PARIS – The Fed did as expected…

It announced it would raise its key rate by a quarter of a percentage point to 0.5% and gradually raise it up over the next three years.

Reports the Financial Times: “Historic gamble for Yellen, as Fed makes quarter-point rise.”

If all goes well, we’ll be back to “normal” in 2019 – 10 years after the long emergency began!

U.S. stocks rose on the news, with the Dow up 224 points – or about 1.3%.

False Premise

Those who predicted panic were wrong. (Surprises rarely come when they are expected.)

But wait…

How does the Fed know what a normal rate will be in 2019? Won’t conditions change?

Besides, there are sidewalk astrologers and mall palm readers with a better record of market forecasting than the Fed.

To borrow a phrase from George Soros, our mission at the Diary is to “find the trend whose premise is false and bet against it.”

Is it true that the Fed is really going to follow through with its promise to return interest rates back to normal?

Is it true that terrorists are out to get us?

Is it true that Donald Trump is a fool?

Of course, we are all fools… but some more than others. The wise man is the one who knows he is a fool. For our part, we deny it. And we resent readers who remind us.

But we admit to being wrong, from time to time. (Any man who has been married for as long as we have must be accustomed to this kind of admission.)

And since investors so heartily endorsed the Fed’s move, we will reexamine our position.

The premises of the rate increase are several…

…that the Fed knows best what interest rate is good for the economy…

…that a recovery is sufficiently established to permit an end to the emergency micro rates of the last seven years…

…and that otherwise everything is more or less hunky-dory.

Dollar Recession