T Nation

What Happens When Interest Rates are Raised?


#1

Will the Fed keep rates at zero forever?

The answer to this is obviously, no (unless the world changed overnight).

It therefore follows that mortgage rates will rise and interest-bearing securities AT THE OLD RATES will fall through the floor. No one wants to be long when rates are rising. Bonds will begin to collapse.

We are now in a recession-borderline-depression. What happens when...


#2

MEh the bankers can end a recession in as quick a manner as they created it. There is nothing you can do. You have no control or any REAL choices when playing their game, by their rules on their game board with them enforcing the rules. I feel it’s already too late to even buy gold.

Im gonna try a different approach to this. Once the recession is over and the market starts to climb, Gold will drop. When it hits lows, THEN will be the time to buy it. In other words, i want to go against the trends in investing and not with the trends.

Then when the markets starts to retract for another recession gold will raise in value and when it peaks it will be time to sell it and acquire alot of stocks for pennies on the dollar. Once the market rises sell and shares and go into the now again cheaper gold/precious metals.


#3

[quote]Gregus wrote:
MEh the bankers can end a recession in as quick a manner as they created it. There is nothing you can do. You have no control or any REAL choices when playing their game, by their rules on their game board with them enforcing the rules. I feel it’s already too late to even buy gold.

Im gonna try a different approach to this. Once the recession is over and the market starts to climb, Gold will drop. When it hits lows, THEN will be the time to buy it. In other words, i want to go against the trends in investing and not with the trends.

Then when the markets starts to retract for another recession gold will raise in value and when it peaks it will be time to sell it and acquire alot of stocks for pennies on the dollar. Once the market rises sell and shares and go into the now again cheaper gold/precious metals. [/quote]

The forces that held gold down are being crushed by the Chinese:

"The second big announcement is that the Hong Kong Monetary Authority has built its own high-tech vault to store its own gold, and they just requested delivery. Up to this point, the Chinese gold had been stored and vaulted in London, England. So now the Chinese are requesting their gold be shipped from London to their new vault in Hong Kong. This has major implications because this is a large amount of physical gold, and I think what it’s going to do is begin to expose the naked shorts who have been playing this game with the gold and silver markets, trying to keep a cap on the prices. So this is a major, major development.

TGR: Why would moving gold from one vault to another vault expose the naked shorts?

GM: Because they won’t have access to that gold. In other words, the shorts, in order to keep a lid on the gold prices, can’t control the gold price. This goes into the manipulation. I don’t talk about this too much just because, to me, it really doesn’t matter. In the end, manipulation never works and free markets eventually overcome any manipulative activity, and gold and silver will go to where they’re going to go. But in this case, the way they’ve been able to play this game over the yearsâ??and it’s been going on for a long timeâ??the manipulation crowd could short paper contracts of gold and silver with huge amount of paper contracts. They didn’t have the physical metal to deliver in case the longs decided they wanted delivery. They would get caught if they didn’t have enough physical metal to meet those demands."

http://www.marketoracle.co.uk/Article13681.html


#4

[quote]Headhunter wrote:
Gregus wrote:
MEh the bankers can end a recession in as quick a manner as they created it. There is nothing you can do. You have no control or any REAL choices when playing their game, by their rules on their game board with them enforcing the rules. I feel it’s already too late to even buy gold.

Im gonna try a different approach to this. Once the recession is over and the market starts to climb, Gold will drop. When it hits lows, THEN will be the time to buy it. In other words, i want to go against the trends in investing and not with the trends.

Then when the markets starts to retract for another recession gold will raise in value and when it peaks it will be time to sell it and acquire alot of stocks for pennies on the dollar. Once the market rises sell and shares and go into the now again cheaper gold/precious metals.

