The Fed: Stuck Between a Rock and a Hard Place

schiffgold.com / BY SCHIFFGOLD  / JUNE 1, 2017

The Federal Reserve basically has two paths forward.

It can continue raising interest rates and risk popping the stock market bubble (among other balloons) it has inflated over the last 9 years. Or it can hold rates at the current artificially low rates and risk a currency crisis.

That’s it. That’s the corner the Fed and other world central banks have backed themselves into. They’re stuck between a rock and a hard place.
The cycle is pretty clear if you step back and look at it. After a crash, central banks push down interest rates and effectively “print” money through bank credit expansion. As a result, market interest rates fall below natural market levels. This sets the boom in motion. Consumption and investment increase. Jobs get created. The economy expands.

We’ve certainly seen that over the last several years. It’s most obvious in stock markets, which continue to flirt with record levels. As Yahoo Finance reported last spring, analysis shows that 93% of the entire stock market move since 2008 was caused by Federal Reserve policy. Bond markets also appear to be in bubble-mode.

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