The decision of the US Federal Reserve to raise its key interest rate was definitely not a sign of confidence in the US economic recovery or a signal that Fed policy is slowly returning to normal as claimed. It was rather a signal of panic over the weakness in US Government bond markets, the heart of the dollar financial system.
Financial markets have reacted with jubilation, by buying dollars and selling Euros, at the decision by the Fed to raise rates for the first time since 2006 for its so-called Discount Rate, going from 0.5% to 0.75%. The Discount Rate is the interest rate charged for banks to borrow from the central bank. At the same time the Fed left its more important short-term Fed Funds rate unchanged and historically low — between 0.0% and 0.25%. In its official statement the Board of Governors said the rate move was intended to push private banks back into the private inter-bank borrowing market and away from reliance on Federal Reserve subsidized money which had been provided since the financial crisis began in August 2007.
Neither the US financial press nor the US bank leaders take the sovereign debt crisis seriously. Even the USCongress seems totally unaware of the growing global intolerance for government debt out of control. The issue is rollover of short-term debt, size of the overall debt burden, borrowing costs to sustain the debt, annual deficits that accumulate further debt, and size of debt versus economic size. The United Statesprojects a certain degree of arrogance that foreigner must continue to finance the USGovt debt at a time when the evidence gathers on loud suspicious activity in the USTreasury auctions. The US travels down a road to debt default also, as the mask of corrupt USTBond management is removed. The plight of Europe will strike the United States and United Kingdom, as contagion is ripe. The claim of containment incites laughter. The Euro currency has finally begun to stabilize, which will make all the more apparent a global bull market in the Gold price. The Gold price in almost every major currency is rising. In the US$ it will be last.
The decision of the US Federal Reserve to raise its key interest rate was definitely not a sign of confidence in the US economic recovery or a signal that Fed policy is slowly returning to normal as claimed. It was rather a signal of panic over the weakness in US Government bond markets, the heart of the dollar financial system.
Financial markets have reacted with jubilation, by buying dollars and selling Euros, at the decision by the Fed to raise rates for the first time since 2006 for its so-called Discount Rate, going from 0.5% to 0.75%. The Discount Rate is the interest rate charged for banks to borrow from the central bank. At the same time the Fed left its more important short-term Fed Funds rate unchanged and historically low — between 0.0% and 0.25%. In its official statement the Board of Governors said the rate move was intended to push private banks back into the private inter-bank borrowing market and away from reliance on Federal Reserve subsidized money which had been provided since the financial crisis began in August 2007.
Contrary to conventional wisdom, George Friedman, Chairman of Stratfor, and author of “The Next 100 Years”, sees the United States, Turkey, Poland and Japan as the great powers of the 21st century
Feb. 17 (Bloomberg) — Italy, saddled with the euro region’s second-largest debt, is the “biggest threat” to the economy of the 16-member bloc, according to Nobel Prize-winning economist Robert Mundell.
“Italy has got to be worried,” Mundell, a professor at Columbia University, said today in a television interview in New York. “If Italy became a target then this would create a big problem for the euro. Whatever is being done to Greece, possibly to Portugal and maybe Ireland, has to also save Italy from that problem.”
Together, the Icelandic and Greek financial crises can be seen as the second stage of the larger global banking crisis. The first stage of the global banking crisis, which began in late 2007, was centered in the European and U.S. mortgage and mortgage derivative market. The second stage began with Iceland’s monetary and fiscal crisis in 2009 and continues with the current Greek crisis, and is centered in European sovereign debt.
