Why is the federal Reserve bank holding the USA hostage by not raising the Interest rates?
Gold went to all time high today at 1,800 and is expected to climb even higher by years end. With the US economy on free fall Why hasnt the federal Reserve raise interest rate to boost up the economy and end this depression?
I have got one word for you buddy: power. That, and they are a bunch of Keynesians. The only reasons Keynesianism (a disproved economic theory, e.g., stagflation) is still accepted is (1) politicians like to use it to justify their shopping addictions; (2) liberals like to use it as an excuse for entitlements, the welfare state, and yadda, yadda; and (3) the central bankers love to keep feeding that addiction.
The Treasury Department is hoping to sell as many treasury bonds as possible without having to pay back much interest on them in the coming years. When someone cashes in their bonds that they buy today years from now, they will make no interest on them. The selling of bonds helps with the federal income crisis, while the low interest helps to not accrue more long-term debt. The only problem is; who wants to buy a bond when they will not make any money off if it? (You will notice that answers to this question from conservatives are typical of their kind: full of emotion and opinion while presenting no facts)
The Fed would have us believe they run the controls. But at least in terms of interest rates, they do not. Interest rates are set in the open market where government bonds are sold at auction. The Fed Board does vote on a Fed rate, but this is just a formality since this rate generally follows the movement of auction rates for 6 month Treasury Bonds. Of course, the Fed can always influence the Bond sales by having anonymous parties in the back of the auction buying up Bonds that might otherwise go unsold. That's basically, how the Fed 'prints' money and helps the government stay liquid. Also, be careful about gold -- when gold is 'expected' to do something, it usually does the opposite.
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