“The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. “It’s almost hilarious in the irony,” says David Frenk, director of research for Better Markets, a financial-reform advocacy group, “that they called it ISDAfix.””
Long ago I asked a buddy who was president of one of the nations largest banks at the time a question about interest rates and where they were going. He laughed and said “the real answer is no one knows what they should be. He added (at that time) we all go to conferences put on and we get a bunch of crap from a small group of economists who all have the same line. So, after a few months of group think at these “conferences” we all have the same message on the actual setting of rates. There is no demand or supply, just what a bunch of PHDs think the rates should be set at and the FED helps with that.”
I guess it is the same today except the rates are set by the central bankers alone but not out of the whim of what economists think but at the direction of the governments they represent acting in concert. Any notion the FED is independent of this process was completely blasted away when its charter was changed to accomodate the economy along with merely stabilizing the dollar. Today in fact it uses monetary policy to prop up the government with no regard to the dollar compared to before when at least there was an attempt to do so. The government is buying its own securities through the FED at virtually zero interest so something has to give...right now it is interest rates on fixed instruments and a deflating dollar. When it cannot hold the tide against the dollar any longer (early cracks appearing now with even the Auzzies using the yuan in its trade with China rather than the dollar) it will collapse and both interest rates and inflation will zoom to beyond historic highs before the entire system gets washed away and the USA is economically finished.