Do You Use Money? If So, You'll Want To Read This By Thursday 
 
 Enlarge this image toggle caption Manuel Balce Ceneta/AP Manuel Balce Ceneta/AP 
 
 This week, you'll hear lots and lots about the Federal Reserve, or "the Fed" as its friends call it. 
 
 The Fed is considering raising interest rates — and will announce that decision on Thursday. If the central bank were to act, it could have an impact on your financial life, forcing you to eventually pay more for car loans, credit cards, home equity loans and more. Or if you're a retiree with savings, a rate hike could boost your income. 
 
 That means it's worth paying attention, but it's also confusing. Fed policymakers meet behind closed doors. They are not elected. And the whole operation seems mysterious. Here are some basics to help explain what the Fed is and why it will get a lot of attention this week. 
 
 WHAT: Congress created the Fed in 1913 to prevent financial panics and maintain a sound economy. 
 
 Today, the Fed regulates many financial institutions and plays a big role in routine tasks, such as clearing checks, distributing paper money and coins to banks and processing electronic payments. It also conducts economic research. 
 
 And the Fed also has one superpower: It has the ability to influence interest rates — what you earn on your savings, as well as what you pay to get a car loan or a home mortgage. 
 
 To help explain what the Fed does, Fed expert David Wessel, a frequent contributor to NPR and director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, said in an email: 
 
 "The Fed has a power that no other entity has: It can create dollars. It can print money — or, more precisely, these days it creates it electronically. When it creates more money — increases the supply — it lowers the price of money, that is, interest rates. "When it soaks up money (by selling bonds from its huge portfolio), it raises interest rates. The plumbing is a little complicated: It does all this through buying and selling government bonds through the banking system or the bond market. But the impact is felt by everyone who saves or borrows in our economy. "Back in December 2008, when the economy was facing a frighteningly severe recession, the Fed cut the interest rates it controls most directly — the ones that banks charge each other for overnight loans — to zero. In effect, the Fed sells cash wholesale to your bank, which then turns around and lends it at a higher rate to you to buy a car or to businesses that want to expand. Now that unemployment has come down, it is considering whether to boost short-term rates a bit." 
 
 WHO: The Fed is a system made up of 12 regional banks, overseen by a Board of Governors. That board is comprised of seven members, nominated by the president and confirmed by the Senate. (Two seats are vacant right now.) Janet Yellen is the board chair, so you hear her name a lot. 
 
 On Thursday, she will hold a news conference following a two-day meeting of the Federal Open Market Committee. That FOMC consists of the seven board members, plus the president of the Federal Reserve Bank of New York, and four of the remaining 11 Reserve Bank presidents, who each serve one-year terms on a rotating basis. 
 
 The committee has eight regularly scheduled meetings each year. After they chew over economic data at this September meeting, the FOMC members will decide whether to raise interest rates. 
 
 WHERE: The Fed is based in Washington, D.C. The 12 regional banks are named after the cities in which they are located. Those are Atlanta, Boston, Cleveland, Chicago, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, San Francisco and St. Louis. 
 
 WHY: According to its website, the Fed exists to promote "maximum employment, stable prices and moderate long-term interest rates." 
 
 HOW: Even though it was created by Congress, the Fed is an independent central bank that makes money — and sends profits to the U.S. Treasury. The Fed has trillions of dollars in assets, such as Treasury securities, and it makes profits by providing financial services, including discount loans to banks. 
 
 Congress has told the Fed that it should always aim for price stability and the highest possible employment level, but it does not give direct orders to the Fed to take specific actions. 
 
 The Fed will make its own decision whether to change the money supply by taking steps that adjust the federal funds rate. That's the interest rate at which a bank lends funds overnight to another bank. People refer to it as the fed funds rate, and any changes in it can ripple out to affect other lending rates. 
 
 IMPACT ON YOU: While the Fed does not directly set rates for home mortgages or Treasury bonds, it creates benchmark rates that echo out. 
 