The forces that held gold down are being crushed by the Chinese:

"The second big announcement is that the Hong Kong Monetary Authority has built its own high-tech vault to store its own gold, and they just requested delivery. Up to this point, the Chinese gold had been stored and vaulted in London, England. So now the Chinese are requesting their gold be shipped from London to their new vault in Hong Kong. This has major implications because this is a large amount of physical gold, and I think what it’s going to do is begin to expose the naked shorts who have been playing this game with the gold and silver markets, trying to keep a cap on the prices. So this is a major, major development.

TGR: Why would moving gold from one vault to another vault expose the naked shorts?

GM: Because they won’t have access to that gold. In other words, the shorts, in order to keep a lid on the gold prices, can’t control the gold price. This goes into the manipulation. I don’t talk about this too much just because, to me, it really doesn’t matter. In the end, manipulation never works and free markets eventually overcome any manipulative activity, and gold and silver will go to where they’re going to go. But in this case, the way they’ve been able to play this game over the yearsâ??and it’s been going on for a long timeâ??the manipulation crowd could short paper contracts of gold and silver with huge amount of paper contracts. They didn’t have the physical metal to deliver in case the longs decided they wanted delivery. They would get caught if they didn’t have enough physical metal to meet those demands."

http://www.marketoracle.co.uk/Article13681.html
[/quote]

OH this will be fun. I can’t wait to see what happens next. The golden rule is, the one with the gold makes the rules.

So now London will loose possession of physical gold. That makes me wonder how much if any gold is left in our vault, Fort Knox.


#5

[quote]Gregus wrote:
OH this will be fun. I can’t wait to see what happens next. The golden rule is, the one with the gold makes the rules.

So now London will loose possession of physical gold. That makes me wonder how much if any gold is left in our vault, Fort Knox. [/quote]

As long as we’re still using paper it doesn’t matter who has the gold. If a new gold standard is created well then, so what? It does no good just sitting in someone’s warehouse. It will need to be exchanged for other goods. If the Chinese were able to amass 90% of the worlds gold reserves (just play along for a second) then the remaining 10% held by everyone else would be worth that much more.

It would be a better situation where money had too much value than having money with little to no value.


#6

Interest will fluctuate with the economy, and there isn’t much of anything anyone can do about that. I think it’s a matter of playing the hand you have, as best as you can.


#7

[quote]MaximusB wrote:
Interest will fluctuate with the economy, and there isn’t much of anything anyone can do about that. I think it’s a matter of playing the hand you have, as best as you can. [/quote]

Like a new age form of slavery, but on a much longer leash.


#8

[quote]MaximusB wrote:
Interest will fluctuate with the economy, and there isn’t much of anything anyone can do about that. I think it’s a matter of playing the hand you have, as best as you can. [/quote]

They don’t fluctuate as long as they are being manipulated.

Interest rates should be a reflection of the rate of savings. The more people save the lower the interest rates will be and people will begin to consume savings on the margins. As savings become increasingly less interest rates rise and people begin to save again. This mechanism obviously cannot happen with a central bank in control.

The result is capital consumption and decivilization on the whole as more people are removed from sustainable to less sustainable means – i.e., poverty.


#9

Rising interest rates will crush any sort of recovery in 2010-2011. This will lead to a pro business candidate being elected in 2012 that will slash tax rates and spending.


#10

[quote]hedo wrote:
Rising interest rates will crush any sort of recovery in 2010-2011. This will lead to a pro business candidate being elected in 2012 that will slash tax rates and spending.[/quote]

We can only hope. My concern is that the problems become so huge from the crushing debt that no one can control it. Someday soon, interest payments due will exceed income taxes collected. When that happens, the flight from the dollar will become oceanic.


#11

[quote]hedo wrote:
Rising interest rates will crush any sort of recovery in 2010-2011. This will lead to a pro business candidate being elected in 2012 that will slash tax rates and spending.[/quote]

No. Rising interest rates will spawn the recovery: More saving, less spending.

The immediate effect will be like a dam burst but eventually everyone will dry off. Bad debt needs to be liquidated and people need to begin building up their savings again. This is the only way to save the dollar. And that is the real problem we are facing.


