According to financial analyst Jim Willie, founder of the Hat Trick Newsletter, there is no way the Fed will be raising interest rates at their upcoming meeting on September 20-21. He claims they cannot do it because it will wreck our financial system. So the only reason they would do it would be to “scuttle the system.”
“Fed Chairman Janet Yellen is talking about raising rates and it is absolutely hilarious, it’s ludicrous, it’s stupid. They cannot raise rates. I have made this point many, many times. If they raise rates they wreck the bond carry trade, which is where the Wall Street banks are borrowing free money and investing in the treasury bonds. That is one of the biggest reasons why the treasury bond is going down in yield. The rally is from Wall Street banks that refuse to make commercial loans to major clients and instead would prefer the no-risk strategy with the Fed winking to them at all times, ‘Don’t worry, we’re not going to raise rates.’
So they borrow at zero and they invest at 2%. They load on the futures contract leverage of 25 or 30 to 1 and poof, they have a 50% annual return. Why would they want to stop that? So they’re not going to stop that. The Fed is not going to wreck that by raising the interest rate, which would not just reduce the profit. It would send the entire trade into reverse.
The other reason why they are not going to raise rates is that the interest rate swap derivative is producing I would say somewhere around 80% of all treasury bond demand. It is 80% artificial.
They can’t wreck that. So if the Fed raises rates, it is to scuttle the system and blame it on foreigners who would sell the bond. The foreigners are selling the bond and the QE architects are lapping it all up. The Fed wants to blame any problem on foreigners because they never blame themselves. They want to blame China, the major creditor of treasury bonds. They still own over $1 trillion. The Japanese own about $1 trillion. Okay, that’s two trillion.
I am hearing the (U.S. government) debt is over $20 trillion right now. For over two years we have had no debt limit applied to the U.S. government debt, and no budgets either. Why is that? And I think the answer is very simple. They already defaulted because they are already in receivership (bankruptcy) because now the only people who don’t know what’s going on is the American public.
They (the Fed controlled U.S. government) are allowing the debt to rise because there is something in the balance right now called the reset.
So if they do it (raise interest rates), it will be a scuttle.
I don’t believe anything about a rate hike. The rate hike that we had last December was nothing more than an adjustment for reverse repos that enabled the Wall Street banks to give up their cash to the Fed, take in treasury bonds, and build a higher Tower of Babel with a smaller footprint as a base. In other words, bigger leverage, more debt, a bigger ratio in leverage and more debt.
What do interest rate swaps and other derivatives dislike? Movement! Wind! Think of the Sears Tower during wind from any direction. We have treasury bonds down on the yield from 1.7% to 1.5% and the derivatives don’t like it. They are having a harder time.”
Jim Willie is not alone in his views. Only 29% of traders expect a September rate hike, which is a little higher than previous surveys, but still way less than half (Source: Zero Hedge).
The experts have been wrong before and they could surely be wrong again this time, but if Jim Willie’s analysis is correct, it would mean game over for the U.S. financial system. I believe that day is coming, but I would be surprised if it happens this fast. Even without any rate hike, I am expecting to see lots of volatility in financial markets in September and beyond.
Author: James Bailey
James Bailey is a blogger, business owner, husband and father of two grown children. In 1982, he surrendered his life to the Lord Jesus Christ. In 2012, he founded Z3news.com to broadcast the message of salvation by reporting end time news before it happens.
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