 Since the recession began in 2007, the Fed has been holding down rates to help the economy get moving. So if you look at, say, 10-year Treasury notes, you'll see those rates have been running at historic lows, thanks to the low-rate environment created by the Fed. 
 
 If you're a saver who wants to earn interest, you haven't gotten a lot of return on your bank deposits and Treasuries. But if you are a homeowner, your mortgage may well be lower thanks to the Fed's actions. 
 
 This week, the FOMC members will gather in Washington and do their darnedest to make good decisions. ||||| Thursday's meeting of the Federal Open Market Committee (FOMC), the body within the Federal Reserve that sets monetary policy, is the most anticipated in at least seven years. 
 
 For months now, Fed officials have been hinting to the public that economic conditions have improved to the point that the economy can handle a small increase in interest rates, and that a small increase will be needed to prevent inflation from rising to harmful levels. 
 
 But recent data coming out of China and stock market declines across the globe have called into question just how strong the global economy is. Analysts are even wondering whether the Federal Reserve has the capacity to guide interest rates slowly upwards, or even set rates where it wants them. 
 
 On his blog Tuesday, former Treasury Secretary Larry Summers argue d that the Fed shouldn't raise rates because it would come as a shock to financial markets. He writes: 
 
 Monetary policy should seek to avoid major surprises. Right now the fed funds futures market is assigning only a 28 percent chance to a September tightening. In the last 20 years, the Fed has never tightened without guiding the futures market to at least a 70 percent chance of a tightening . So a move now, given how expectations have been managed, would be an extraordinary shock at a highly uncertain time. 
 
 The last time the Fed moved to raise rates when the markets weren't prepared for the move was back in 1994. Fortune called the subsequent market hysteria the Bond Market Massacre . As Summers describes it, "Over the ensuing nine months, the interest rate on the 10-year bond rose by 2.2 percentage points — nearly twice as big an increase as any subsequently — with mortgage rates rising in tandem. Volatility spiked dramatically across the world , and Orange County, CA, had the then- largest municipal bankruptcy in U.S. history. Mexico and Argentina moved towards financial crisis." 
 
 In other words, the Fed can't simply raise rates unless it's laid the groundwork through effective communication of it's intentions, and in recent weeks, it has not done that. 
 
 Another reason the Fed might not be able to raise rates is that the economic situation of the United States will simply not justify a federal funds rate above near-zero. This is the implication of a recent article in the Wall Street Journal , which showed that more than a dozen central banks have tried raising rates in the past, only to be forced to lower them again as the economies they were supposed to be managing tanked. 
 
 This gets at the central question of whether the Fed should raise rates. Traditional measures of an accelerating recovery, like a falling unemployment rate, say that the answer is yes. But there is also reason to believe that, post-crisis, the new rate of "full employment" is much lower than it used to be. Others argue that fears of rising inflation are overstated, and weakness abroad makes deflation the bigger risk. 
 
 Finally, there is the question of whether the Fed has the technical tools to force interest rates to rise. In normal times, the Fed would control rates by adding or subtracting "reserves" to the banking system. If it wanted to raise rates, it would sell Treasury bills to banks in exchange for these reserves. But after years of quantitative easing, the system has been flooded by reserves, and therefore it must use new and untested tools, like adjusting the interest rates it pays on reserves kept at the bank, or using reverse repo agreements, whereby it sells bonds to a counter party with an agreement to repurchase that same security at a specified price at a specific time in the future. This will, theoretically, enable the Fed to set an interest rate floor, because promise to repurchase a bond the next day at a high enough price will be like setting an overnight interest rate, and be a transaction that bondholders can't afford to forgo. 
 
 Nonetheless, these methods are untested. Janet Yellen is often referred to as the most powerful woman in the global economy, but not even she can override the will of global markets. We may see Thursday just how far her power extends. ||||| In early 2011, Federal Reserve officials were winding down the second round of their post-crisis bond-buying program known as quantitative easing and plotting an exit strategy from their unprecedented monetary stimulus. 
 
