postponing the death sentence. Something I'm seeing in Greece's case too.

That being said, I like Keen because he brings in some interesting points, the one I discussed above and the abuse of mathematics in economics (and finance) for istance, and in general I read anything from Marxists to Libertarians because anyone can have a good idea. Those are all kind of off topics though.
The question is, does anyone have a clue what's the real state of the US economy? The mainstream, clearly, do not.

[Sphere]

The same Schiff who has been predicting hyperinflation of the dollar since 2006?

http://economicpredictions.org/peter...ions/index.htm

The only thing he ever predicts is economic crisis. He's a broken clock that is right twice a day.

[Basil II the B.S]

The same Schiff who has been predicting hyperinflation of the dollar since 2006?

http://economicpredictions.org/peter...ions/index.htm

The only thing he ever predicts is economic crisis. He's a broken clock that is right twice a day.

Yes an no. Schiff was wrong about the Dollar collapse, but that's simply because the Fed started the quantitative easing. Years later however, we are finding that the Fed is trapped in quantitative easing and unable to raise interest rates without risking another crash. Meaning, quantitative easing did not fix the US economy, it just postponed the bigger crash, that is if we stick to Schiff the Dollar one.

Is Schiff right about the Dollar one? Maybe. We don't know that yet. He is right that the Fed is stuck with quantitative easing though just like he was right about the economic crisis. So his discourse starts making sense again.
His mistake was to predict that the Fed would do what he believes is the right thing and that is let Wall Street investment banks rot in hell. Wishful thinking.
Nonetheless his analysis remains valid. Is the US economy an overblown consumption, with too little production and savings in comparison? Yes. Is it all financed in debt? Yes.

It's not like he's predicting 129038234 different crashes or economic crisis every day, which is the rather standard criticism Austrian economists get and I think it's what you are implying. It's one, specific, crash, the Dollar one because of the above mentioned problems.

His biggest problem is at best the libertarian bias and the Austrian fetish for gold. There's worse out there anyway.
The site you posted is good though, I had read it months ago, forgot to bookmark it.

[Sphere]

Is Schiff right about the Dollar one? Maybe. We don't know that yet.

No. We know.

At a minimum, the dollar will lose another 40 to 50 percent of its value. I'm confident that by next year we'll see more aggressive movements to abandon the dollar by the [Persian] Gulf region and by the Asian bloc. That's where the stuff really hits the fan.

-Peter Schiff 2009

Years later however, we are finding that the Fed is trapped in quantitative easing and unable to raise interest rates without risking another crash. Meaning, quantitative easing did not fix the US economy, it just postponed the bigger crash, that is if we stick to Schiff the Dollar one.

The Fed ended quantitative easing a year ago. The US economy has done well. The dollar is trading strong. You're in need of a new hypothesis.

[Rex Somnorum]

If we have tried the libertarian route in the latest financial crisis, or in any economic crisis really, we would be in a deflationary spiral with no end in sight. It would lead to a severe recession, very high unemployment, lower investments because of a plunge in demand, and so on. We could see that it was happening in the 30:s so the governments had to greatly stimulate the economy. Keynesianism has ruled since then.

But that's wrong. The great depression was the result of Hoover's interventionist policies. Roosevelt actually ran on a platform of less government intervention. Did you know there was a market crash in 1920 that was as bad as Black Tuesday? Do you know how the federal government responded? They jacked up interests rates, lowered taxes and reduced spending. The recession was over within a year. Quantitative easing doesn't work. It's just making tomorrow's taxpayers pay for today's expenses. It's sacrificing your future for the present.

[tgoodenow]

No. We know.





The Fed ended quantitative easing a year ago. The US economy has done well. The dollar is trading strong. You're in need of a new hypothesis.

Quantitative easing may have ended, but the expansionary monetary polices remain. The dollar is trading strong because it is viewed as the safest economy to invest in with the alternative BRICS in tough spots with the exception of China. The trading price of the Chinese Yuan is pegged, economic data is manipulated, and during times of trouble businesses are scapegoated so China is a very unsecured bet. The stock market swings across the world are reflective of the fear people have of ending expansionist monetary policies and the prospect of seeing the real situation that this is largely debt fueled growth that will whither and die when its cut off. The core fundamentals of these economies need to be fixed for growth, not government spending or punishing saving.

[Basil II the B.S]

No. We know. The Fed ended quantitative easing a year ago. The US economy has done well. The dollar is trading strong. You're in need of a new hypothesis.

So what? It's not a perpetual status to begin with. The Dollar trading strong today doesn't mean it will be tomorrow. And if the US economy is doing so well then why is the Fed unable to raise interest rates?

The only reasonable explanation is that it will crash the stock market, killing the illusion of recovery. The US economy is still dependent on ultra cheap credit, which has a tendency to create bubbles.

As for QE, again, who says they aren't going to do QE4? It's not written anywhere.

[Principe Alessandro]

All this effort to stimulate economy is just the epitome of the failure of the mainstream economics which is just a synthesis of Keynesian and neoclassical economics.

