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Edit to comment: I don't understand what will be different in 2016.
One must presume the "buying time" concept for all of these folks who "redistribute" monies around the globe.
Higher rates transfer to the cost of money for central banks and the likes of "IMF", too....eh?
Do ya think Ms. Yellen and Ms. Lagarde ever have a cup of coffee or other together, to chat about stuff?
And if the Fed does raise this year, all signs are it will be a quarter point, followed by a delay before any further move. If the market drops 10% in response to that, I'd be a buyer.
Europe, Japan, China, they each have their own central banks to nurse them through soft economic times. The Fed needs to focus on US economic conditions. Let Draghi worry about/act for Europe.
Then too, 2016 is a presidential election year; the Fed would probably prefer to not have to take belated action then, and become a focus of election-year politicking. Raising rates once, in 2015, might inoculate against the need of multiple, rapid raises later.
The Idolatry of Interest Rates James Montier
is a member of GMO’s Asset Allocation team. Prior to joining GMO in 2009, he was co-head of Global Strategy at Société
Générale. Mr. Montier is the author of several books including “Behavioural Investing: A Practitioner’s Guide to Applying Behavioural
Finance; Value Investing: Tools and Techniques for Intelligent Investment"
Part I: Chasing Will-o’-the-Wisp
A wider idolatry: the greatest con ever perpetuated
Lest you think I am being unduly harsh on the world’s poor central bankers, let me turn to the wider
idolatry of interest rates that seems to characterise the world in which we live. There seems to be a
perception that central bankers are gods (or at the very least minor deities in some twisted economic
pantheon). Coupled with this deification of central bankers is a faith that interest rates are a panacea.
Whatever the problem, interest rates can solve it. Inflation too high, simply raise interest rates.
Economy too weak, then lower interest rates. A bubble bursts, then slash interest rates, etc., etc. John
Kenneth Galbraith poetically described this belief as “...our most prestigious form of fraud, our most
elegant escape from reality... The difficulty is that this highly plausible, wholly agreeable process exists
only in well-established economic belief and not in real life.”
Ultimately, the popularity of the equilibrium real interest rate amongst central bankers may simply be
a case of “never ask a barber if you need a haircut,” and their resistance to the ideas outlined here is a
function of Upton Sinclair’s view that “It is difficult to get a man to understand something when his
salary depends on his not understanding it.”
As someone insightful (if only I could recall who!) said: It is scary to realise you don’t know what is
going on. It is even more terrifying to realise those in authority think they do.
( A little wonky but a good read )