#12

Does anyone feel that inflation is worth more worry than interest?


#13

The crushing debt! You mean the ~70% debt/GDP ratio? You know Japan’s (and someone else’s; I forget who) is over 100%, right?


#14

[quote]MaximusB wrote:
Does anyone feel that inflation is worth more worry than interest?[/quote]

The two are related.

The more the Fed inflates the lower they need to keep interest rates artificially low. That is the only way banks can move money otherwise none would borrow all this “cash” that is just sitting around collecting dust.


#15

[quote]LIFTICVSMAXIMVS wrote:
hedo wrote:
Rising interest rates will crush any sort of recovery in 2010-2011. This will lead to a pro business candidate being elected in 2012 that will slash tax rates and spending.

No. Rising interest rates will spawn the recovery: More saving, less spending.
[/quote]

Is this what you mean?

Rising interest rate will spawn a depression.
Depression will create a behavior of more saving, less spending.
More saving, less spending will spawn wealth creation.
Wealth Creation will lead to economic recovery.


#16

http://www.youtube.com/watch?v=WpfYd3ADLPU&feature=sub

This is a good video.


#17

[quote]Ryan P. McCarter wrote:
Headhunter wrote:We can only hope. My concern is that the problems become so huge from the crushing debt that no one can control it.

The crushing debt! You mean the ~70% debt/GDP ratio? You know Japan’s (and someone else’s; I forget who) is over 100%, right?

[/quote]

Hmmm…got a source?


#18

This post was flagged by the community and is temporarily hidden.


#19

[quote]formerfatboy wrote:
LIFTICVSMAXIMVS wrote:
hedo wrote:
Rising interest rates will crush any sort of recovery in 2010-2011. This will lead to a pro business candidate being elected in 2012 that will slash tax rates and spending.

No. Rising interest rates will spawn the recovery: More saving, less spending.

Is this what you mean?

Rising interest rate will spawn a depression.
Depression will create a behavior of more saving, less spending.
More saving, less spending will spawn wealth creation.
Wealth Creation will lead to economic recovery.
[/quote]

Yes, in a sense. Rising interest rates would cause people to slow down their spending and save more. Whether it leads to a “depression” I cannot say that for sure. Some claim we are already in a depression – which is a slowdown of wealth creation.

Saving is the only way to create wealth because it allows investors a chance to risk in an entrepreneurial endeavor to bring about new goods and services – that is wealth creation. We don’t necessarily have to save a huge amount. The key is to not over consume – that is to say, don’t take on more debt than can be paid back.


#20

[quote]LIFTICVSMAXIMVS wrote:
formerfatboy wrote:
LIFTICVSMAXIMVS wrote:
hedo wrote:
Rising interest rates will crush any sort of recovery in 2010-2011. This will lead to a pro business candidate being elected in 2012 that will slash tax rates and spending.

No. Rising interest rates will spawn the recovery: More saving, less spending.

Is this what you mean?

Rising interest rate will spawn a depression.
Depression will create a behavior of more saving, less spending.
More saving, less spending will spawn wealth creation.
Wealth Creation will lead to economic recovery.

Yes, in a sense. Rising interest rates would cause people to slow down their spending and save more. Whether it leads to a “depression” I cannot say that for sure. Some claim we are already in a depression – which is a slowdown of wealth creation.

Saving is the only way to create wealth because it allows investors a chance to risk in an entrepreneurial endeavor to bring about new goods and services – that is wealth creation. We don’t necessarily have to save a huge amount. The key is to not over consume – that is to say, don’t take on more debt than can be paid back.[/quote]

Ah, but there’s the rub, Lifty – savings goes to hell when people don’t trust the currency. They see our currency being printed like napkins, knowing that such low rates as today had to come about because of a flood of new money.

The history of money is a fascinating topic, esp how the Romans absolutely despoiled their currency, wanting to continually spend, spend, spend. Once everyone gets wise, the country collapses into ruin and slaughter.