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The Federal Reserve raised its key interest rate by 0.25% on Wednesday. The corporate news media, both liberal and conservative, claimed this signified the Fed’s confidence in the improving U.S. economy. There may be some truth to this, but maybe not.

Anybody with any knowledge of US business cycles can see our current business expansion is nearly over, which makes this a poor time to raise borrowing rates. See The Coming Recession Is Going to be a Big One–Johnhively.Wordpress.com. The current expansion is 91 months old this month, which makes it the fourth longest on record. In February 2017 it will become the third longest in US history. All the variables indicate we’ll be hitting a recession sometime before or by June 2017.

Maybe Fed officials decided to deflate the stock market and housing bubbles the US economy is in the thrall of. The US economy has been powered by a series of federally created or federally condoned bubbles since the 1980s, which is radically different from the US economy of 1933-1981. The US economy will be suffering from a massive hangover when this next recession hits, which is why it will in many ways be far worse than the last recession.

Rising rates will affect millions of Americans, including home buyers, savers and investors by increasing the cost of which they borrow. In other words, trillions of dollars are going to be redistributed from the 99 percent to rich bank shareholders and bondholders. It’ll cost you more to borrow, and the difference between the old rate and the new rate goes straight into the pockets of the rich.

Income and wealth have been massively redistributed from the 99 to the 1 percent by a series of deliberate federal government actions over the last thirty-five years. This is why interest rates have been historically low over the last eight years, and had been getting progressively lower since 1981. The demand for goods and services by the 99 percent is largely dependent on the ability to borrow to a much greater extent than earlier decades.

This is also means the Fed will have to enact negative interest rates to help bolster the economy during the next recession, which is currently the case in Europe.

Change in the form of a shift of political power from the billionaires to the middle class will finally come because of this next recession as millions more people vote via their wallets and take to the streets.

Fed officials raised its target for short-term interest rates by 0.25 percentage points to a range of 0.50% and 0.75%.

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The Federal Reserve Bank is expected to raise interest rates tomorrow. It will most likely be a mild increase of 1/4 to 1/2 percent.

The US and world economies are heading for a recession worse than the last one, and it should begin by June 2017, give or take a few months. Then President Donald Trump will get the blame, as well as the Republican US senate and the Republican US House of Representatives.

The Republicans will blame the Federal Reserve. Blame the recession and its dire impacts on the effects of Reaganomics, which has been a long-term policy of redistributing income from the 99 to the 1 percent (I doubt Reagan intended it that way). That decreased the demand for goods and services on the part of the 99 percent, and has led to a series of bubble economies for the United States since the 1980s.

The result has been the weakest economic growth in US history under President George W. Bush. The job gains under Bush numbered less than 1.4 million jobs total, with declining real wage growth. Things have been quite a bit better under President Obama. However, the job growth numbers under Obama are far worse than any other president since and including Jimmy Carter, with the exception, of course, of Bush.

Carter had the best monthly job growth numbers of any president since 1976. See Why Did President Jimmy Carter Create More Jobs Per Year Than Any President Since Him? JohnHively.wordpress.com

The Fed and everybody else expect the current economic expansion to continue. That’s insane. All the indications and variables suggest we are on a crash course with a massive recession by June 2017. See The New Recession is Knocking at the Door, and It’s Going to Be Worse than the Last One–JohnHively.Wordpress.com

Only two US business expansions have lasted longer than 100 months. The third longest expansion began under President Ronald Reagan and lasted 92 months. Including this month, the current expansion is 91 months. That means by next June it will have lasted 98 months. Given the weaknesses of the current US economy, we most likely won’t make it much longer than June.

The Federal Reserve will likely raise interest rates tomorrow and hasten the coming of the next recession by a month or two.

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US Federal Reserve Chairwoman Janet Yellen is faced with a problem. In the seventh year of an economic expansion there is considerable disagreement over whether the Fed should hike interest rates.

According to Bloomberg News, “At the presidential debate on Sept. 26, Republican candidate Donald Trump accused Federal Reserve Chair Janet Yellen of inflating “a big, fat, ugly bubble” by keeping interest rates too low. Yellen couldn’t just shrug off the accusation, because only five days earlier three members of her own rate-setting group, the Federal Open Market Committee, had expressed the same idea in more delicate language.”

So what’s the problem? The economy isn’t overheating at a time when it’s likely peaking. Unemployment is low, but then so is demand for goods or services compared to previous business expansions. Otherwise, the Fed would be happy to raise rates in order to curb inflation.

