After its genesis in 1913 as a result of the Federal Reserve Act, The Fed now has the main responsibilities of A) stabilizing prices, B) maximizing employment, and C) controlling long-term interest rates.
But are those duties the main focus and source of motivation right now?
Here’s the real reason why Chairwoman Janet Yellen and the Federal Reserve won’t raise rates anytime soon…
Politics.
For an institution in which politics shouldn’t be playing a part, what’s currently occurring is particularly troubling. And it could have grave consequences moving forward…
But the signs are all there, and I choose not to ignore them.
First of all, President Obama doesn’t want to experience a recession or stock market crash while in office. That much is understandable.
Yet if unsustainable forces are artificially propping up the market, the short-term Band-Aid being applied to the overriding economic wound is only going to add to the pain when it’s ripped off.
But even Obama’s wish to manipulate his legacy by hiding the natural, cyclical issues facing the stock market isn’t the scariest possibility.
What’s more frightening is Yellen using her power and vehicle to become a political pawn in one of the most important events for the foreseeable future…
So let me ask you this: what’s the most consequential situation unfolding right now?
The 2016 United States presidential race.
And while we’re still in the intermediate stages of choosing candidates to represent their respective parties, the competition is already very much on between Democrats and Republicans for the White House beyond Obama.
Why does that matter regarding Yellen and the Fed?
The state of the economy and stock market can easily sway the outcome of the election.
If the stock market and economy dip, voters will pin it on the sitting Democratic president and his party. If the stock market and economy can hang on by the fingernails until Election Day, voters may be more inclined to stand by the current president’s party because of the perception that everything is OK.
So with Yellen at the center of a situation so vital, it’s no surprise to see Obama using her as a political weapon by inviting her to the White House to chat in a rare meeting between the two.
And knowing that raising interest rates has had a negative impact on the stock market, do you think there’s a chance that Obama could have mentioned a need for Yellen to hold off on further rate hikes until after the election when the two met in the middle of April?
The breadcrumbs are all there – now it’s just a matter of seeing how much the lack of rate hikes now will hurt the economy in the future…
As a general rule, the Fed would normally need to lower interest rates around 300 points to get the economy out of a recession. Right now we’re sitting at 0.25% with a recession on the horizon, both globally and domestically…
Well, how does Yellen plan to cut interest rates when there aren’t any to cut?
