Wednesday, November 4, 2015

Fed Motives

CNBC Financial Editor Jeff Cox writes that while the Fed claims to be "data driven," behaviorally it appears to be "market driven," which is unattractive in his eyes. COTTonLINE suggests the news is even worse.

It is our observation that Fed interest rates are driven by crass politics. As long as most people hold a gloomy view of the economy and their chances within it, the Yellen Fed appears likely to hold interest rates near zero. We believe it an effort to create optimism in voters' minds and help elect Democrats.

Most of us who have saved money on which we'd like to earn actual interest will vote Republican anyway. Understanding that, the Fed loses nothing by keeping interest rates near zero. My snarky estimate of Fed policy: let's help the improvident (who vote D) at the expense of the provident (who vote R).