When does the market make rates rise?

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When does the market make rates rise?

Postby Pixel8r » Mon Nov 03, 2014 3:56 pm » Safari 8.0 Safari 8.0  Mac OS X Mac OS X  Screen Resolution: 2560 x 1440 2560 x 1440

Since 2008 we have been on a zero interest rate policy in the west. Central banks have been buying government debt and mortgage bonds to keep rates at zero. They have now stopped expanding their balance sheets in the UK and US but still rates are being kept low. We are getting the repeated head fake that they are going to be raising rates soon as the economy recovers. I think that they will never be able to raise rates, it will only happen when the market forces it on them.

When does the market force higher rates? When that happens the central banks will result to the only method they know which is to create more money and buy the debt to keep rates low.
"Money is Gold, and nothing else"
(As John Pierpont Morgan once stated under oath before the USCongress and the Pujo Commission in 1912)
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Re: When does the market make rates rise?

Postby d2thdr » Thu Nov 20, 2014 1:45 pm » Google Chrome 38.0.212 Google Chrome 38.0.212  Windows Vista Windows Vista  Screen Resolution: 1280 x 800 1280 x 800

Please read this enlightening interview of Gideon Gono - a man I have learnt to respect (for that matter any central banker is worth respecting irrespective of our dislike for them) - http://newafricanmagazine.com/gideon-go ... VcBbl.dpuf

NA: Zimbabwe’s inflation rate rose astronomically. Couldn’t you have controlled it to a more reasonable level?

GG: We could have kept inflation below double digits if this was an option but it wasn’t. As a central bank, we could have pushed a hard-nosed tight monetary policy and not printed any money. We would have had low inflation if we had decided not to try to assist industry and get involved in other quasi-fiscal operations. By being blind to the realities of our situation, and pursuing conventional in-box economics, we could have kept our inflation to even single digits but at what cost? This is the issue! At the cost of very high inflation in terms of dead bodies!

There would have been lots of dead bodies lying in our streets, of children, the elderly, the vulnerable, and the sick, piling up in the hospitals and streets on a daily basis. Our only option was to go for a lesser evil, and we chose monetary inflation in place of dead bodies. It was a deliberate choice!

Dead men have no tales to tell, and that was our philosophy. With the wolves at the door, we had to use each and every tool at our disposal to defend the family rather than let the enemy have their way.
During that period, we experienced floods and droughts that destroyed our crops, and if we had not done what we did through the central bank, and through the interventions that were directed by none other than President Mugabe, people would have died of hunger or from the lack of medicines.

NA: What you did was quite revolutionary, wasn’t it?

GG: Yes indeed, and as I said earlier, the credit should go to President Mugabe. We sat down, the President and I, and agreed to deploy any sovereign tool that was at our disposal and that included the printing of money or “quantitative easing” as it was later called the world over after 2008.

We had no foreign currency, but we needed foreign currency to buy medicines and food. We are not a fuel producing country but we couldn’t do without fuel. Our industry depended literally on 70% imported inputs and needed foreign currency. Our agricultural output was not good enough at the time and we needed foreign currency to import food. Our military needed spare parts. We had national elections that required funding as a constitutional imperative, and all these requirements needed our creative attention.

If we had not done what we did and our law enforcement agencies had failed to do their duties properly, the same outside forces would have been the first ones to scream the loudest about the breakdown of law and order in Zimbabwe, and the need to send international forces to “protect civilians”.

NA: Like they did in Libya.

GG: Exactly. They would have used the pretext of protecting civilians to come in here to execute their selfish regime change agenda. If we had not done what we did to capacitate and keep our military machinery in place, we would have been fodder for our enemies. But because the world was aware that our defence forces were well taken care of, they dared not even dream of attacking us militarily.

In short political will is going to prevent the rate rises. Come what may. Just my opinion.
In the world today there are only three assets, gold, oil and currencies. The paper currencies, so long admired and accepted are now in a war of self destruction. They will consume each other in an end battle of "I'm the last man standing but have lost all use as a unit of value".
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