I am about to witness the fall of Democrats and Yellen's...

I am about to witness the fall of Democrats and Yellen's resignation out of Fed.

This is my last post as I am 97% of losing to Skol but I'll come back to fix him again.
Why Are Democrats So Worried About A Fed Rate Hike?
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12/02/2015 06:43 PM ET




Federal Reserve Chairwoman Janet Yellen speaks during an Economic Club of Washington luncheon on Wednesday. View Enlarged Image

Monetary Policy: Fed Chair Janet Yellen thinks the economy is so strong that the central bank can start raising rates this month. So why are Democrats alarmed? Because they know that the "Obama recovery" is hollow.

It's true there have been marginal improvements in key economic indicators since 2008, as would be expected following the worst downturn since the Great Depression.

But the "recovery" that was touted so loudly by Democrats until last year has also been the worst ever — 2% average growth. Now they're worried about the prospects of even a tiny hike in interest rates by the Fed.

"God's plan is that things rise in the spring, and so if you want to be good with the Almighty, you might want to delay (raising rates) until May," Rep. Brad Sherman, the California Democrat, joked after Yellen testified before Congress last month.

Stand-ups aside, what really frightens Democrats is the political fallout of a rate hike imposed prematurely. As a Politico headline bluntly asked, "Could An 'Accident' By Janet Yellen Derail Clinton?"

Yellen doesn't seem to think so. "I currently judge that U.S. economic growth is likely to be sufficient over the next year or two to result in further improvement in the labor market," she told the Economic Club of Washington on Wednesday, implying that with unemployment near 5% and annual inflation close to the Fed's target of a 2%, a rate hike might come soon.

Contrary to what the Democrats say, the recovery was never that good to begin with. And contrary to Yellen, it's not that strong now. When the nation's top central banker touts a 5% jobless rate, she does so knowing virtually no economist treats that number as real anymore. Most agree the "real" unemployment rate is 10% or so.

Worse still, the economy is way below par. By our calculations, current GDP is $2.3 trillion less than it should be, based on median postwar recoveries. That's $19,000 less income for every American household.

Speaking of which, median family incomes have fallen since 2007. How can this be called a recovery at all, especially after seven years of zero interest rates?

As for the future, things may not be so rosy.

• Banking giant Citigroup says there's a 65% chance of a recession next year.

• The Institute of Supply Management's manufacturing index has fallen to its worst level since 2009.

• The Atlanta Federal Reserve's GDPNow index for the fourth quarter dropped to 1.4% this week, well below market forecasts of 2% to 3% GDP growth.

• Brazil, Russia, India, China — the BRICs — have tumbled into steep slowdowns, recession or, in the case of Brazil, depression. Europe is barely growing, and Japan is contracting. Global recession, anyone?

As global growth hits the skids, the European Central Bank is moving toward negative interest rates. Meanwhile, the Fed is set to begin raising rates.

One of these central banks is very, very wrong.

Given so much doubt, now is not the best time for the Fed to start "normalizing" interest rates. And, no, we don't worry about "derailing" Clinton's presidential campaign. Voters will do that. We do worry about derailing what remains of the post-Obama economy.



Read More At Investor's Business Daily: http://news.investors.com/ibd-edito...-time-for-fed-to-hike-rates.htm#ixzz3tFO43TEX
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