If we have tried the libertarian route in the latest financial crisis, or in any economic crisis really, we would be in a deflationary spiral with no end in sight. It would lead to a severe recession, very high unemployment, lower investments because of a plunge in demand, and so on. We could see that it was happening in the 30:s so the governments had to greatly stimulate the economy. Keynesianism has ruled since then.
You don't have to look far to see a libertarian approach to solving an economic crisis - Greece since 2010. Slash the deficits and balance the budget - a true depression. This is according to Schiff a good way to cleanse the system so it can start growing again, but in a more healthy way. Oh and Greece also lacks the ability to print money since they have the Euro, which is basically similar to a gold standard Schiff so much fancies.
Leave Capitalism to handle the economy itself and we will have constant booms and busts. As spectacular the capitalists are at innovation and entrepreneurship, failures are equally spectacular with severe consequences to the society as a whole.

On the other hand, Schiff is correct about the debt bubble. That is why I think we are stuck with zero interest rates for a long time. The Fed have tried to 'talk' up the economy ever since the 'recovery' started in 2009 and warned for rent hikes every year, but nothing have happened so far.

Tip: Skip Schiff and follow Steve Keen

yeah classical Keynesian approach to the economic problems, let's create artificial demand through the creation of artificial wealth, we shouldn't let people not overspending like there is no tomorrow and saving their moneys.

[Condottiere 40K]

I always thought of it as a pyramid scheme, with measures like quantitative easing and interest rate manipulation a delaying action, building a scaffolding that that they hope some development further down the line will fill, like the arrival of automation and introduction of the internet economy.

[Platon]

All this effort to stimulate economy is just the epitome of the failure of the mainstream economics which is just a synthesis of Keynesian and neoclassical economics.




yeah classical Keynesian approach to the economic problems, let's create artificial demand through the creation of artificial wealth, we shouldn't let people not overspending like there is no tomorrow and saving their moneys.

I don't actually disagree with you here.
All I'm saying is that our politicians, and especially our central banks, are stuck and have no tools to get out of this stagnation.
Those who have the power to boost the economy, the elites, just sit on their money..

[Principe Alessandro]

I don't actually disagree with you here.
All I'm saying is that our politicians, and especially our central banks, are stuck and have no tools to get out of this stagnation.
Those who have the power to boost the economy, the elites, just sit on their money..

Well there is no alternative, we should simply accept the fact that we will have an imminent total crash of the global economy and from the ruins and the lowest point we reach we will have to build from zero a different approach of living, working and managing the economy where before we can spend we will have first to work and save some wealth. The Federal Reserve is just delaying the inevitable.

[Basil II the B.S]

Well there is no alternative, we should simply accept the fact that we will have an imminent total crash of the global economy and from the ruins and the lowest point we reach we will have to build from zero a different approach of living, working and managing the economy where before we can spend we will have first to work and save some wealth. The Federal Reserve is just delaying the inevitable.

Nah, not everyone will be crashed. Just those who rely on the US. Indeed Europe is ed.

[Denny Crane!]

Schiff makes his money predicting disaster and he runs a bank with gold as its basis, so he promotes gold.

It's not hard to figure out.

[Basil II the B.S]

Would he make gold the basis of his bank if he didn't think it was a sound investment? I don't think so.

[Platon]

.. before we can spend we will have first to work and save some wealth. The Federal Reserve is just delaying the inevitable.

But before you can start working someone have to be able to spend to buy the fruits of your labor - this is why governments try to do everything to stimulate spending. If there is no demand, there is no investment, and nobody works. And as I said before, in a capitalist system, in order for the capitalists to invest there has to be demand. When an increasing number of the working class are living paycheck by paycheck, or are unemployed - there is no demand.
And so we're stuck. A major crash followed by war has worked before. But do we want to go there?

[Thorn777]

Problem is debt in the Systems, demanding continual growth to make up for the debts. All while shareholders take their share from indebted balance-Sheets of companies, take their share from indebted balance-Sheets of states, and their share from households. All while being marginally taxed, and the tax-burden stuck with the average consumers able to buy less because of it a.o. It is simple as can be. What we did was "Keynsian" for the Banks/stock market, but thats all there is Keynesian about all this. It is just propping up the status-quo and avoiding Inflation.

USA doesnt want to go away from the trickle-down/reagonomics/petro-dollar-MIC model. It makes sure that it satys top-dog in a Crash and will make the others Crash first and draw capital flight and human capital to the US. That is also what all the politics with Russia and EU is about. Also this is pretty simple to understand.

This is just politics out of necessity in emperial mindsets.

[Sphere]

So what? It's not a perpetual status to begin with. The Dollar trading strong today doesn't mean it will be tomorrow. And if the US economy is doing so well then why is the Fed unable to raise interest rates?

Inflation is still below the Fed's target of 2% (its currently at 0.2%) http://www.usinflationcalculator.com...flation-rates/.

There are inflation hawks on the Fed committee, but the Chair isn't among them. The push to raise rates is mostly ideological, there is nothing in the data calling for it. Only the sense that, as you say, prolonged low interests rates risk the growth of bubbles.