Fed Chairman Yellen says the Fed didn’t raise interest rates last Thursday primarily because of low inflation and turbulence overseas (i.e. China). But behind what she says, there’s a heck of a lot more going on that she would never say: - She realizes the U.S. economy is a lot weaker than the Fed is letting on. - She’s worried about making the financial and political turmoil in Europe and the Middle East even worse, with major spillover effects on the U.S. - She doesn’t want to make the U.S. dollar even stronger — and the U.S. even less competitive — especially on the heels of the greenback’s biggest winning streak since 1984. - She’s aware of the fact that, as rates rise, the interest costs will rise for heavily indebted governments in Western Europe, Japan and the U.S., leading to a new, larger sovereign-debt crisis. Plus, most important, she’s terrified of the … Two Elephants in the Room The first elephant is the pervasive impact on society of over six long years of zero interest rates. ... zero interest rates ... creating rows of dominoes that are potentially very vulnerable to any rate hike!

The second elephant in the room is the massive amounts of new funny money the Fed has pumped into our economy since September 2008 … and the speculative bubbles it has created.

This chart says it all.

Throughout history, the U.S. Federal Reserve almost always expanded the nation’s monetary base (bank reserves and money in circulation) at a relatively steady pace. Then, suddenly, in September 2008, the Fed began running its money printing presses like never before. What triggered such an incredibly massive and abrupt policy change at the Fed? Answer: The single most shocking financial failure of our era — Lehman Brothers.

After [previous] crises had passed, the Fed promptly reversed its money infusions and sopped up the extra liquidity from the banking system. But in the six-plus years since the Lehman Brothers collapse, the Fed has done nothing of the kind … Yet! And it’s this three-letter word that contains the secret to our entire future — not only for the United States, but for the entire global economy.

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