 At the same time, Janet Yellen, then-Fed vice chair, and her subcommittee on communications strategy were working on a way to convey to the public more information about the central bank's view of the future, at a time when many expected that a major shift in its policy stance was not too far off. 
 
 If you work in the capital markets, there's a good chance you have become familiar with the result of that work: the Federal Reserve's "dot plot." 
 
 The chart released by the central bank four times a year has since become a market-mover. For investors, the appeal is simple. It answers the key question of where policymakers expect to take interest rates over time. 
 
 Officials on the policy-setting Federal Open Market Committee meet eight times a year to formulate their monetary policy. Before every other meeting, they submit updated forecasts for economic growth, unemployment, and inflation a few years ahead. The dots show the interest rate projections underlying those forecasts—the policy rate each official expects to set in order to make a given forecast a reality. The Fed’s dot plot is a little hard to read. So we took a stab at a more user-friendly version that let's you compare the current rate forecast to previous ones. 
 
 Forecasting the Future: The Fed’s Dot Plot 
 
 By the time the first dot plot was released in January 2012, the Fed was no longer expecting to chart an exit from stimulus soon. The economy had taken a turn for the worse; in fact, additional bond-buying was on the horizon. 
 
 Then-Fed Chairman Ben Bernanke consequently downplayed the dots, a tradition that Janet Yellen continued when she assumed leadership of the Fed at the beginning of last year. At times, the chart—with its 17 disparate projections of the future path of policy—can conflict with the unified message the committee is trying to send. 
 
 In her first press conference as Fed chair in March 2014, Yellen told reporters "one should not look to the dot plot, so to speak, as the primary way in which the committee wants to or is speaking about policies to the public at large.” 
 
 At the time, the dots were rising as members of the committee were marking up their projections of where interest rates would be in 2015 and 2016. Over the last several quarters, however, the dots have come back down, suiting Yellen's message that the pace of tightening to follow what would be the Fed's first rate increase in nearly a decade will be gradual. 
 
 So Yellen has turned back to the dots as "Exhibit A" for investors. During her press conference in June of this year, she pointed to it repeatedly when asked about the central bank's likely course. 
 
 Now investors aren't just seeking clues about the pace of rate increases likely to follow a rate increase. They are also looking at what the dot plot says regarding when officials expect to make that first rate increase in almost 10 years. 
 
 While the median official's projection was unchanged in its expectation of two rate increases in 2015 when the latest set of dots was released in June, market participants homed in on the fact that seven officials were now projecting fewer than two rate increases this year. That was up from only three officials making such projections in March. 
 
 Why dots anyway? 
 
 "We looked at lots of other ways of conveying the individual projections," said Andrew Levin, a former Fed economist who assisted Yellen and Bernanke in designing the dot plot while serving as a special adviser from 2010 to 2012. "This one turned out to be a good way of showing the distribution, but where—if a bunch of people have similar views, and a bunch of dots are close together—it draws your attention." 
 
 With only two meetings left in 2015 after this week's gathering, the new set of dots will send a strong signal as to what policymakers expect to happen over the next few months. 
 
 If the Fed doesn't raise rates and the dots still show one increase penciled in for this year, investors will assume that the Fed is planning to raise rates in October or December. If the Fed does raise rates and the dots show that only one increase was expected, investors will assume that the Fed has no plans to raise rates again until 2016. 
 
 "Sometimes it seems like the only way that people can really understand what the committee's views are," Levin said. "The dot plot was meant to increase transparency, not shape views on policy. It's like a very thin reed that is suddenly carrying a huge amount of weight." ||||| Now that U.S. stock markets have experienced their first 10 percent correction since 2011, investors are again looking to the Federal Reserve to bail them out. Although the Fed hasn't raised interest rates in almost 10 years, sympathetic pundits say it's still too soon to raise them now. The economist Larry Summers, runner-up for the top spot at the Fed a few years ago, says raising rates would risk "tipping some parts of the financial system into crisis." 
 
