How Bad Would It Need to Be For Fiscal Stimulus? Maybe That’s Why the Fed Wants To Raise Rates….

First a clarification after my recent post.  I am NOT “flat broke and unemployed.”  At least not yet 🙂  The 2nd half of my post yesterday was a quote from another blogger –  “The Coppola Comment“.  As a follow up to that post….

The ongoing mystery of the Fed’s desire to raise rates is “Why the rush?”  The evidence (rock-bottom inflation, no wage growth, general lassitude) doesn’t suggest any reason to take away the punch bowl.  There’s hardly a wild party going on around it.

The Fed is desperate to “re-load” on monetary stimulus because they know fiscal stimulus won’t happen.  

The Fed’s real fear is obvious Rigor Mortis on the fiscal side.  “Fiscal” means “Congress.”  Which is on a nihilistic binge not seen since the Spanish anarchist parties of the 1930’s Civil War (not a model of success).  Right-wing wackos pushing the simple-minded, wrong-headed idea that a country’s fiscal policy should be managed like a household budget.  With a wall of money behind that rhetoric preserving plutocratic preferential protectionism.

In 2008, it took a near-miss banking crash and “the Great Recession” to force Congress to (painfully inadequate) action.  In 2015, we’d probably need a full-blown bank crash AND a full-blown depression to get anything “fiscal” done.  

The Fed remembers that the 2008 House voted down TARP the first time it came up.  It took a massive market crash to win a 2nd vote.  The 2008 House looks almost reasonable vs the nihilistic nut-jobs driving the agenda in 2015.  There are House & Senate Republicans who seem to want a mega-crash.  A bonfire of the vanities in the classic sense (“burning of objects condemned by authorities as occasions of sin.”) 

Seen in this light, maybe the Fed should raise rates?  I still don’t think so.  They are pushing on a string already.   And they can’t raise rates enough to stop the next recession without causing the next recession.  

Maybe the Fed should speak truth to power?  Tell Congress to take the free money on offer and do its darn job?  Use testimony as a forced course in basic macro-economics?  Hah!  That would be impolite and impolitic.  The Fed will preserve its prerogatives above all else.  So we are all along for a ride to God-knows-where driven by people believing God-knows-what who clearly don’t give a God-damn.  Let’s hope we don’t hit any major bumps in the road…  At least I am not unemployed and flat broke (yet).  🙂

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