Dear CIGAs,

What some say the Fed should do and what the Fed will do are two different things.

A well-read weekly publication featured an article with authoritative quotations suggesting the Federal Reserve will raise interest rates to 2%.

If government statistics are to be taken at face value and the financial banking system really is in a recovery mode, such opinions would be hard to argue with. Sometime when you hear this you wonder if the main contribution of such an article is to make the statement that a low in economic activity has been established and the financial side, although not wholly sound, is free of systemic challenge.

You can also see this opinion emanating from financial people as their businesses are turning in record breaking profits and record breaking bonuses which has to say to them everything is all right with the world.

The truth of the situation is more akin to CIT, which is once again today leaning at more than a 60% angle toward bankruptcy. Any loans coming from the private sector will seek to be placed as the most senior debt that invites the likely final result of liquidation of the company, its business and assets.

CIT is to Middle America what Lehman was to the financial world. CIT needs not only to stay free of bankruptcy, but also to be financed to the degree that they can be competitive in price and service levels to their clients.

It would seem to me that if you cannot meet your debt obligations you cannot conduct your normal day to day business.

That leaves the suggestion of increasing interest rates as at best academic, for if it were to occur, you could write off Middle America into one big Detroit. Car sales will not happen. The volt even with a $7500 government rebate will bomb out, as even then it is not price competitive with the Prius, a real mileage maker. Regional banking would continue to implode at an accelerating rate as commercial debt stresses the rest of the system.

Politically speaking that would be suicidal. The call for further bailouts would be deafening.

I think the article was more well structured MOPE than serious policy options.

If what should be done was in the past done, we would not be where we are today.

Certainly that is what the US dollar and Gold say about it, today.