From Minimalism To Tech

Claim: “The Fed Wants To Create A Disaster”

Posted in Money on September 15th, 2016

I’ve already made it clear to regular readers and followers that I don’t expect the Federal Reserve to raise interest rates this year:

Recall that I predict the Fed won’t raise interest rates this year while expert economists predicted that there would be four interest rate increases this year. So far, I’m winning.

Back in January, “experts” said we would see at least four interest rate increases this year and now we’re in September 15th with 0. So far, I’ve been right and now very few people expect that we’ll see four interest rate hikes. This was also true last year: I predicted 0, most predicted 3-4 and we had one hike in December, making my prediction closer to the truth. Of course, I’m not above being wrong, so I was wrong about the December hike, but used it as an opportunity to load up on more miners, since I estimated they were cheap due to people overestimating the Fed’s seriousness.

I was right.

There is a new argument against my view that I’m hearing now, so I’ll write a short post to address it.

“The Fed Will Raise Rates To Cause A Disaster …

… and then get more power from that disaster.” This is a claim I’ve seen several times across social media, so I’ll address this quickly.

First, the Fed could do this, but they won’t be raising rates because the economy is strong, which is my argument. I say that the Fed won’t raise rates because they know the economy is weak and can’t handle an interest rate increase, so this doesn’t refute my point. What it does is offer a different reason – they want to control more, so they’ll intentionally crash the markets.

Second, if the Fed gets more power because of crashing the markets, this is a reflection of US voters, not the Fed. Why we even have a Fed after Ben Bernanke denied there was a housing bubble a year before it popped is beyond me. Still, this says more about US voters than it does the Fed.

Third, if the Fed doesn’t raise interest rates, they’ll cause another disaster – the pension crisis. The Fed is stuck, which is my entire point. Either pensions collapse or markets do. They’ve set themselves up for this and – again – if this is intentional, it says more about US voters than the Fed. In the world of personal finance we talk about personal responsibility. This is true; but personal responsibility also means participating in the system.

Fourth, like my bet on gold miners, one way or another the Fed will surrender to what I already know: it is trying to control reality and this will never work. When reality has the final say, expect a lot of economic and financial pain. There is no way around this. Even I will be hurt too – I can’t escape reality either. Sadly, most people who’ve followed the rules of the past in personal finance – like you and I – will be crushed since these rules no longer apply.

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