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Monday, August 23, 2010

Can rates remain low? 2nd warning in 10 days...

As we continue to enjoy lowest rates in our lifetimes, we have received two warnings this past two weeks, the of which Blog posted on 8/13 in which Kansas City Fed President Hoenig said that ZERO Percent interest rates (at the Fed discount window) is a dangerous gamble, and using monetary policy as a "cure-all will will lead to a recession and unemployment in a few short years.

Today's warning: Raghuram Rajan, the former chief economist for the International Monetary Fund, say the Fed should raise the Fed Funds Rate by 200bp. Rajan's words are not being taken lightly, because back in 2005 he correctly warned central bankers of a potential financial crisis should banks lose confidence in one another.

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