We’ve discussed this before. “Later,” says Chairperson Janet Yellen of the US FED, the organization with a treasure chest that never empties. She refers to raising the FED interest rates from their floor of 0%, of course. Something she has been saying for quite a while now.
Right after unusually low levels reached around May 22, 2015, volatility increased rather dramatically, peaking at ~20, as much as 60% higher. Markets globally have been roiling, what with uncertainty relating to another bailout for Greece, and a plunge in the Shanghai index after a drunken, unsustainable rise in a span of ~7 months. The Chinese government is attempting to support their market with similar measures of increased liquidity, through lowered interest rates, and by restricting trading dramatically, fearful of its majority retail investors stampeding out in panic.
But these measures – lowered interest rates, etc. – are emergency measures, are they not? They are intended for temporary relief, not extended implementation.
Or, can a government print as much as 4 Trillion dollars out of thin air (QE1, 2, 3, …), “purchase market assets,” and additionally maintain zero interest rates, effectively providing money (capital) freely to big businesses, with no accompanying regulation of its use, for 6 years and more? Is this how a floundering economy is bailed out, and stock markets supported (past 6 years of a bull market in the US enriching the wealthiest), or is this how leaky, weak market bubbles are propped up, and profits carved out by the top 1%?
How much later does the FED intend to keep their artificial and last resort economic measure going? I see fear in Chairperson Janet Yellen’s indecision (doesn’t her face show it?), not circumspection. Fear of adding to the market’s doldrums, of losing the illusion of a growing economy. Is the FED guiding the economy, or is the market wagging the FED?
Nevertheless, there are clearly waves of fear in the market; the VIX is moving violently. I remain long VIX, making small, opportunistic transactions along the way.
Update (July 25, 2015): The FED numbers were leaked at the end of June 2015 and are summarized in the image below. They indicate a single interest rate (FED Funds Rate) increase by the end of 2015.