The whole house of cards that is our economy and federal deficit spending is held together by 0% interest. If the rates would move a few points, or actually be where they should be with our inflation, we would be in deep kimchee.

What could force the fed reserve to raise the interest rates to a realistic level?

They can't. As you correctly pointed out, the only way we have any hope of servicing our debt is by artificially low interest rates.

There's no such thing as inflation. Just ask .gov

(fingers in the ears - We can't hear you ! LA LA LALALAAAA)

All that would have to happen is the chinese and others stop buying our treasury bonds at the rates currently offered. That is why our credit rating is/was so important. Higher risk demands higher rates. Bond prices drop (the relationship is inverse to interest rates) and then the whole thing runs the risk of snowballing.

There are some who theorize that the only way out of our mess is hyperinflation which would ruin our economy as we know it but also make the debt that china holds almost worthless depending on how heated the inflation is.

Unemployment going to 5% or less would cause inflation. If inflation goes much past 2% the fed would be forced to raise interest rates.

What?! Employment doesn't cause inflation. Printing money causes inflation.


Inflation is presently about 10%, measured using the methods they used in 1980.



The Fed is not going to raise interest rates, no matter what. It would provoke a crash of proportions not seen since--well, never. The cause of the crash would be crystal clear to everybody.

They're going to keep inflating, and as felt inflation increases they're going to blame it on somebody--Jew bankers, rednecks clinging bitterly to guns and religion, big business, small business, capitalists, somebody--else. Maybe there'll be a convenient Reichstag Fire when things begin to look really black.

If they were planning to do anything but inflate into oblivion, they would already have repudiated the debt. It's the only option that permits a modicum of control over the resulting disaster, and they've already rejected it.

How do they "inflate into oblivion" with such low interest load rates?

The progressives want to maintain the economic recession. It looks like the failure of capitalism and creates lots of poor people who are greatful for their help.

The Federal Reserve buys 70% of the bonds right now. Why would they care if The Fed bought 100%?

Erosion of faith. Things seem manageable until you reach a tipping point. Beyond the tipping point all that seemed reasonable becomes moot.

The Fed isn't going to raise rates. Bottom line is they is don't have to regardless of anything that might occur. When the nation lives on credit the only way to keep it propped up is with low interest rates.

The Feds are starting to think of raising interest rates in 2015. That must be when Helicopter Ben's term is up.

so what would it take to get your local bank to raise the rates it pays on CDs and savings deposits?
Around here, pass book savings generate I believe .05 percent.

Low interest rates are having another effect. It is dramatically reducing the wealth of the baby boomers in and approaching retirement. Another means of the liberal leveling the playing field.

The OP's question is "What could force the fed reserve to raise the interest rates to a realistic level?"

I'm addressing the question based on the way the world is now, not in 1980. The money has already been created yet there's relatively little inflation as it's now measured by the Fed relative to how much money has been created.

Consumer spending represents about 70% of the U.S. economy and when people don't have jobs or are worried about losing their job, they cut back on spending. That lowers the velocity of money which has the same effect on the economy as lowering the money supply.



If unemployment dropped to about 5% then consumer confidence would increase and they would start spending money, which increases the velocity of money. Given the huge money supply that's already been created anything close to a historical normal velocity of money would cause inflation as it's measured by the Fed and they would respond by raising interest rates.

Thing is, unemployment is likely to go up in the short term, which the Fed will respond to by keeping interest rates low by creating money as needed.

Below-market interest rates encourage inflation. Above-market interest rates encourage deflation.