Sunday, May 24, 2015

The Current Forecasts on a Fed Rate Hike: Ron Paul, Peter Schiff and Robert Wenzel

Ron Paul:  Yellen's Talk About Raising Interest Rates is Just Talk

Peter Schiff: No Rate Hike and QE4 is Coming

Robert Wenzel; The Federal Reserve will almost certainly raise rates this year (Most likely by 25 basis points). It will be a "One and watch" rate hike, meaning it won't be a "stepped"series of rate hikes, but more will follow 2016-17.


  1. Wenzel, I thought you posted an article a couple of weeks ago outlining your view that it would be a "stepped" rate hike? Similar to Greenspan between 2001 and 2008. That was your argument then, why are you changing your view now?

    Several readers have responded that there might be one rate hike and it would be essentially insignificant because it would be 25 basis points and that is all. Now you are agreeing with us?


    1. As MalcomNYC might say. it appears we are dealing with a bit of a reading comprehension problem. This is what I wrote I couple of weeks ago:

      "I could go on, but the point is clear. The Fed is not going to wait for price inflation to hit its 2% "target," before they raise rates. As long as they believe inflation is trending toward 2%, they will feel justified in raising rates...The rate hike itself will be a hike from the current Fed funds target range of 0.0% to 0,25% to the 0.25% to 0.50% range. The rate paid on excess reserves at the Fed will be raised from 0.25% to 0.50%. But this will be just one rate hike. It won't be the type of stepped rate hikes that we have seen in the past."

  2. Showdown in Econoland!!!
    Wenzel vs. Ron Paul and Peter Schiff (tag team)
    Stay tuned!!!

  3. Mr. Wenzel, I respect your economic analysis, encyclopedic knowledge, and expert judgement on these matters, but...0.25% hike sometime in 2015 and some unspecific future hike (maybe) before the end of this not just a distinction in search of a difference? I think you've dialed this back so that all our Austrians are now on the page essentially. Such a "timid baby-step" hike would be insignificant -- window dressing only -- and could occur with a QE4 still to follow. I don't think the bond market would react catastrophically. So what's the ballyhoo all about? You are obviously not talking Volcker-type rises. If someone was predicting 80s style Volcker rises, this would be something to ballyhoo, because such hikes would indeed be catastrophic NOW, given, the economic stagnation of the so-called "boom", the sovereign debt-to-GDP levels, and the world-wide money-printing going on.

  4. Where exactly do you get the idea that Wenzel "dialed back"? From what other position?

    And where do you get the idea that Wenzel said a further "unspecific future hike (maybe) before the end of 2017." He said:

    "MORE will follow 2016-17."

  5. The Fed WILL raise rates. It may harm the economy but that is not the Fed's number one concern.

    The Fed will raise rates to protect the dollar and drum up demand for US Treasuries. With a slew of de-dollarization initiatives taking hold (e.g.AIIB) and lower gas prices reducing the demand for dollars and UST, the Fed needs to raise rates to make the UST unique in that it actually pays some yield.

    All the people shouting the Fed won't raise rates were the same people shouting the Fed would not taper. They did.

    The Fed will raise rates but state they are for the reasons above, but rather they will insist the economy is better, QE worked and they will 'restate" GDP numbers if they have to in order to convince people that they are raising rates because they can because the economy is accelerating.

    The Fed does not want to become BOJ and needs external sources to buy US Debt because the US borrowing needs are not going away.- but foreign creditors might.

    1. Seems plausible the fed will leave rates at zero as long as they can in service to the banking community however to give the pretence that rate hikes "are again possible" and "to protect the dollar and drum up demand for US Treasuries" as Smaul mentioned is also very relevant.

      Good point there Smaul........

      The fed is probably noticing that external demand for US debt is waning....

  6. Whatever the fed does it will not tighten policy during a recession or during a correction in the stock market of any significance. It will remain accommodative ad infinitum. They are talking about raising rates because they believe that a 50 basis points funds rate is still accommodative yet makes them appear somewhat hawkish and conservative. Janet Yellen is a major dove no matter what she says in her speeches and conferences. Major inflation is on the way. Maybe next year is when it shows up.

    1. Neil
      That is correct A quarter pt is enough to differentiate the Fed from other cbs but still hoily accalmaudative mawnetree paulicy in Yellen speak
      You are correct Yellen is an uber dove
      Google Janet yellen and negative interest rates

  7. Replies
    1. How nice is it though to see someone put their differing opinion out there in a respectful way?

      It will be very interesting to see who has made the correct call in the next few months.

      Both Ron Paul & Peter Schiff called the housing bubble(though Ron much earlier), but I think there's room for them being right on the long term trends while RW being correct on the short term outlook...