Europe may push the Fed to raise rates

Enough is enough. Let’t return to sanity for the rest of the year. Raise rates a little at a time. A weaker dollar means other trading countries can by oil cheaper than the USA. That’s the craziest contraian idea ever thought up. We are gambling with our economy and our standing as a nation in the world of economics.

The FED needs to raise the rates

There is clearly a lot of deep thought that goes into comments to this story. I’m going to stick to what I know …

It’s important to separate “inflation” from “energy” from “oil”. The rising price of oil is caused mainly by the control of supply and prices by the OPEC cartel and aggravated by speculators. Also, oil is not renewable; it is a rapidly declining resource. Energy is often confused with oil. For example, by energy content, natural gas costs about half or less the price of oil, coal costs about one-eight or less the price of oil, and electricity is even cheaper than that, thanks to much of our electricity coming from renewables that use no fuel (such as hydro), and nuclear (that uses very tiny masses of fuel).

We really need to reduce and replace our use of oil (now being called petrofuel) as quickly as we can, before it runs out, not during or after. It is not easy to do this, and we have to get creative, but it is getting less difficult: drive less, fly less, ship less, waste less, lower speed limits, live closer to work, switch to a 4-day work-week, reduce immigration, substitute more biofuels for petrofuels, mandate new vehicles with smaller engines, etc. There are other ways, too.

We have a great country: Happy Independence Day !

- ECB hikes, FED holds – dollar plunges

- Cheaper dollar leads to higher oil demand in the world

- The world follows ECB’s footstep to hike rates for cheaper oil

- The US is now being isolated having to pay for higher oil prices

- Inflation sky rockets and economy is unable to absorb higher oil prices

You know the rest…

Personally, I think the dollar has been too high for too long, encouraging the buying of cheap consumer goods and the moving of any and all movable jobs out of the US.

Face it America, an hour of an American’s labor is not worth 20X an hour of a Chinese persons labor. Our dollar is going to continue to drop even if the feds DO raise the rates. The world economy will balance it out, like it or not.

That said, the fed should raise rates. Lending banks federal money at significantly less then inflation is asinine. Too bad they wont lend it to me at that rate.

Oh yeah, I forgot, I’m the one who has to pay the bill. Not get the benefits.

Hold it just a minute. Lets stop and look at reality. In the last year crude oil prices have doubled, but in the same time frame the dollar has lost only 15% against the EURO. At worst the weakenned dollar would only acount for about $10 a barrel of the $70 per barrel increase. Does the Feds action impact oil prices? Sure. Can they take the fall for more than a small portion of the increase, absolutely not. Will a FED rate increase bring oil prices back to where they were a year ago? Absolutely not.

The real problem is that oil has been so cheap for so long. If you adjust the price for inflation, what we were paying for gas a year ago was some of the cheapest in my life time. Cheap oil has meant we developed cities where you have to drive and it meant we use huge SUVs and trucks to transport one person. It has also meant that we have not developed alternative energy sources. And finally it has meant that we have dumped tons and tons of carbon into our atmosphere.

Oh, and sorry – one more comment.

To the “Fed has no control of oil prices”, maybe you would also like to explain how oil began its 96% run up from prices last September when the Fed surpised the market with a half point cut. Did the demand picture change all that much since then?

Of course not. Oil is denominated in dollars, and when the dollar goes down, oil goes up.

ECB raises rates, EUR/USD goes up. Dollar goes down, crude goes up. Headline inflation goes up and the ECB is forced to think about raising rates, and the cycle perpetuates.

The Fed is lost, behind the curve, and focused on helping Big Banks recoup their losses through keeping Fed Funds low and allowing banks to lend at much higher rates – thereby allowing them to replenish their balance sheets with capital.

The Fed cares nothing for Joe 6-Pack. If it did, it would concentrate on stomping out inflation before the genie is completely out of the bottle. And we’re almost there.

For the lost soul that said raising rates would cause a depression, I suggest reading up on Paul Volkner and the 80s.

