The end of market rate interest

Here are some Cookies for you.  And you.  And you.  Grandma has been baking all day. Would you like some tea?

Interest rates will remain historically low for the coming years.  Return on savings and interest-bearing securities will yield you next to nothing. If you saved your money, you are a fool.  Grandma will determine the rates.  Grandma will encourage inflation and she will measure it the way she wants to measure it. You have no say, nor does anybody elected to office. 

Isn’t that nice? You sure you don’t want another cookie, there are plenty?  They’re still warm.  Grandma can make cookies any time she wants and as many as she wants.

Wall Streeters say, “She is a grandma, but she’s our grandma.”  Though cloaked in the armor of free market capitalism, those on Wall Street and those fully invested in the market just adore this manipulation of interest rates

“Don’t fight the Fed. Whether the central bank is right or wrong, that’s good stock market advice”.  So, to capsulate, when the manipulation is one way, get with it.  Again, good advice, no one should fight the Fed or the “tape”.  But fellas, you forget to mention your outrage with the imperial Federal Reserve and their departure from free markets.  Those three-piece suits can’t hide your hypocrisy.

It used to be that the Federal Reserve would follow the free market around.  Rates would be set in accordance with what the markets were dictating, freely.  Only when aberrations or special situations introduced themselves would the Fed become proactive.  Now is different. And the condition seems permanent, like Ronald Reagan speaking of a “temporary” government program being “permanent”.

The Federal Reserve will tell you what rates are, always.  For 6 years now, they have set the peg, not the free market.  The “special situation”, apparently the last special situation to initiate proactive Fed action in lieu of the free market, has been delivered in the 2007 and 2008 markets.  I say the last because to move from the free market on rates, one must first reside in such.  We likely will never again be in an interest rate market determined by supply and demand.  Free marketers care not if they are riding the tidal wave of the stock market.  They declare themselves one way, but embrace the most fundamental departure from that which they declare allegiance.  The Federal Reserve, and arguably one person, sets the cost of money, i.e. interest rates. 

If we pretend to operate and promote a free market, how can we not notice that the fundamental element, the cost of money, which is integral to the market itself, is fixed by a central planner?  Free market?  Stop pretending.  How about a cookie, grandma has been busy in the kitchen and will be for a long long time.