#TellAUselessLie – No One Fears Bulls

Image

When you are just too busy or too mellow to be scared.

Select your favorite caption for this photo.

1.  I can’t wait to finish reading this Fifty Shades book.

2.  I should have brought some baseball equipment.

3.  I should have brought an ice chest full of drinks to sell.

4.  I feel kind of mellow.  Do you smell marijuana?

Enjoy!

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Special thanks to Samuel Kubani of AFP/Getty Images.

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#Daughters Deemed Disorganized Deserve Discussion

Do you have a daughter whose bedroom floor is a mine field?

daughters_bedrom

Well, you are not alone.

My wife and I were fed up with stepping on toys and papers in our daughter’s bedroom.  We stood over her while she cleaned it up.

But a week or so later, we found her room in the same condition.  This time we warned our daughter that we were serious and the next time we would confiscate everything that we found on the floor.

Her behavior did not change.

So the third time came and my wife and I scooped up everything into a big box and put it in the master bedroom.

Our daughter let out the loudest and longest cry.  It was the biggest fake cry I have ever heard, even to this day.

For fear of losing all her stuff, she begged us to give it back.  She made a long list of promises.

A day later I walked her to her room and whispered that if she just pushed her things under the bed or into the closet, so they were out of sight, we would not have a problem.

When our daughter once again promised to keep her room clean, we gave her back the box of her belongings.  From that day forward, her room looked a lot better.  There was stuff under the bed and in the closet, but we could walk around the room without stepping on anything.

Everyone lived happily ever after.

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Refugees Refuse to Relinquish Resourcefulness

You have to see this Lucify graph that illustrates the extent of the refugee situation.

refugees_graph

We are talking about half a million migrants in 2015 alone.

Go to the middle of this MarketWatch.com website. Click on the speed bar and the time bar, then click on the gray rectangle above the graph between these two bars.

http://www.marketwatch.com/story/the-refugee-crisis-captured-in-one-staggering-animated-graphic-2015-10-28?dist=tbeforebell

You will be amazed at the number of people fleeing the Middle East for Europe.

Here is a ground photo of a different kind of hope. A hope for a better life for kids and family somewhere, anywhere.

refugees_collage

Amazing.

The Kelley Monetary Policy Rule

Everybody hates rules but this is a breakthrough policy to free the fearful Fed.

fear

Background

The Federal Reserve Board (Fed) has held the Fed Funds Rate (the interest rate the Fed charges banks) below 1 percent for 7 years.  That is unprecedented.   The Fed originally lowered the Fed Funds Rate to 0.25% to counteract the last Great Recession.

When the Fed lowered its primary interest rate, it also started Quantitative Easing (QE) by buying securities in order to pump money into the economy to stimulate it.  Now the Fed has stopped buying securities via QE.

Today

The next step according to the standard Fed playbook is to raise the Fed Funds Rate, completing the unwinding of the previous actions.

Unfortunately the Fed Funds Rate has not risen to normal levels because the Fed is afraid to hurt the economy.

What Is Normal?

https://michaelekelley.com/2015/02/11/fed-inflation-target-is-abnormal/

According to the above website, if the Fed wanted the Inflation Target to be 2%, then the Fed Fund Rate should be 2% plus 1.44% or 3.44%.  Then 3.44% should be the normal Fed Funds Rate.

What Are The Fed’s Options?

How does the Fed get back up to the normal 3.44% Fed Funds Rate?  It can do one of these:

1.  Reverse QE by selling securities OR

2. Set the long-term interest rate to set a goal OR

3. Simultaneously raise the Fed Fund Rate AND offer another round of QE.

Ideally, the Fed should have raised the Fed Funds Rate while phasing out QE from 2011 to 2014.

The best is option 3 which has the most influence and least fear.

But How Fast?

A return to normal Fed Funds Rate involves small baby steps in a gradually higher Fed Funds Rate while offering a phased out QE.

If the Fed only raised the rate .25% each quarter, it would take 13 quarters or over 3 years to get to 3.50%.

Kelley Monetary Policy Rule

The Taylor Rule involves raising the Fed Funds Rate 1 percent for each 1 percent in inflation.  We have no inflation so the Taylor Rule is of no help.  The Kelley Monetary Policy Rule states the Fed Funds Rate will be increased gradually and QE will be reduced gradually to zero at a rate inversely proportional to the Fed Funds Rate.

This should eliminate any fear by the Fed or the financial market and get us back to normal.

Good luck.