Ineffective Fed Needs to Advertise For A McGyver

After more than six years and in the face of abject failure, the Fed continues its hawkish talk. After once again reviewing its floundering track record last month at the Jackson Hole summit, the Federal Reserve Board emerged with a renewed threat of interest rate hikes, soon and continuing. And like every previous threat, the announcement was met with the reality of the situation, in the form of a weaker than expected August jobs report and an ISM non-manufacturing report showing that most market expectations missed to the downside. As a matter of fact, it was the report’s lowest reading in six years. Nevertheless, we heard, “It makes sense to get back to a pace of gradual rate increases, preferably sooner than later,” from San Francisco Federal Reserve President John Williams, in a presentation to the Hayek Group.

This kind of attitude and rhetoric is exactly what was needed three to four years ago, but at this point, it’s nothing less than adolescent and futile. The Fed has become increasingly desperate to make an interest rate move, because they have nothing left to throw, except the kitchen sink. They’re one click away from the zero interest rate (again) and two clicks away from the economic black hole of negative interest rates. They need to stop the rhetoric and place the ad for a McGyver-type miracle worker, because that’s the only salvation that could make a difference at this point.

An interest rate hike would give the Fed a perceived cushion, but a perception is all that it would provide. Last December’s increase is responsible for our current economic doldrums and a further increase would only expedite the inevitable economic decline. We’re now looking down the barrel at the dollar’s further devaluation in the eyes of the International Monetary Fund, when China’s Yuan joins the global reserve currency basket on October 1. The Yuan fell to a six-year low this week as bears tested the central banks tolerance for a weaker currency. Bloomberg reported that, Kenix Lai, a Hong Kong-based foreign exchange analyst at Bank of East Asia Ltd. reported that, “Bears were testing the psychologically important level of 6.7 (Yuan/Dollar), which appeared to have been the People’s Bank of China’s bottom line lately, but the central bank may have tried to support the exchange rate later.”

With every accepted currency in the IMF basket floundering, my question is very simple. How long before the IMF will tire of this exercise in futility and implement their IMF-sponsored “One World Currency”? And when that happens (potentially overnight) are you prepared? Do you have the precious metals necessary to survive the universal currency collapse that could occur?