Standard doctrine is that the Federal Reserve sets interest rates in the United States. But what if they don’t? If they don’t, and it is really the market that dictates interest rates, then the following (which is scary enough on its own) gets particularly scary.
Here is Dollar Collapse quoting Bloomberg:
Investors who piled into the riskiest corners of the credit markets during seven years of rock-bottom interest rates are getting a reminder of how hard it can be to cash out.
With outflows from U.S. high-yield bond funds running at the fastest pace in more than a year, Martin Whitman’s Third Avenue Management took the rare step of freezing withdrawals from a $788 million credit mutual fund on Dec. 9. …
Investor withdrawals “are driving the high yield market now more than anything. Institutions — hedge funds and mutual funds — are being forced to get out and unfortunately that’s pressuring the entire market.”
Growing tumult in credit markets comes eight years after BNP Paribas SA helped spark a global financial crisis by freezing withdrawals from three investment funds because it couldn’t “fairly” value their mortgage holdings.
Debt-laden commodity producers have been some of the hardest hit parts of the junk-bond market this year as prices for everything from oil to steel tumbled on signs of oversupply and weak demand from China. The slump is burning investors who relied on lower-rated bonds to boost returns as the Fed kept its benchmark interest rate near zero since 2008. …
So is the Fed being forced to raise rates in order to look like it is in control and like it is doing the responsible thing? If rates begin to spike across the board while the Fed is still attempting to keep rates low would that not scare the bejeebers out of world investors and speculators?
So I say that in spite of the world economy and commodities absolutely tanking, and in spite of the already-too strong dollar threatening to bankrupt the third world; the Federal Reserve is going to raise rates on December 16th.
See also Tic Toc Canary