Raising The Roof

The big financial story over the weekend is the call from Barron's Magazine writer Andrew Bary for Helicopter Ben to raise interest rates from 0% to 2%. CNBC says it's not happening.

"I think that the US central bank should begin raising rates in December, I believe that the economy is strong enough for that," Dariusz Kowalczyk, chief investment strategist at SJS Markets Limited told CNBC.

"At the same time I'm sure they will wait longer because they will want to err on the side of caution," Kowalczyk added in an interview for "Worldwide Exchange."

Caution is the word, but also the economic indicators are not there yet, Jim O'Neill, head of global economic research at Goldman Sachs, told CNBC.

Well of course these guys say it's not going to happen. They'd make less money if it did. That speculative bubble has to keep swelling like a boil. Actually letting the pressure out slowly would be logical, and we can't have that in the era of irrational exuberance.

He reminded of Japan's "lost decade", saying part of it was caused by the fact the Bank of Japan raised rates too quickly in the mid-1990s, causing deflation.

"I think the name of the game to have kept us away from an even more severe recession than we have is to ease financial conditions," O'Neill said.

"They (the Fed) want financial conditions to be as easy as possible. I think the Fed will be pretty relaxed about it at the moment, as it should be," he added.

The Barron's article served one good purpose though, to remind market participants that central banks' decisions are not always easy to anticipate.

"It's a widespread view that the Fed won't be able to move rates until 2011. They miss the point," David Page, economist at Investec, told CNBC. "We do expect to see the Fed start its move around the middle of next year."

The Fed will likely raise rates to around 2 percent, but will probably have to remain around that level for a few years to avoid choking the recovery, he said.

They're worried that raising rates will cause deflation? Have you been paying attention to the housing market, guys? Deflation's already here. The only thing balancing it is the massive amount of money the government is creating to throw at the problem.

The real issue that money's going to the people who already have money. It's called transfer of wealth. All the money going into the economy is being sat upon by the Too Big To Fail crew, and they're getting richer and richer. So much money's going in now that your average American is getting burned by both deflation in housing AND inflation in consumer prices.

What recovery? What middle class? We're well beyond the point where fiddling with interest rates will fix anything.