116 THE BiG DROP
You have people who say March and other people say June
or July. Some of them think it might be a little later. I don’t see
anyone, however, saying that they won’t do it at all in 2015.
That’s what I expect.
We might not even see an interest rate increase 2016, but
that’s another story. For now, let’s just look at 2015 and explain
why they won’t raise rates.
The Fed is saying a couple of things at present. They say
the U.S. economy is getting stronger; and that they want to
normalize interest rates. They’ve also hinted with a nod and
a wink and tweaked their language to imply they’re going to
raise rates 2015. That’s what the market is set up for.
This explains why the dollar is so strong. People expect
Europe is going to continue to print money and that the Fed is
going to raise interest rates or tighten. If you are an investor,
you’d rather be in the dollar because you are going to get a
higher return.
I think a lot of investors are missing that the data is com-
ing very weak. We’ve actually been losing full-time jobs and
gaining part-time jobs. If you have a $25 per-hour job at forty
hours per-week, you earn $50,000 each year.
But if you have a $10 per-hour job, twenty hours per-week,
you earn $10,000 each year. That’s a big difference. We’re
losing $50,000 jobs, gaining $10,000 jobs. There’s’ nothing
wrong with those $10,000 jobs. I’m sure people are glad to
have them, but this is not going to drive the economy forward.
The other problem is the strong dollar. The dollar is up be-
cause people think the Fed is going to raise rates, but a strong
dollar is deflationary. The Fed has said over and over they want
inflation.
They’ve told us that. They say 2%... sometimes they say
2.5%... and privately, central bank officials have told me they
wouldn’t mind seeing 3–3.5%.
But inflation is actually coming in at zero or negative.