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Thursday, November 12, 2015

Can You Spot The Interest Rate Cycle That's Different? The Fed Can't!!!

As the Federal Reserve discusses and prepares the nation for a potential December interest rate hike, seems appropriate to compare the "success" of the latest cycle with previous interest rate cycles.
  • Federal debt incurred per net full time job growth per interest rate cycle (below).

  • The percentage of net new full time job growth per population growth (below).

  • Interest rate cycles compared with average interest rates over the cycle, full time job growth, and federal debt incurred per cycle.

  • Duration of interest rates at the minimum rate per cycle prior to initiating rate hikes.
  • Below, federal debt growth per interest rate cycle vs. full time job and population growth per cycle.

Apparently, this is what passes for "success" in the Fed's eyes in the new normal!?!


  1. TBH I'm struggling to fully understand this. On the face of it, interest rates have previously been used to slow s surging economy and dampen down business activities. In the above it looks like there isn't anything to dampen down. Like putting speed traps on a road that is only used by turtles. The lack of FT job growth merely articulates the poor state of the economy.

    1. @ A Jones - Thanks for your thoughts. TBH, that is exactly my thought as well! We are entering a world where economics and capitalism are upside down and inside out...

    2. The fed is lost. It's trying to look butch by talking rate hikes when in reality NIRP and helicopter money is in the pipeline. Think about it. The ECB is going more negative on nominal rates and the EMs are still being killed by an unwinding USD carry trade. They are going to hike in December? Yeah if they want to blow up the system.

      Meanwhile you can tell by the action in the miners that the price managers are being tested. Notice how gold and silver are down the HUI, especially AEM is up?

  2. I have an unconventional view of interest rates. Interest rates are indicative of how much wealth the bankers can steal from the common man. They are set to maximise the theft. Currently low rates are more profitable than high rates.

    In summary, interest rates are set at whatever level maximises the flow of wealth from the many to the few.

    At some point, we get lots of defaults. This is where bankers steal your collateral. This happens when the flow of wealth to the few slows below what they feel is tolerable.
    We might get hyperinflation, this is where the common man realise the banks continually steal from him.

    Don't get me started on government and this so called civilised society we live in.


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