Bernanke’s top concerns about a Fed rate hike

Even the cost of equity capital is at or near an all-time low for most businesses.

What is the natural rate of interest? . For a while, that looked like a simple regression to the mean. And at this point it is nearly becoming a requirement for Central Bankers to just be plain Dodgy, Comical, Squirming in their Seats, Stupid, In Denial, Blatant Liars who look like Meth Abusers being questioned at the Press Conferences like a criminal in an interrogation room at the police station – even they don’t believe their own “shit” these days that comes out of their mouths. Something unusual is happening.

No sane business person is going to invest their hard earned to make Government or Banks rich no matter how many of them tell us we should, Adam Smith was very clear about this, we do it because of self interest.

So why are rates so bizarrely low? For example, Thomas Laubach, who is now director of the Division of Monetary Affairs at the Federal Reserve, and John Williams, who is now president of the Federal Reserve Bank of San Francisco, used the trend growth rate of potential GDP and consumer impatience to estimate the natural rate in their influential 2003 paper, “Measuring the Natural Rate of Interest”. Any explanation for falling rates must involve an increased desire to lend, a decreased desire to borrow, or both.

MONDAY, OCTOBER 26 BRUSSELS – European Central Bank board member Yves Mersch speaks at Belgian Financial Forum on “The Challenges of Innovation” in an event organized by the National Bank of Belgium – 1045 GMT. This makes sense to most people, since we all hear that the US Federal Reserve, or the Bank of Japan, has a policy of holding interest rates near zero. MEXICO CITY – Central bank of Mexico announces interest rate decision – 1900 GMT. Core inflation, which strips out volatile food and energy prices to give us a better idea of future inflation, is also a lot lower than we want, at 1.3 percent.

The simple story is that when interest rates go up more than they do in Europe, the dollar goes up against the euro.

So are low rates being driven by a savings glut? LONDON – Former Federal Reserve chief Ben Bernanke speaks at London School of Economics on his new book, The Courage to Act: A Memoir of a Crisis and its Aftermath – 1830 GMT.

“The ratio of credit downgrades to upgrades has risen to levels not seen since the financial crisis”, he writes. And if there is risk you might not fulfill your promise, then the more risk-averse the consumer, the higher a rate he or she will demand.

In addition, these rich countries have steeply declining populations, and shrinking domestic markets discourage companies from expanding.

Mr Lee said surges of volatility would continue to rattle financial markets – whose assets had been inflated by leveraged investors financed by QE in the U.S. and elsewhere – until the Fed began its long-awaited tightening cycle. Indeed, the UK’s unemployment rate declined to its lowest level since 2008, which in turn offset the negative impact on sterling in light of the announcement that inflation was negative for the second consecutive month in September. In past times when interest rates have moved higher, it has dampened returns in the stock market. CHISINAU – Central bank of Moldova holds monetary policy committee meeting.

Reading between the lines the Fed wants to raise rates in December to get back the ounce of credibility they once had as they have reiterated their intention of raising rates this year, and with the financial market once again “healed” they are going to sneak in a 25 basis point rate hike, (maybe a lame 10 basis point rate hike if they completely wimp out on the rate hike) just to keep their original word of raising rates in 2015.

Reuters/David W CernyItaly’s Andrea Morassi goes down on a lift chair from a flying hill in Harrachov as the Ski Jumping World Cup, which was cancelled due to bad weather conditions, January 20, 2008.

There are a few factors that may stop the downward slide. At the same time, China is also rebalancing towards a more consumption-based economy.

China’s current sharp slowdown has run its course.