Many believe that the Federal Reserve controls interest rates.
By Jake Towne
Gold Seek
Many believe that the Federal Reserve controls interest rates. But what if they do not? Here is a case for readers to decide on.
The Federal Reserve, myself, and many others, have made the claim that the FED controls both the interest rates and supply of dollars and credit. [For those unfamiliar with the FED, you can learn just about everything you need to know from the links at the bottom of my Federal Reserve plank, and this article "Fractional Reserve Banking in Pictures."] Several weeks, I had a conversation with Karl Denninger from Market Ticker on the gold market, and we also discussed his theory that while the FED can jawbone and could theoretically move the federal funds rate wherever it wants, it still follows the marketplace. In other words, its control of interest rates may be all bluster and a false charade.
Denninger noticed that not only does the short-term 3-month US Treasury bill interest rate overlay with the federal funds rate as seen below, but it moves lockstep and actually precedes volatility movements up or down in the rate.
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