The underlying problem for Yellen and the governor’s of the Fed is that income distribution has become so one-sided that the 99 percent cannot afford to purchase enough stuff to make inflation rear its head. This is the one thing the press and Yellen don’t consider, at least not in public. Perhaps this is because it’s politically unpalatable to the super-rich overseers of the elected officials of the Republican and Democratic parties.

Those overseers have a financial stake in the outcome of the Fed’s decision. Raising rates might push share prices lower. Of course, that housing bubble might also blow up.

The 1 percent took 99 percent of all income growth from 2009-14 (an historic record), and more than 50 percent in 2015. The 1 percent now are stealing via legislation anywhere from 22 to 36 percent of all income produced every year in the US (depending on whose figures you use), up from roughly 8 percent in 1981. That leaves the 99 percent with less money to burn.

Of course, the 99 percent use credit to make up for some of that shortfall, but during this recession, picking up the slack in demand via credit isn’t working as well as during the other boom times during the last 35 years.

And so Yellen sits and waits, while the governors of the Fed argue over whether rates should be raised. There’s obviously strong interest within the Fed to pop that bubble.

Maybe those Fed officials should be wondering what they’re going to do when the economy tanks. It’s late in this boom period. Perhaps, Fed officials need to think about applying negative interest rates.

#Note: The Fed raised interest rates by a tad last November, but it hasn’t dared lift them since.

Yellen Can’t Hide the Struggle Inside the Fed–Bloomberg News

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The governors of the Federal Reserve Bank voted to keep interest rates at historic lows in their September 17, 2015 meeting. The bank has not raised interest rates in nearly a decade. Lucky us, or maybe unlucky us.

Chairwoman Janet Yellen cited a number of reasons why the bank decided to keep rates low. She mentioned, for example, the weakness of manufacturing in China.

However, she didn’t mention that nearly 50 percent of US manufacturing is done in China, which, quite naturally, indicates a slowing down of US outsourced manufacturing, which certainly impacts the US. Like a good politician, she also did not mention that the evil US trade deficit is fueled by US manufacturers exporting jobs overseas, like Microsoft, Apple, Nike and Adidas. These and hundreds of other companies manufacture their products in China and elsewhere, and export their stuff to the US.

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This is precisely and the only reason why the US has a trade deficit. The US trade deficit, in other words, is with US job exporters, not with China, Pakistan, Mexico or elsewhere.

Anyway, keeping interest rates low was a good thing for the US economy. Typically, the Fed waits to raise interest rates until just after the US economy begins to slide into recession.

That process begins when US corporations see a slowdown in their earnings growth, in the aggregate. These businesses begin to lay people off, which jacks up their profits. Perhaps the folks running the Fed take this as some sort of sacred signal that everything is all right. However, laying enough people off throughout the economy ignites recessions in the process of jacking up those profits, because the demand for goods and services slackens, jobs and profits decline, and a recession begins even while corporate earnings expand.

This is why I mentioned the slowdown of Chinese manufacturing, which in all likelihood, represents something of a slowdown of US manufacturing abroad. Profit growth has been shaky the last two years, though still growing in fits and spurts with sudden quarterly declines followed by rapid growth.

In other words, the US and world economies are still quite weak, especially since the rich have stolen 95 percent of all income growth in the US since 2009, an historic high by a wide margin. This has meant sluggish US and world economic growth since the more money the 1 percent steal in the US and elsewhere, the weaker the demand for goods and services by the 99 percent.

Yellen has the brains to understand all of this. This is likely why the Fed has kept interest rates at historic lows for years. To maintain their standards of living, the 99 percent had to keep borrowing because they haven’t gotten a raise in 35 years on average and in real terms. Raise interest rates and the demand for goods and services begins to die.

Raising interest rates will likely be the straw that sends the world economy into the monstrous fangs of the biggest economic crisis since the Great Depression. This crisis may already be in its early less visible stages.

Not a single world leader has learned the lesson from the last Recession. The current US economic expansion is fueled by the same artificially created housing and stock market bubbles as the last recession. Wall Street executives are calling the economic shots in the White House, on Capital Hill and the US Supreme Court. That’s why nobody who could do anything did squat about the corrupt forces that brought about last recession, and now the bill is coming due.

The last recession was the worst since the Great Depression. The next one, as I have pointed out in my book, The Rigged Game: Corporate America and a People Betrayed, will be far more hideous.

