What Are the Odds The U.S. Economy Pulls A Crazy Ivan?

What are the odds that an interest rate hike by the Federal Reserve causes confidence to increase such that higher interest rates cause higher inflation? In this scenario, rate hikes signal greater confidence and increase inflation expectations. An inflationary spiral ensues, with the Fed unable to hike fast enough.

I don't think the odds are good because it requires credit growth at a pace closer to pre-2007 levels and we're not there yet. However, zero percent interest rates causes great psychological damage to many savers and investors who are responsible for the bulk of economic activity. The people who really set inflation expectations are worried because rates are zero (they might worry about inflation, deflation, or just feel that zero percent interest signals something deep and fundamentally wrong with the economy) and they are worried rising rates will be bad for the economy. If they're wrong, those millions of people controlling trillions in wealth are going to switch from fear to greed, from risk aversion to risk taking. Credit growth will be the first sign. Inflation will quickly follow.

IT'S OFFICIAL: America is back!

We have seen false dawns several times since 2008, but never with a Federal Reserve hiking rates. President Obama is leaving office in 18 months. No serious candidate from either party will be worse than Obama on the economy, so even if people complain about "uncertainty" with the election, it will make sense to bet on saner economic policies.