The truth about the recent Fed discount rate increase
Sat, 20/02/2010 - 07:40
The Bloomberg message for the news was "Fed Discount Rate Increase Signals Recovery on Track".
Bank of England, ECB to Maintain Exit Plan After Fed
http://www.bloomberg.com/apps/news?pid=20601068&sid=awvBHibLjW5w
Quote:
By Emma Ross-Thomas Feb. 19 (Bloomberg) — The Federal Reserve’s decision to raise its discount rate shows that the global recovery is on track and other central banks can afford to keep withdrawing emergency measures, former policy makers and economists said. “It’s another minor step in a long march towards normalization,” said former Bank of England official Charles Goodhart in a telephone interview. “The Fed has already moved some way to reducing credit easing, as has the ECB, as has the Bank of England.” The Fed yesterday raised the rate charged to banks for direct loans by a quarter-point to 0.75 percent, the first increase since June 2006. The Fed said it was a “normalization” of lending that wouldn’t affect monetary policy, and the main federal funds rate would remain low for an “extended period.”
The Central Banks, and their lap dogs the MSM, are well known for spinning the economic news.
But what it the truth?
Since December 2009 the 3 month treasury bill rate has risen from 0.03 to 0.09%. It's tripled 
The rate had been declining, but it changed direction.
The dealer commercial paper rate also jumped last week, after being stuck at a low of 0.21%. It 'jumped' to 0.23%
It hasn't done anything like that for months, except go down.
Then the Fed raised the discount rate from 0.5% to 0.75%.
The truth is the Fed is FOLLOWING the treasury bill rate up
The market is in control, and the Fed follows it.
Most commentators think it is the other way round.
The market is demanding higher rates. That is the truth.
And the big question is, can the already over-indebted countries afford to service their debt with higher rates?
I think the answer is no.