The Fed has literally no tools to fight off this coming Great Depression, but it will print trillions of dollars to save billionaires and others from their foolish investment decisions. See breakdown-of-the-26-trillion-the-federal-reserve-handed-out-to-save-rich-incompetent-investors-but-who-purchase-political-power–JohnHively.wordpress.com

The federal government will be forced to expand the deficit, and instead of having 48 million people permanently on food stamps, the US will have 60 to 100 million, unless the madness of redistributing income from the 99 to the 1 percent via job exporting trade treaties, unsustainable and illogical immigration policies (both legal and illegal, HB1 visas), and privatization scams.

Much of this can be reversed simply by amending income redistribution schemes known as international trade agreements, limiting immigration by restricting the flow of people moving into the USA at least until wages begin to rise, enforcing current immigration laws, and putting a halt and reversing many privatization follies.

All three of these policies have stolen jobs from American citizens, while enriching the politically and financially affluent in the process, all at the expense of people who produce goods and services.

Of course, that is precisely what the corrupt US government (all three branches), and both corrupt major political parties, have been driven to do by the money unleashed in the political markets since and because of the Reagan tax cuts for the rich.

The ultimate end game of Reaganomics is coming to its ugly conclusion.

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Student loans are a way the US government redistributes income from the 99 to the 1 percent. Notice also that virtually all K-12 educational reform is geared toward turning the most IQ challenged children into university students. The complete process of student loans and educational reform are interrelated scams to redistribute income from the 99 to the 1 percent. The more students take out loans, and the more kids and parents feel pushed toward university educations, the richer Wall Street and its investors get.

Wall Street investment corporations purchase student loans, and then turn around and issue bonds based on the value of the government guaranteed student loans, meaning there is no risk for the rich investors who opt to purchase these bonds. These student loan transaction generate billions of dollars of income for Wall Street.

That’s one reason why the US government allowed student loan interest rates to double from 3.4 to 6.8 nearly two years ago. The rich investors of Wall Street benefited from this at the expense of the 99 percent.

There is another reason why the US government keeps this massive income redistribution scam going. Wall Street banks have invested billions of dollars into private, for profit, universities.

* ITT is 100 percent owned by Wall Street investment companies.
* The Apollo Group owns the University of Phoenix, among other private universities. JP Morgan, Citigroup, Barclays, Wells Fargo and Blackrock, among others, own 98 percent of the Apollo Group.
* Devry University is 100 percent owned by Bank of America, Barclays, BlackRock, JP Morgan, and Morgan Stanley, among other Wall Street Investment firms.

You can go on and on and the story is the same with respect to for-profit universities. Many of them are owned by Wall Street.

These universities target low income students, and charge several times more tuition than community colleges. Student loans amount to $32 billion in revenue a year for Wall Street owned private universities. That equals 25 percent of all student aid in the USA. The revenue generated by student loans provides up to 90 percent of annual income for Wall Street investment schools.

* In 2012, 88 percent of graduates left school with debt equal to almost $40,000 per student, which goes straight into the pockets of Wall Street investors.

* With interest, late fees, penalties, and collection fees assessed against students, the total cost of an education at these private schools is “can end up being more than double the cost of an education at Harvard University.

* 17 percent of revenue is spent on teaching, 19 percent goes to profits, and 23 percent does to marketing their bogus products.

* The average annual pay of a CEO at any of these corporate schools equals $7.3 million.

* The US Department of Education reports that 72 percent of private school graduates wind up in jobs that “average less pay than high school dropouts.” This may explain why corporate school college graduates represent only 13 percent of all college graduates, but they account for 47 percent of all loan defaults.

And these are only some of the reasons why student loans represent a nice income redistribution scam for the 1 percent at the expense of the 99 percent. Check out the link below for a story and interview about how one person decided, among many, decided it was in his best interest to default on his student loans.

why-this-man-defaulted-on-his-student-loans-and-suggests-others-do-the-same–Yahoo! News

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The interest rates above are from July 2013, but as of November 2014, they’re still the same. Here are a few basic reasons why the government charges banks and student borrowers for loans at different rates. Also, the rate for student borrowers in the poster above doubled from 3.4 to 6.8 percent. Why?

1. College students who need student loans are typically members of the 99 percent. Rich students do not need loans.

2. Investment and commercial banks are owned by shareholders, the vast majority of which are members of the 1 percent.

3. If interest rates for banks jumped from 0.75 percent (yes, that’s less than 1 percent) to say 6.8 percent, that would cut into the already record profits of the banks, reducing their earnings, stock prices, and dividend payments. That would make the shareholding members of the 1 percent angry with the current government, and politicians wouldn’t want that to happen, because then they wouldn’t receive campaign contributions, other perks, and bribes.

4. Investment banks purchase student loans, issue bonds against the loans, and sell the bonds to rich investors, hedge funds and other financial organizations of the 1 percent.