 How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle? 
 
 The process started a dozen years ago, when Alan Greenspan -- then chairman of the Fed -- decided to lower rates to 1 percent after the country had emerged from the mild recession that followed the popping of the tech bubble. Then, when the Fed began to tighten policy, it did so with agonizing slowness -- raising rates just a quarter of a percent at a time, so as not to upset the financial markets. 
 
 This set the table for the subprime housing debt mess in a way that neither Greenspan nor his successor, Ben Bernanke, could foresee. Everyone assumed real estate was too diverse an asset class to ever be in a bubble. Despite credible warnings about the potential problems starting in 2005, the Fed and Treasury were still blindsided in 2008 by the enormous losses at Bear Stearns, Lehman and AIG. Suddenly, the emergency 0 percent overnight lending rate was required and, almost seven years later, it's still deemed necessary. Meanwhile, three rounds of quantitative easing have added roughly $3.5 trillion in purchases to the Fed's balance sheet. 
 
 What we have to show for this is a more concentrated financial system, in which the top five banks control nearly half of all U.S. financial assets. Even more troubling is evidence that, this time around, asset bubbles have formed in multiple arenas. Earlier this year, the economist Robert Shiller, who predicted the tech and real estate bubbles, warned that the U.S. now faces a potential bubble in the bond market. The high-end housing and art markets also seem to be in bubbly territory, but before they can cause too much trouble we're likely to see a serious correction in the U.S. equity market. 
 
 The trigger is likely to be the hundreds of billions of dollars worth of bad debt in the energy sector -- loans that were made to finance the fracking frenzy. Even when the price of oil was twice what it is today, many of the borrowers involved were not cash-flow positive, and few adequately hedged their exposure. While the experts like to talk about how quickly the price of oil rebounded after the financial crisis, the current oversupply makes today's situation more akin to what happened in the 1980s. That took years to correct, as desperate companies and governments kept producing more crude. 
 
 Whatever the catalyst, a handful of indicators suggest that since the beginning of this year, the U.S. equity market has been significantly overvalued. The ratio of gross domestic product to market cap, as well as Shiller's CAPE ratio (stock price divided by 10-year average of earnings divided by inflation), demonstrate that the market has been stretched to extremes not seen since 2007. The amount of margin interest being used is at a record high, as is merger and acquisition activity. Earlier this summer, PEG ratios (price to earnings growth expectations) by analysts of the companies in the Standard & Poor's 500 were at 1.7 -- the highest in 20 years, and 30 percent higher than average. 
 
 Perhaps the most disturbing statistic is that American corporations have announced dividends and share buybacks for this year that total more than a trillion dollars -- more than all their projected profits combined. This is happening at the expense of long-term capital investment, as corporations seem to care more about share prices -- upon which so much executive compensation is based -- than about prospects for long-term growth. 
 
 Another area for concern is the burgeoning private market for investments, where companies are finding it relatively easy to raise capital. Uber, for example, a not-yet-profitable car-service company, got two new rounds of such funding -- and saw its valuation jump to $50 billion, from $20 billion, in a little more than a year. As billionaire Mark Cuban, who sold his company Broadcast.com at the peak of Internet mania, said, "The bubble today comes from private investors who are investing in apps and small tech companies." 
 
 This is why the Fed has to finally take away the punch bowl. The economy may not be in top shape, but it's strong enough to handle an equity correction of 20 percent to 25 percent. (Stocks are still up 200 percent from the previous bottom.) Another mild recession would not be the end of the world; given how long it takes to revise economic data, it may turn out we've already been through one. 
 
