A Brief Colonial History Of Ceylon(SriLanka)
Sri Lanka: One Island Two Nations
A Brief Colonial History Of Ceylon(SriLanka)
Sri Lanka: One Island Two Nations
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Thiranjala Weerasinghe sj.- One Island Two Nations
?????????????????????????????????????????????????Tuesday, June 20, 2017
USA: Democracy Is A Front For Central Bank Rule
( June 19, 2017, Washington DC, Sri Lanka Guardian) Several
years ago when the Federal Reserve had its Fed funds rate at zero to 25
basis points (one-quarter of one percent—0.25%), there was a great deal
of talk, somehow presented as urgent, whether the Federal Reserve would
raise interest rates.
RT asked me if the Fed was going to raise interest rates. I answered
that the purpose of low interest rates was to restore the solvency of
the balance sheets of the “banks too big to fail” by raising debt
prices. The lower the interest rate, the higher the prices of debt
instruments. The Fed drives bond prices up by purchasing bonds, and the
Fed raises interest rates by selling bonds, or by purchasing fewer of
them than previously.
I told RT that a real increase in interest rates would undercut the
Fed’s policy of rescuing the balance sheets of the big banks whose
balance sheets were loaded up with bad debt that desperately needed a
rise in debt prices for the banks to remain solvent.
When shortly thereafter the Fed raised the overnight funds rate, it blew
my credibility with RT. RT did not understand that real interest rates
had not increased. Indeed, two days after the “rate increase” the
nominal interest rate had not changed. It was still 18 basis points. The
announced rate had gone from the old range of zero to 25 basis points
to a new range of 25 basis points to 50 basis points. The former max was
the current minimum.
Moreover, over the long time period in which there was such well
marketed concern over whether such an inconsequential interest rate rise
would occur, inflation had risen, making the real interest rate
negative well below the 18 basis points official interest rate. By the
time the Fed raised the nominal rate, the real rate was already more
negative. Thus, there was no rise in real interest rates.
The financial press did not explain this, either from incompetence or
collusion. RT accepted the fake news as reality and wrote off my
credibility. I am often interviewed by RT, but no longer on economic
matters, about which I know the most.
A couple of days ago, after a long period of waiting for another
interest rate rise, an announcement from the Fed, amidst further
indication of US economic decline, announced another 25 basis point
increase in the target range for the Fed funds rate.
Inflation aside, in fact interest rates declined, as my sometime co-author Dave Kranzler reports.
Despite this publicized “rise” of the Fed funds rate, the 10-year
interest rate on Treasuries “has declined 30 basis points this year.
Thus for certain borrowers, the Fed has effectively lowered the cost of
borowing.”
Kranzler goes on to point out that “the spread between the 30-day
Treasury Bill and the 10-yr Treasury has declined this year from 193
basis points to 125 basis points – a 68 basis point drop in the cost of
funding for borrowers who have access to the highly engineered
derivative products that enable these borrowers to take advantage of the
shape of the yield curve in order to lower their cost of borrowing.”
Kranzler provides a chart that shows that the spread between the 30-day
Treasury bill and the 10-year Treasury bond is narrowing. As the
short-term rate rises, the long term rate is falling, and the spread
between the long and short rate has declined 68 basis points from almost
two percentage points to one and one quarter percentage point.
Clearly, this is not a rise in interest rates.
Clearly also, a rise in the Fed funds rate no longer signals a rise in all interest rates.
Why is the Fed raising short rates when the long rates are falling?
Why do “democratic Western democracies” have central banks that do
nothing except protect big banks at the expense of the people?
How long will the insouciant peoples of the West continue to conspire in their own demise?