Inflation is a FAR greater threat to an economy than stagnant growth. The ECB knows this.

Good for them.

No. Don’t raise interest rates. Doing this during a slowdown or a recession is a great way to make a depression. Read about the Great Depression and the Fed chief that finally cured it, Marriner Eccles:
http://en.wikipedia.org/wiki/Marriner_Stoddard_Eccles

Oil prices are controlled by a cartel: OPEC. They are aggravated by speculators. The Fed has almost zero influence on oil prices, and they have admitted so. We do have some solutions within our control. We need to reduce demand for oil: drive less, fly less, ship less, waste less, lower speed limits, switch to a 4-day work-week, produce more ethanol and biodiesel, mandate new vehicles with smaller engines, etc. until the crisis passes. The list goes on. We also need to raise margin requirements on oil futures from 7% (can you believe it ?!?) to at least 50% (like stocks and bonds) to squeeze out some of the speculators.

This is a great country: Happy Independence Day !

The Fed should be focusing on inflation at this point. The rates are too low and inflation is starting to run wild. Waiting will only make the problem worse and cause real economic damage. The Fed should be taking a proactive approach and not the reactive stance of waiting for trouble to be too far gone before doing anything.

I’d love to see the Fed raise rates, but I don’t think they will do it. Low rates help banks make money, and apparently, they need that help right now. Also, the housing debacle will not likely improve if raising short term rates pushes mortgages higher. Lastly, a stronger dollar will hurt our exports, and make imports cheaper. How will that affect our already whacked out trade imbalance, especially w China? I don’t think Bernanke and pals have the guts to raise rates anytime soon.

Raise the rates. As I understand this mess, part of the reason oil costs so much is that it is traded in US dollars, and with rates so low, the dollar is getting pounded, thus producing slightly inflated oil prices (slightly inflated more then they would be with a strong dollar). Simple fix: Raise rates. Banks are not passing on these better rates anyway, and what do we have to lose by trying to raise rates? If wall-street plunges in value due to a rate increase, then the FED could call an emergency session and simply lower them again. Makes sense to me to apply a little trail and error at this point.

1.) Feds lower interest rates to boost the economy.
2.) Banks who received the cheaper loans don’t pass on the liquid cash to the country, i.e. consumers. The interest rates are still same, or loans are non-existent.
3.) Dollar gets cheaper, even though the consumer doesn’t receive more cash.
4.) Money supply doesn’t change after cash is “dumped” into the banking system, yet each day we readh that the dollar got stronger or weaker based upon the perception, rather than fact.
5.) Greenspan continues to say his legacy had nothing to do with the housing bubble.
6.) The CD interest rate is deplorable. I can’t keep up with inflation.
7.) No matter what the government says, actual inflation (inflation that affects my personal budget against my earnings has gone up pushing 12 – 14%)
8.) Oil has doubled in the past year, yet Bernanke has been so concerned about keeping Bear & Stearns afloat to the destruction of the rest of us.
9.) I would propose that the banks who received the loans not use it to pad their bottom lines, but rather get it into the public. If the public are going to pay for a deflated dollar, then the public needs it to offset the deflated dollar. I would also propose doing what the Fed Reserve chair did in the late 70’s. Short term pain for long term stability. Beranke needs to get the interest rate back up, he needs to encourage the country to start saving, and stop pandering to Wall Street. Wall street went down anyway, inspite of the cash influx, so what does it matter?

“Concerned” made some excellent comments. The question know needs to be answered. What can we (the people) do about it? Don’t we control our Congress?

If you think we’re in a bear market now, go ahead and raise the rates and see what happens. The only thing contributing to positive GDP (and not declaring a recession) now is directly associated with a weak dollar and the politicians now that. They orchestrated it and that’s why the jawboning they are doing now is just that… jawboning. All talk and no action. If rates go up, you’ll see GDP fall in the toilet and jobs will get cut horribly! Doesn’t matter if oil gets cut in half if half the people are working. I’m soooooo glad I don’t have the Fed’s job!

