Fed Rate Hike Prospects Fade As Bubble Builds In Equity Markets

As the potential for any Fed rate hike in 2016 begins to dwindle, stock markets around the world are continuing to climb upward with weak interest returns and uncontainable credit.

Less than one month after Federal Reserve Chair Janet Yellen upped the odds of a rate hike and sent the stock indices here in America tumbling, the impossibility of her optimism has become glaringly clear.

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” Yellen said, according to the New York Times back in August.

As Lawrence H. Summers of the Washington Post points out, the latest economic data shows a lack of inflation and a far less healthy economy than Yellen and company anticipated just last month following the annual Fed meeting in Jackson Hole, Wyoming. This all signals yet another economic recession that could have been easy to see coming if only that was the true intent.

Instead, the Federal Reserve postures about a rate hike and toys with the emotions of everyone, only to let the roller coaster zoom back down the slope toward reality once again. And it’s this manipulation of currency and emotions that makes the prospect of a rate hike so unbearable at present for the economy.

There’s been evidence of another bubble building in the housing market, as pointed out by the Inquisitr, with rates so low that it’s nearly irresistible to consumers who can’t see the forest for the trees when it comes to the impending day of reckoning for the economy. And it seemed obvious due to all of these factors that the house of cards would risk collapse if the Fed chose to go on with another rate hike by the end of the year, let alone in September.

So here we stand, with equity markets around the globe soaring to near record highs and the outside stimuli for a rate hike looking more positive than ever. As Reuters points out, emerging markets touched their highest levels since July of 2015, but a lot of that has to do with a flight to safety when the safest investments (treasury notes, certificate of deposits, government bonds) are yielding next to nothing thanks to near-zero interest rates.

But despite the potential ramifications of a rate hike soon, U.S. News points out that perhaps the biggest effect of raising rates now would be psychological. If the Fed were to enact a rate hike now, it would allow them to potentially lower rates again later to give the perception of things having room to improve and the higher interest rates being at fault for a sluggish economy.

Of course, when reading between the lines, it’s easy to see that no rate hike or cut has ever truly stimulated the economy. The credit markets are only illusions that provide terrific talking points for politicians and the master manipulators to lull folks into a false sense of security. The only way for the economy to truly improve is to quit propping up the lousy debt that’s been weighing it down since the initial collapse back in 2008 and let the markets fix themselves.

When the impact of these rate hike teases begins to wear off and the bubble built in the equity markets bursts, causing yet another massive selloff and millions to lose the bulk of their retirement savings, it will be interesting to see how the Fed explains their logic. Chances are, the answer will be the same as it’s always been with wash, rinse, and repeat, as the consequences of near-zero interest rates eventually come to pass. As the prospect of a rate hike is put on permanent hiatus, the bubble will only grow to proportions not yet seen in this era of faulty monetary policy under the Federal Reserve.

[Photo by Richard Drew/AP Images]