 Fixed-income investors are subsidizing irresponsible lending, and getting too little return for it. Moreover, it makes no sense to try to solve a debt crisis by lending more money (a reality that seems to have eluded Europe, Japan and China). Writedowns can be painful, but they instill a sense of responsibility -- the kind that hasn't existed in the bond market for more than a decade, as investors have learned to count on government bailouts. 
 
 If the Taylor Rule -- a practical recommendation on setting nominal interest rates -- were taken more seriously, the Fed would have lifted overnight rates back up to the 2.5 percent range years ago. This would generate at least a trillion dollars annually, if not more, for fixed-income investors -- and a possible boost of 6 percent to GDP. The average American wouldn't likely suffer, because credit-card interest rates still average 13 percent and, given a likely flattening of the yield curve, mortgage rates would barely increase. 
 
 And while some people will worry that higher interest rates could exacerbate trade problems, a 2 percent differential is not all that relevant to currency fluctuations. Even without a change in overnight lending rates over the past few years, the dollar-to-euro exchange rate has varied by 10 percent to 20 percent annually. 
 
 So let's end the era of the "Greenspan put" and Bernanke's quantitative easing, and return to basics. The Fed should raise rates 0.25 percent this September and 0.50 percent thereafter. Already this century, the Fed has helped enable two bubbles that resulted in equity corrections of 40 percent and 50 percent. Investors would be wise to remember that if the Fed doesn't raise rates now. 
 
 This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. 
 
 To contact the author of this story: 
 
 Brad Brooks at brad@brooksbaycapital.com 
 
 To contact the editor responsible for this story: 
 
 Mary Duenwald at mduenwald@bloomberg.net ||||| In recent writings, I have laid out the strategic case against the Federal Reserve tightening this week. There is a compelling tactical case as well. 
 
 Monetary policy should seek to avoid major surprises. Right now the fed funds futures market is assigning only a 28 percent chance to a September tightening. In the last 20 years, the Fed has never tightened without guiding the futures market to at least a 70 percent chance of a tightening. So a move now, given how expectations have been managed, would be an extraordinary shock at a highly uncertain time. 
 
 To find a relevant precedent, one has to go back to 1994, when the Fed raised rates by 25 bps despite the market assigning only about a 30 percent chance (around what is expected now) of a tightening. What followed was dubbed by Fortune Magazine as the “Bond Market Massacre.” Over the ensuing nine months, the interest rate on the 10-year bond rose by 2.2 percentage points — nearly twice as big an increase as any subsequently — with mortgage rates rising in tandem. Volatility spiked dramatically across the world, and Orange County had the then-largest municipal bankruptcy in U.S. history. Mexico and Argentina moved towards financial crisis. 
 
 There is a point here quite separate from the issue of what monetary policy should be. Communication is a key part of the art of monetary policy. The Fed for a generation has caused its tightening moves to be anticipated because it learned from the 1994 experience. The same approach should be taken going forward. Even if it were otherwise a good idea to tighten, no adequate predicate has been laid for a rate increase this week. ||||| For years, everyone involved with investing has wanted to know: When will the Federal Reserve raise interest rates? 
 
 But there’s another important consideration that isn’t asked nearly enough: Can the Fed raise interest rates? 
 
 That query is more than academic. With the US economy looking increasingly strong, some still think the Federal Reserve could act to raise rates after its monetary policy committee, the Federal Open Market Committee, meets this week (Sept. 16 and 17). 
 
 Such Fed rate increases used to be commonplace. But those days are long gone. It’s been roughly nine years since the US central bank last ratcheted up its once primary policy rate, known as the Fed funds rate. 
 
 And in the near decade since then, pretty much every rule, technique, and guideline the Fed once relied on has been drastically rewritten, revamped, or removed. That blank slate underscores the fact that seven years after the financial crisis, the US economy continues to feel the reverberations. 
 
 In the words of one analyst, when the Fed tries to raise interest rates, its “actions will entail the largest monetary policy experiment in human history.” 
 
