William Thien

The FED and False Prophets. Ahem, False Profits.

Posted on: September 20, 2016

Profits are profits until the method used to achieve and generate those profits is no longer a valid method of profit generation and instead becomes a generator of future liabilities, turning profits into false prophets, ahem, false profits.

We know that ultra low interest rates, something we have been seeing for over a decade, have resulted in incredible surges in stock market strength and gargantuan growth in the real estate market. Yet, we also know that even slight upticks or the mere talk of increases in lending rates can result in sizable market corrections. We have seen this phenomenon during the last year and a half during public discussions by the FED to increase interest rates, causing the FED to abandon all such plans time and time again as the market plummets over several days. Just the mere whisper of an increase in rates causes panic.

Therefore, has the method of keeping interest rates so low for so long actually created an environment where today’s profits are actually future liabilities? If so, then they are false prophets, ahem, false profits.

Copyright © William Thien 2016

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