The Federal Reserve is a serial bubble blower; and it has done it again. As we’ve been saying for a long time (too long, it seems), when this bubble comes apart, massive disruption and economic pain will follow.
Based on recent events, it seems that the time has finally arrived to say: This is it.
It’s done. Put a fork in it. It’s over.
While we are 100% confident that the Fed, et al., will do everything they can to keep propping up the headline stock indexes, especially in the thinly traded overnight futures markets, we are also 100% confident that the Fed lacks the ability to buy every asset in every market.
Once the deflationary wave we’ve been expecting gets rolling, it will defy any and all attempts to prop up the headline markets any longer.
Loss Of Faith
To begin in this story, let’s remind ourselves that fiat money relies on confidence. As especially do bubble Ponzi schemes.
The Fed has backed itself into a corner where I believe they are now damned if they do and damned if they don’t. I am speaking of course about the upcoming interest rate hike on December 16th, 2015.
The Fed has publicly committed to doing it; if they don’t, they will have lost credibility. But if they do hike rates, the pace of the destruction of the world markets will only accelerate. Very soon after that, the Fed will have to reverse course, lower rates once, try further QE efforts and generally continue to flail about with free 'thin air' money while seeing their credibility float away like a child’s lost balloon.
Either way, the necessary confidence required to keep the whole mess stitched together is rapidly being lost.
Market expectations are not only for a hike, but a hike up 0.50% which would be a full 37 basis points (0.37%) from the current Fed funds rate:
(Source)
That’s actually further than I was thinking the Fed would go. (I expected it to just ‘raise’ the Fed Funds rate to a solid 0.25% vs. the current range of 0% to 0.25%).
37 basis points, may not sound like a lot. But in the world of negative sovereign interest rates in Europe, a +0.5% return on short term
by snydeman 