5. The higher the interest rates paid by students, the greater the return on investment for those rich bond holders since much of the student loan payments made by members of the 99 percent go directly into the pockets of the bondholders. Some of the money goes to paying down the student loans, another portion goes toward servicing the debts, such as adjusting the books with each payment to reflect the status of the loans.

6. Doubling the interest rates of student loans increased the profits of the investment banks, hedge funds, other financial institutions of the 1 percent, and the rich investors themselves, which brings us back to point three.

7. Increasing the profits of the 1 percent makes those people happy, even if it means redistributing massive amounts of money from the 99 to the 1 percent via higher interest rates generates unhappiness among the members of the 99 percent.

8. Doubling the interest rate of student loans increased the demand for student loan backed bonds, raising the value of the bonds by increasing the return on investment, making Wall Street bankers overly happy.

9. The doubling of interest rates on student loans is a scam of the 1 percent, enacted by a remarkably corrupted government by the money of the 1 percent, especially Wall Street.

10. Much of the profits generated by student loan backed bonds are used to corrupt government even further, so that the money of the 99 percent that is being redistributed to the 1 percent via student loans is used to corrupt government even more against the interests of the 99 percent.

Conclusion: Student loans are simply a way for the 1 percent to steal money from the 99 percent and corrupt government even more than it already is.

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Paul Krugman is a typical, and often correct, critic of President Barack Obama. He’s been right on policy decisions on a number of occasions, and most notably, when President Obama has been wrong.

In a new story in Rolling Stone, Krugman has done an about face on Obama and the president’s historical significance.

“When it comes to Barack Obama,” Krugman writes, “I’ve always been out of sync. Back in 2008, when many liberals were wildly enthusiastic about his candidacy and his press was strongly favorable, I was skeptical. I worried that he was naive, that his talk about transcending the political divide was a dangerous illusion given the unyielding extremism of the modern American right. Furthermore, it seemed clear to me that, far from being the transformational figure his supporters imagined, he was rather conventional-minded: Even before taking office, he showed signs of paying far too much attention to what some of us would later take to calling Very Serious People, people who regarded cutting budget deficits and a willingness to slash Social Security as the very essence of political virtue.”

“And I wasn’t wrong. Obama was indeed naive: He faced scorched-earth Republican opposition from Day One, and it took him years to start dealing with that opposition realistically. Furthermore, he came perilously close to doing terrible things to the U.S. safety net in pursuit of a budget Grand Bargain; we were saved from significant cuts to Social Security and a rise in the Medicare age only by Republican greed, the GOP’s unwillingness to make even token concessions.”

All of this is true, and everything Krugman writes in the Rolling Stone appears on surface to be true, but Krugman misses a major point.

Under President Obama, income and wealth equality has skyrocketed. 95 percent of all income growth in the USA over the last four years has gone into the pockets of the 1 percent. Record levels of income and wealth are now in the hands of the 1 percent, which accounts for much lower demand for goods and services, lower job and wage growth, and slower economic growth, all of which hurts the 99 percent, and all of which serves the 1 percent.

The policies the president has championed have played a major role in this.

Free trade treaties, for example, are negotiated with an eye toward shipping US jobs overseas with the difference between the old higher wages and the new lower wages going into the already fat wallets of the super rich via higher corporate earnings, rising share prices and soaring dividends. Right now, as we speak, the president is championing the Trans Pacific Partnership, the largest income redistribution scam of all time. It is a so-called free trade treaty that has been negotiated to jack up prices on goods and services, and lower wages, all of which redistributes income from the 99 to the 1 percent.

Under Obama, student loan interest doubled, and the payments of millions of student loans goes straight into the pockets of those who possess bonds backed by student loans: hedge funds and the rich. With a little work, the president might have stopped this madness.

Obama is not stupid, he knows precisely what he is doing. He’s redistributing income on behalf of his largest campaign contributors, the largest investment banks on Wall Street, hedge funds, and the largest investors of the 1 percent. This is precisely why the president refused to unleash his attorney general against the crimes of Wall Street that brought about the tanking of the world economy five years ago.

And these are just a few of the things Obama has done to redistribute income from the 99 to the 1 percent, something Krugman doesn’t want you to know about.

So while Krugman makes his points in his article, and with passion, his defense of Obama is in very narrow terms.

By the way, despite my critic of Obama, he hardly rates among the worst of presidents. That distinction goes to George W. Bush, the man who created the worst mess in US history. Warren Harding, as well as several others, would have to rate below our current president, as well.

rollingstone.com/politics/news/in-defense-of-obama

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