Say, Say, Say.

The debate continues to rage over whether the Fed should tighten or leave the Fed Funds rate unchanged. There are many market participants who espouse the opinion that the Fed needs to keep rates low. I will concede that keep rates low help troubled banks by keeping Fed and interbank borrowing costs low.

Although that would be a valid argument, many of these easy money advocates go as far as saying that the Fed is not keeping rates low to help banks (some insist that higher rates would help banks - yeah right), but to help consumers. Their argument is that it keeps credit card rates, ARM rates and HELOC rates low.

My argument is that borrowers are tapped out and banks are not lending. Besides, more consumers are feeling the effects of higher food and energy prices than would be affected by higher rates. The easy money apologists have an answer for that too. They claim that food and energy prices are not being affected by low rates and a weaker dollar, only supply and demand. I will concede that supply and demand is the primary driving force between higher commodity prices, but to say that the weaker dollar is not significantly affecting the price if IMPORTED oil is a bit disingenuous. What would make so many smart people say stupid things? Agenda!

Nearly all of the pundits who clamor for continued easy Fed money work for banks or investment banks. Analysts, economists and strategists, whose firms depend on easy financing. Consider the source of the opinion as well as its message. I do work for an investment bank, but the cloak of anonymity provided by this blog permits me to tell the truth.

My readers should also read the blog posted by bondguy1824.