CHART: The Fed’s Big Dilemma

Since 1971, U.S. interest rates (Fed Funds Rate) have averaged 6%. Since 2008, however, the Federal Reserve has held interest rate targets down to near-zero. The Fed justified this extended period of extremely low interest rates as a means of sparking economic growth. However, instead of unleashing genuine growth, the policy has served to discourage saving while enriching the same corrupt money lenders that created the mess in the first place. Ultra-low rates have also served to distort investment expectations and return on capital.

The Fed has long grappled with how and when to begin raising rates. Most Fed watchers expect the FOMC to begin a methodical increase in interest rate targets sometime in 2015. How will global markets handle these new rate hikes? Many analysts believe that a rate hike will not slow the current U.S. stock rally. We disagree, and expect major turbulence when (and if) the Fed raises rates later this year.