Of course the FED should be concerned about the weak dollar, inflation, …. if it is concerned about the general short and long term welfare of the country. Unfortunately, the FED doesn’t see the interests of the country as part of its mission and seems more concerned with bailing out large banks that made bad decisions and supporting the salaries and bonuses of Bernanke’s budies on Wall Street.

From the Federal Reserve’s website:
“Today, the Federal Reserve’s duties fall into four general areas:
• conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
• supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system”
I do not see anything in the mission of the Federal Reserve in which the relative strength and weakness of the dollar are a priority. The priorities of the Fed are at best a defensive approach to their main mission, which is regretful. Most likely, because of the publicity on rate setting, the Board has forgotten most of their missions and focused only on interest rate policy. The currency issue, however, that would be the job of Congress. Unfortunately, I do not see Congress doing anything (no matter who is president) taking the steps necessary to control the dollar. Democrats, Republicans, Libertarians, and heck, even the Green Party all lost focus on fiscal responsibility and accountability. We pass laws to that throw money at every group to fix a problem within the economy or the society. Our government has become too large. Freedom has thus far had an extremely high price tag (and I am not talking about the war), but what about generations to come? Until Americans can Stand United and force the government to cut spending, debt, and reduce the trade deficit, the dollar will never be of any real value. Any corporation that ran their business as government has would have oust the Board, CEO, and shaken up management (who knows, some would be taken out with handcuffs for money laundering and accounting scams). The shareholders of the United States have been on the losing battle with their management team. The only question is what can we do about it?

Yes! Raise the rates. It would help the people on fixed incomes living on their savings, and many more problems including the price of energy.
Give me the high interst rates of the eighties. I struggled a little then, and I loved it ! ! !

I know that this is a tough time to hear it, with gas prices going through the roof and groceries costing more every day, but a weak dollar is good for our economy. A weak dollar means a greater portion of the money earned by our people stays in our country, and more money from overseas flows here as our goods become less expensive overseas. This helps to create and retain jobs and industry.

Looking back, the twin problems of cheap oil and strong dollar have been the primary cause of much of the pain Americans are facing today. This is well illustrated by the Auto Industry. Cheap gas gave little reason not to buy and drive huge gas guzzling, poluting behemoths and because profits on each SUV was higher than on smaller cars it gave GM, Ford and Chrysler little incentive to build quality smaller vehichles. At the same time a strong dollar made imported auto more affordable and thousands of manufacturing jobs were sent overseas.

As a consumer being squeezed mightily, i’d say strengthen the dollar.
However, i do recognize that the weak dollar has actually helped some industry including domestic tourism and machinery exports to other countries sell more products and helped those industries boom for the first time ever.
However, is that small group of niche global economy trotters boomtimes, worth the pounding and pain and LITERAL suffering being heaped upon our US citizens whose incomes from $0 to 50k are not making it with this kind of skyrocketin costs of living and stagnant wages?
If my company paid me what i have now, and subsidized my gasoline, i’d be fine, but thats not going to happen and we are not able to save a dime with gas like it is.
So selfishly, Fix the dollar and drop US costs including gas prices.
Sorry to the few global entrepreneurs.

The Fed HAS to raise rates! I’m fed up with subsidizing cheap money for those who don’t save. I’m getting a lousy %2.0 return that doesn’t even cover half of inflation — PLUS I have to pay %50 of the interest on my taxes. It’s time that those who voted for George Bush begin to feel the pain of their decisions.

For years the FED has used it’s clout in order to stimulate growth or, as in thepresent case, to attmept to stave off recession. In my opinion, this roller coaster of applied stimulus has been the root of much of the problems we now face. Let’s face the facts, in over-simplified terms: as a nation, we overspend our income , with the same predictable, inevitable and dire consequences as a household will experience in the same circumstance. None of thie mess we are in will get “fixed” by temporary monetary manipulations, rather only by the application of sound fundamentals which we will, sooner or later , be FORCED to adopt as a society. We just cannot have our cake and eat it too.