The Federal Reserve just raised interest rates again. Is The Fed Actually Trying To Cause A Stock Market Crash?

submitted by magnora7 from zerohedge.com

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[–]magnora7[S] 3 insightful - 1 fun3 insightful - 0 fun4 insightful - 1 fun -  (2 children)

So if they expect the value of the USD to increase, then shouldn't they be lowering rates? If their goal is to keep the USD even, and the value is going up, then shouldn't they increase supply? And increasing supply happens when you lower the interest rates.

So if anything, these actions will only compound the growing value of the USD. So they're planning on seeing deflation as you point out, but also creating more deflation at the same time by increasing rates and thus decreasing money availability and thus money supply!

[–]infantile_ocelot 3 insightful - 1 fun3 insightful - 0 fun4 insightful - 1 fun -  (1 child)

So if they expect the value of the USD to increase, then shouldn't they be lowering rates?

No. For the treasury, the USD is their "product." If people are becoming excited over your product and want it more than they did in the past, would you raise the cost of it, or lower it?

You would raise it, you'd make it more expensive to acquire. That's exactly what the fed is doing.

[–]magnora7[S] 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (0 children)

But the fed has stated their goal, for decades now, has been a target of 2% inflation per year. What you're describing is an infinite deflation scenario, which is not the goal of the fed.

And also increasing the price lowers demand. So by raising price you decrease the number of interested "buyers", so it's not always a net profit move to increase price.