Why the Fed Can't Give Straight Answers Anymore

Written By Christian DeHaemer

Posted June 7, 2016

Chairwoman of the Fed, Janet Yellen, is known for her vague statements; they don’t usually signal the direction the Fed is leading, but they sure sound good.

The Federal Reserve, or Fed, is in charge of currency stability, keeping unemployment low, job opportunities high, and raising and lowering interest rates. Their most valuable tool is the power to change interest rates, which they use sparingly. They’ve only hiked once –last December– in several years.

In its simplest form, raising the rates in a good economy takes the air out of bubbles and reduces the chance the economy will overheat with runaway inflation. Lowering rates during downturns greases the wheels of commerce with cheap money. In theory this allows companies to build plants and buy equipment, and consumers to pay down debt.

There are many who are critical of the Fed. Instead of focusing on the United States’ economy, some think they’re more dedicated to fixing the world-wide economic problems, or filling the pockets of Wall Street fat cats.

fed sign

No Clarity from Yellen

Whatever they’re doing, the Fed is unclear as ever. After the minutes of the FOMC meeting in April were released, many analysts saw it as likely that interest rates would rise. But now, no one seems to know either way.

The problems started for the Fed last week, when the jobs report for May came out. May had the least amount of jobs growth in five years. An estimated 164,000 jobs were supposed to be added to the economy, and we only saw growth of 38,000. Manufacturing and construction jobs decreased sharply.

Yellen though, is still saying everything is okay. During her remarks on Monday she indicated that even with the disappointing report, the economy is still headed in the direction it’s supposed to be. But she gave no indication as to whether a rate hike is still likely, and with the recent jobs report, and whispers of a recession ahead, a rate hike in June could be problematic for our economy.

It is the same old shell game that has been going on for seven years.

The Fed says they will hike next month. It gets priced in and then the Fed doesn’t hike. Rinse and repeat. I’m already hearing talk about a July rate hike – blah, blah, blah.

At some point the Fed will lose all credibility – if it hasn’t already.

Its time to add to your gold and silver positions and tell Yellen to go pound sand.

To continue reading about the Fed’s latest balderdash, click here.

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Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.

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