FED: Officials: Fed will need to boost rates quickly

[Dionysus]

They are FREAKED OUT that people will realize how their whole CON works. Read End The Fed!
Unemployment is going to be massive.

http://finance.yahoo.com/news/Offic...tml?x=0&sec=topStories&pos=main&asset=&ccode=

 

[torchbearer]

20% interest. can't wait!

 

[Dionysus]

20% interest. can't wait!

Yup. That article is freakin' scary. This is going to suck.

 

[torchbearer]

Yup. That article is freakin' scary. This is going to suck.

It sucks for the debtor, its awesome for the saver.
High interest rates will wipe out the rest of the debtors that aren't on fixed rates.
they will have to start over.
this will force the recession they have been trying to avoid. so i'm not sure they will ever do it.

 

[Dionysus]

It sucks for the debtor, its awesome for the saver.
High interest rates will wipe out the rest of the debtors that aren't on fixed rates.
they will have to start over.
this will force the recession they have been trying to avoid. so i'm not sure they will ever do it.

Hmmm, now would be a good time to open a bunk bed business, since everybody is going to be moving in with family members to survive.

 

[squarepusher]

how does gold do/what investments are good for high inflationary periods?

 

[Zippyjuan]

The price of gold would be going up but would it be going up any faster or slower than other prices would be the question.
http://inflationdata.com/inflation/inflation_rate/gold_inflation.asp
Inflation adjusted price of gold:

Which you can compare to:

http://en.wikipedia.org/wiki/File:US_Historical_Inflation.svg

You really can't look at the period before say 1969 since the price of gold was basically fixed by the government.

 

[Dionysus]

how does gold do/what investments are good for high inflationary periods?

Someone more knowledgeable can answer this. Real asset prices, like gold, go up, because there is too much fake money made. It protects your wealth. The whole too few dollars chasing too few goods. This is why we need a commodity (precious metal) backed currency. You can't just trust bankers and politicians with a printing press. It would also be a good time to borrow money with a fixed interest rate, cause then you pay it back with cheaper dollars. Of course, they're pledging to "protect the dollar" from inflation by jacking up interest rates if gold starts to take off. That article basically says it all, essentially, they're ready to jack up interest rates QUICKLY, even if there's still high unemployment! My prediction comes from a Dr Paul Q&A with Bernanke: Stagflation with high interest rates.

 

[SelfTaught]

I definitely think we should get the recession we deserve, but when I get my imagination involved, I realize that it isn't going to be pretty. I mean really bad. It could easily be the worst economic downturn in history. Not only will we get a sharp contraction, it will be coupled with a devalued dollar, even if they start raising rates and cutting government spending.

 

[hugolp]

They wont do it. They are not going to raise the rates any time soon.

They are just threatening with doing it to give a boost to the dollar by playing with the expectations.

My guess is that they wont raise the interest rate until 2010.

 

[tmosley]

There is no way to do it. They wouldn't be able to make payments on the national debt. Currently, the payments are something like 300 billion per year at an average of 3% interest. If that went to 20%, the payment would be $2 TRILLION/year, or 14% of GDP. They would have to double taxes (at least double, probably more given the number of businesses and individuals that would be driven into the ground by the increase tax burden) to maintain the current level of spending.

Hyperinflation is their only way out. Either they are smart enough to see that and have accepted it, or they are dumb enough to plow right into it. Repudiation of the debt would destroy their ability to borrow, which is political suicide. All they can do is print money and pretend that everything is fine.

 

[FunkBuddha]

It's all part of a high-wire act that the Fed has to perform as the economy transitions from recession to recovery.

Can't we just fire Bernanke out of a cannon instead?

 

[SevenEyedJeff]

It sucks for the debtor, its awesome for the saver.

If you can get 10% interest on your savings, don't forget you will be taxed on that. Plus, what if inflation is 30%? Are you going to sell your gold for fiat?

 

[squarepusher]

If you can get 10% interest on your savings, don't forget you will be taxed on that. Plus, what if inflation is 30%? Are you going to sell your gold for fiat?

yes, so gold may not be the best position to take during high inflation? or is it

 

[tmosley]

If the rates are high enough to stop inflation, then yes, it is better to hold fiat. I think that in order to achieve that, rates would have to rise to the 30-40% range at least, which would destroy the country.

In other words, don't worry about it, it ain't gonna happen. Even if they WERE to raise rates, they would have to use the print press to pay interest on the debt, which means inflation will exceed the interest rate anyways, in which case it is still better to own STUFF.

 

[LibForestPaul]

Someone more knowledgeable can answer this. Real asset prices, like gold, go up, because there is too much fake money made. It protects your wealth. The whole too few dollars chasing too few goods. This is why we need a commodity (precious metal) backed currency. You can't just trust bankers and politicians with a printing press. It would also be a good time to borrow money with a fixed interest rate, cause then you pay it back with cheaper dollars. Of course, they're pledging to "protect the dollar" from inflation by jacking up interest rates if gold starts to take off. That article basically says it all, essentially, they're ready to jack up interest rates QUICKLY, even if there's still high unemployment! My prediction comes from a Dr Paul Q&A with Bernanke: Stagflation with high interest rates.

Otherwise,its US carry trade, yippee!

 

[Mapleton]

Isn't this what economists like Peter Schiff and Jim Rogers say we need?

 

[teacherone]

Isn't this what economists like Peter Schiff and Jim Rogers say we need?

Actually, Schiff, Rogers, and Paul, all say we need the market to determine interest rates. And since americans are in the debt-shithole with no savings, interest rates should be much higher than they are.

But no cabal of bankers should arbitrarily decide what those rates should be.

 

[hugolp]

Isn't this what economists like Peter Schiff and Jim Rogers say we need?

Yes, they say they think the market would set interest rates much higher (its obvious) and that is exactly what we need.

Ultimately, the market should freely set the interest rates. But if we are stuck with a central bank, at least it should try to set the interest rates as close as the market would, and that is much higher than they are now.