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Pop Quiz: Should the Fed Have Hiked?

Courtesy of Mish

Here is the question of the day: Should the Fed have hiked on Wednesday?

Here is my question in the form of a Tweet Poll:

Please think through your answer before reading further.

The question stems from a question by “Cautious Observer” who commented earlier today “Mish, you infer the Fed should be easing. Other than the very short term, how does that help?”

His comment was in response to my sarcastic statement “Hike away” in Retail Sales Dive (And It’s Not Just Autos).

“Cautious Observer” was bang on in his assessment, in question form:

If the real economy is contracting despite near zero nominal rates and negative real rates, why would even more negative rates and asset purchases via CB balance sheet expansion be expected to make the underlying economy start growing? Easier credit and more QE may grow the asset bubbles, but the only way I can see that increasing economic activity in even the short term is if the average person starts using their home as an ATM again (refi with net cash out). That works for a while, but we all know where that leads. Do we have to keep reliving this over and over? Mish, you infer the Fed should be easing. Other than the very short term, how does that help?

Hike Away!?

As for inferring that I would like the Fed to cut: I have stated repeatedly the Fed does not know where interest rates should be, and neither do I. At least I know that I don’t know.

The Fed has never managed to see a bubble in real time. Three consecutive bubbles prove the Fed does not know where rates should be.

Continue reading here…


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