Don Miller, Associate Editor of Money Morning, reviews the process and implications of the Fed’s possible plan for raising intereste rates without actually raising the rate itself.

Don Miller (Money Morning): The U.S. Federal Reserve may take an unorthodox approach to raising interest rates by paying interest on bank reserves rather than relying on traditional open market remedies, as it exits from its long-term fiscal stimulus programs, Reuters reported today (Tuesday).

Paying interest on reserves is mostly untested and would represent an unexpected twist in the Fed’s response to the financial meltdown.

“In the old days … the Fed controlled the federal funds rate with open market operations,” Antulio Bomfim, a former Fed economist now with Macroeconomic Advisors LLC in Washington told Reuters. “Now, at least in this period when reserves are over-abundant, the way the Fed hopes to raise the federal funds rate will be primarily by raising

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Keith Fitz-gerald (Whiskey & Gunpowder): Everything we know about classic economic theory suggests the U.S. economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the U.S. Federal Reserve has pumped into the system.

But we’re not…yet.

Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward — all in a desperate bid to make Americans feel better about the global financial crisis.

To their way of thinking, the trillions of dollars have been a success. That’s why any meeting of the Group of Eight (G8) nations looks more like a mutual affection society with central bankers anxious to claim

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According to the FT, Russia, Belarus and Kazakhstan have abandoned their attempt to join the World Trade Organization as a single customs union, after WTO members made clear the unprecedented suggestion would elongate the process by some years.  The trio will reportedly attempt to join simultaneously.  French retailer Carrefour has made a swift exit from Russia, only four months after the opening of its first store.  Bad news for Avtovaz: Sberbank and VTB have declined an offer to take stakes in the company in exchange for debt.  Gazprombank had its worst month of the year in September, posting losses of $529 million, the sixth time this year that the bank has posted a monthly loss.  Italy's Cremonini Group is set to open a $148 million meat-processing plant in the Moscow region to produce hamburgers for McDonalds by ...

Billionaire investor George Soros said yesterday (Monday) that the U.S. recovery would be a slow one because of all the “basically bankrupt” financial companies impeding it.

U.S. Federal Reserve Chairman Ben S. Bernanke and Congress agreed Friday that the financial system – not the American taxpayer – should bear the costs of bank bailouts. Sheila Bair, head of the Federal Deposit Insurance Corp. (FDIC), wants the banks to ante up $45 billion – three years’ worth of deposit-insurance premiums – to bail out the fund that insures bank deposits.

When it comes to bank stocks, we all know that there were a number of Money Morning readers shrewd enough to buy Citigroup Inc. (NYSE: C) shares when the foundering giant’s stock price was below $1 a share.

If you’re one of those investors, good for you: With Citi’s shares now trading at nearly $4.70 a share,

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Kenneth D. Lewis There are many ways to view Kenneth Lewis’ eight-year reign as Bank of America Corp. (NYSE: BAC) chief executive, but two seem to hold the most landscape.

On one hand, the $130 billion he spent on acquisitions – FleetBoston Financial Corp., MBNA Corp., LaSalle Bank Corp., Countrywide Financial Corp., Charles Schwab Corp.’s (Nasdaq: SCHW) U.S. Trust private banking unit and Merrill Lynch – that more than tripled the size of Bank of America, making it the largest U.S. lender both by assets and deposits.

On the other, his open-wallet policy and the example it set forth almost perfectly encapsulates the boom, bust and nascent rebound of the U.S. housing and banking crisis – which later became the financial plague that devastated markets all over the world.

In the second half of 2007, the extent of the U.S. housing crisis began to crystallize when Countrywide’s freewheeling

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Investment banks have gotten fat off the land since 1982, when the great U.S. bull market got its start. Their business has multiplied many-fold, and their earnings have soared into the stratosphere, to a level far higher than any other sector.

Now, JPMorgan Chase & Co.  (NYSE: JPM) has issued a report suggesting that investment-banking returns on capital will be sharply down over the next few years. Perhaps this will be only a moderate downturn.

However, there’s also a good chance that labor-cost pressures – combined with tightening margins – will take the likes of JPMorgan and Goldman Sachs Group Inc. (NYSE: GS) down a path similar to that of General Motors Corp. (NYSE: GRM) and Chrysler Group LLP, both of which earlier this year declared bankruptcy.

Challenging Headwinds

JPMorgan anticipates that the regulatory changes that are likely to take place over the next year or so

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Stocks moved lower for the third consecutive day on Friday, something that hasn’t happened in more than three weeks, as the bulls just couldn’t capitalize on a short-term overbought condition. Measures of selling pressure eased as the bears rested their knuckles after a two-day pummeling.

Investors are worried. The big question – as always – is whether the primary uptrend remains intact.

And the answer is yes.

To understand just what that target should be, let’s take a look at where we are right now.

Just before Wednesday’s sell-off, measures of the supply of stocks moved to new lows, while demand moved to new highs. This means bull-market-trading rules remain in effect. But as the cyclical bull market matures a little, we need to change the target of our buying efforts.

Although it looked like losses would be cut in the early afternoon, a lack of demand resulted in the major U.S. indices settling gently

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In their official statement Wednesday, U.S. Federal Reserve policymakers said they “continue to anticipate that economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for an extended period.”

That means interest rates will remain at artificially low levels for some time to come.

And it also means the central bank’s policymaking arm, the Federal Open Market Committee (FOMC), has finally and firmly cemented its role as the Keynesian death panel for the savers of America.

The malign influence of the late economist John Maynard Keynes is nowhere more destructive than it is in the area of saving. After all, it was Keynes who proclaimed that his ideal economy would see “the euthanasia of the rentier” – an abolishment of the class of people who live off of income from savings.

We know that Keynes’ theories are still rampant in choosing U.S. fiscal policy, which has given us

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Is the government creating another subprime-mortgage bubble?

The first time around, the three-headed federal serpent – the Bush administration, the Treasury Department and the U.S. Federal Reserve – used Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) to “legitimize” trillions of dollars worth of toxic financial waste known as subprime mortgages.

The result was the worst financial crisis since the Great Depression – a mess that was global in nature.

And we’re now headed for a repeat performance.

Some of the players may have changed since the first subprime-mortgage crisis, but the game apparently remains the same. With banks currently unwilling to lend, the new federal triumvirate of the Obama administration, the Treasury and the Fed are trying to inflate the moribund U.S. housing market. This time around, however, the FHA is the weapon of choice.

Obama & Co. are making an all-or-nothing bet that the

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With prices testing their record high of $1,033 an ounce set last year gold has again become the hot topic of conversation.

But while many analysts are focusing on threat of inflation – which could be a byproduct of the U.S. Federal Reserve’s reluctance to withdraw monetary stimulus – investors should really be watching China.

“In the post-financial crisis global economy, China is quickly becoming the proverbial ‘800-pound gorilla’ – the player that has to be courted, but that can’t be tamed,” said Money Morning Contributing Editor Peter Krauth.

In a recent article for Money Morning, Krauth said that he believes the stage has been set for gold to make a lasting run above $1,000 an ounce, in no small part because of China.

For the past six years China has quietly been stocking up on gold, boosting its holdings of the yellow metal to 1,054 metric tons from 400

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