Why it’s not a big deal if the Fed decides not to cut rates any further.

Over the past week, Fed minutes were released that painted a bleak scenario for future economic activity for the US, but also alluded to the fact that they were on a holding pattern regarding any rate adjustments on the horizon.  A holding pattern with no planned cuts in the near term…..Big Deal.  Reality is that at the current pathetic 2% level of Fed Funds once again creates a significant negative real interest rate scenario for the mighty US economy.  Cutting rates from say 2 % to 1 % would only exacerbate the failed negative rate policy and create imbalances in the system while not providing much new stimulus.

Inflation is rising dramatically and has been rising over the past couple of years and unfortunately the failed indicator of CPI has raised serious questions over US data reporting.  The creation of negative real interest rates has keep the US$ in a massively depreciated state.  At the same time, the US economy is weakening significantly.  Fed policy?  I wouldn’t blame the problematic state of affairs on Ben Bernanke.  He inherited the perfect negative storm from inappropriate activities by his predecessor.  So when you hear the Fed may not cut anymore…the answer is…Big Deal.