Oh boy...Republicans Already Crying About Higher Rates

By Chris Rossini

The Fed raised interest rates by a measly .25% and already cries from the right can be heard. The Fed must be sabotaging the incoming Trump Administration! 

Let's look at an example from Ann Coulter. She tweeted:

To dispel rumors that the Fed is political, Yellen to raise interest rates for 1st time during Obama admin ... in time for the Trump admin.

First let's start with what Coulter got right. The Fed is political. They are the financier for the wars and welfare of the biggest government in the world. To think that Fed officials hover over the world like angels, disconnected from politics is pure naiveté. So Coulter has that part right, but goes downhill from there.

Today is actually the second time that the Fed has raised rates during the Obama Administration. The first time was back in December of 2015. So Coulter has her facts wrong.

But the real error is in the implied belief that artificially low interest rates are a good thing.

They're not!

An environment of artificially low interest rates is when the damage to the economy is done. It's when all the bad investments are made. It's when all the pie-in-the-sky companies are started (Remember eToys and Pets.com?). It's when all the projects that should never be undertaken, are undertaken. (Remember all the shopping centers and neighborhoods that went up during the housing boom?).

Artificially low rates are poison. They enable economic behavior that should never occur. But here's why politicians love them: They give the outward appearance of things being great. It appears that the economy is sound and business is booming.

Unfortunately that's all government and politicians care about...outward appearances. They suppress reality with as much ferver as they can on a daily basis otherwise.

Artificially low rates cannot last. A great analogy is to compare it to a night out drinking with your friends. While the alcohol flows, the world becomes an artificial wonderland. Some are more confident than they would be without the alcohol. Some are funnier, more gregarious and outgoing.

The outward appearance (much more often than not) is that it's great, right?

But the alcohol can't flow forever, lest one happens to have a death wish. Ultimately, a return to reality must commence. It's painful. Let's not mince words. But the damage that was done during the binge must be repaired.

Since artificially low rates screw the economy up, a rise means a return to reality. All the bad investments are exposed. The businesses that should never have been started go bust. All the waste that The Fed brought into being must enter liquidation (unless of course they know somebody in power that can get them a taxpayer bailout).

This is what the Fed does. It creates a false economic reality. The vast majority of people must suffer as a result. Only a very small handful are able to position themselves correctly to avoid being a part of the carnage.

This doesn't have to be. It exists because the Fed exists.

Economic reality is not a bad thing. But politicians hate it with a passion. They always want the appearance of an economic boom. More money out of thin air!...More credit!...Turn those machines back on!

Ann Coulter obviously doesn't want the bad investments exposed during the Trump Administration. How will he get re-elected?

It has to happen sometime. The market always beats The Fed. No exceptions.

The market must set interest rates, not a bunch of people in marble palaces. There is no other way off The Fed's boom/bust roller-coaster.

We need supply and demand, not Fed Chairmen. What the Fed thinks, what their outlook is, and what their next move happens to be is all bubkas.

End The Fed.