Saturday, December 27, 2014

This Christmas Gift to Wall Street Will Hurt the Economy

-Ron Paul
Hello everybody, and thank you for tuning in. I would like to give a brief update on the recent announcement by chairman of the federal reserve board, Janet Yellen and the wonderful things that happened in the market following this. She made a major announcement that caught the attention of everybody on Wall Street, that no longer would she be waiting a considerable time before she raises interest rates. The market had interpreted that to mean that in about six months, she was going to raise it. They don’t speak in clear terms, but they have to interpret it.

Then, she changed those words. She changed it from considerable time to being patient to that time when we would do, when she would raise the interest rates. The market interprets that as, “Oh, they’re not going to be in a rush.” Then when she was quizzed about it, she says, “We keep getting closer and closer to that day.” This was interpreted favorably for the stock market that interest rates would not be raised within the next several months. The response to this was sky rocketing prices of the stocks and of course, bond values went up. My guess is, as an immediate response within a day or two of that, there could have been a trillion dollars of increase and asset values. That’s how much effect a few words has.