The "Need" To Raise Interest Rates
This past Friday the BLS released another "whopper" set of employment numbers. The economy supposedly created 271,000 new jobs. I was fortunate to be able to speak with John Williams (I encourage you to subscribe to his service at www.shadowstats.com) and asked him two questions. First, with the current backdrop of an extremely weak global economy, how was this whopping big number generated? Mr. Williams believes the "seasonal adjustment" has been an extreme outlier this month and last, a seasonal adjustment of near 70,000 jobs were added. This would have left the jobs number at close to 200,000 jobs. I also asked what the "birth death" model added and he responded 165,000 jobs. If you do the math, between the unusual seasonal adjustment plus the birth-death model addition, 235,000 of the 271,000 in job gains are "fictional"!
Switching gears but still looking at macro economics, the Baltic Dry Index just hit the lowest level ever for http://www.zerohedge.com/news/2015-11-06/its-official-baltic-dry-index-has-crashed-its-lowest-november-level-history the month of November. (While editing, this story http://www.zerohedge.com/news/2015-11-08/ceo-worlds-largest-shipping-company-global-growth-worse-official-reports came out). It confirms what we knew and tells us global trade is quite weak and shrinking. This is important because it flies in the face of the Fed looking at "BOGUS" employment numbers and deciding to raise rates next month. I do want to remind you, two weeks ago on Monday and Tuesday we heard two separate trial balloons for negative interest rates ...and then BAM! ...Janet Yellen and company strongly hint they will raise rates! So which is it? Will they raise rates, lower them or do nothing?
My opinion is this, the Fed will either leave rates the same or even be forced to lower them into the depths of negative territory. No matter how many "fabricated" reports come out, it will not in any way change the reality that Main St. economy is weak. False reporting to try and fool the masses is one thing ...but the truth is the truth no matter how many times or to what extent you tell the lie. I believe the Fed would truly like to raise rates but they are petrified what they might unleash with a rate hike. Interest rates have been zeroed out since 2009 and now the talk of negative rates. The Fed has lost all credibility, "talking" about raising interest rates is as close to the real thing as I believe they will get. The Fed "needs" to raise interest rates to have any credibility at all. Problematically, if the Fed actually does do anything at all, raise OR lower rates, they will probably spark a panic.
Going further into opinion and theory, I believe what we may be seeing now with such fabricated economic numbers accompanied by the Fed talking hawkish is the "set up" for an excuse. Geopolitical events between the U.S. and Russia/China have been heating up rapidly. Are we seeing a lead up to something very bad financially or geopolitically? Are we being fed prior "cover" to create the ability to say "our policies were clearly working, the Fed was even going to raise interest rates but (this or that came up) and disturbed the recovery"?
The weak US and global economy is fact, the ability to raise interest rates I believe is fiction. Interestingly, we are heading into December which each year is THE largest delivery month for COMEX gold. We are entering this timeframe with a registered gold inventory lower than any time in memory. Less than $200 million can now clean out ALL registered gold stocks on COMEX. This, at a time the U.S. has pushed both Russia and China very hard. As I have maintained for months now, do not be surprised if a "truth bomb" is dropped on the American population. This may be the only way a war can be avoided, show the American people the truth and take any public support for aggression away. Reveal the truth and our markets will be crippled. Cripple our markets and the ability to make war will largely be neutered. I believe we are very close to a point in time where the bleak reality can no longer be hidden and the attempts to hide it will become desperate. Truth will reveal an entirely different world than what many believe we are in!
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Bill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration. Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present.