 Here’s what you need to understand it. 
 
 How rates move 
 
 Once upon a time, the Federal Reserve altered monetary policy by raising and lowering its target for the Fed funds rate. 
 
 What are Fed funds? 
 
 They’re the reserves that banks have to hold—for large banks a 10% fraction of their deposits—by law. These funds are essentially for safekeeping, and can’t be invested. (Though since 2008 the Fed has had the power to pay interest on them.) 
 
 But funds in excess of that 10% ratio can be invested and lent out within the Federal Reserve system. This is the Fed funds market, where banks that have more reserves than they need lend to banks that don’t have enough, usually on an overnight basis. And the cost of borrowing money in this market is the Fed funds rate. 
 
 Here’s the problem: Right now, everybody has way more reserves than they need. That’s because the Federal Reserve has pumped large volumes of reserves into the system in recent years, in an effort to first contain the financial crisis and, later, support economic growth. 
 
 How did the Fed push these reserves into the system? Easy. It created them out of thin air, and used them to buy government securities from banks. 
 
 And why did it do it? To push interest rates down. (Supply and demand creates prices. All else equal, a rising supply of reserves pushes the price of reserves—the Fed funds rate—down.) 
 
 Here’s the trick: Traditionally, in order to raise interest rates, the Fed has to find ways to suck some of those reserves back out of the system. 
 
 But that’s gotten a lot harder to do. 
 
 Getting the genie back in the bottle 
 
 The Fed used to have a really simple and effective way to slurp bank reserves out of the system and raise short-term interest rates; it sold securities, often out of its stockpile of short-term US Treasury bills. 
 
 By selling bills, the Fed withdraws reserves by accepting them as payment. That reduces the supply and raised the price of reserves, i.e., interest rates. 
 
 And it worked well in the pre-crisis era when the Fed was trying to manipulate a much smaller market. 
 
 But today there are $2.5 trillion in reserves. By comparison, at the end of July, there were only $1.4 trillion of US Treasury bills in existence. In other words, there’s nowhere near enough Treasury bills to soak up the amount of reserves the Fed has created. 
 
 And at any rate, the Fed doesn’t have any Treasury bills left. It has effectively let its holdings of Treasury bills mature, leaving it with none to sell as a way to pull money out of the system and raise rates. That’s because the Fed long ago realized that there was more than enough reserves around to keep short-term rates at zero. 
 
 But the Fed still thought it needed to do more to help the economy. So it started buying longer-term US Treasury bonds—unlike bills which are shorter-term government debts, bonds mature over a period of a year or longer—using an unconventional monetary policy known as “quantitative easing.” You can see the process in action in the chart below, which shows the Fed’s Treasury bill holdings withering away as its holdings of longer-term Treasury bonds explodes higher. 
 
 Why doesn’t the Fed sell its Treasury bonds then? 
 
 Because there’s no one buyer big enough to purchase them. The Federal Reserve itself is now the world’s largest holder of US government debt, after its bond-buying programs pushed its holdings above those of China. 
 
 If the Fed tried to sell its bond portfolio it would likely tank the market and cause interest rates to spike, undoing much—if not all of—the beneficial economic effects its efforts have achieved over the last few years. 
 
 So what will it do? 
 
 The Fed will dig into its new toolbox. 
 
 Since the financial crisis, the Fed has been able to pay interest on reserves that banks sock away at the central bank. Basically, it has the ability to pay banks to keep their money sitting idle at the Fed. 
 
 The Fed is by definition the safest place to put your dollars in the world—because it has the ability to create any money in might need to pay you back. 
 
 As such, in theory, no bank should be willing to lend money for less than the Fed is willing to pay. (After all, why would you take more risk for a lower return?) So the Fed’s original plan for raising interest rates this time was to raise the interest rate it pays on reserves, which should act as a kind of magnet that would pull the Fed funds rate higher. 
 
 There is one problem, though. The Fed can only pay interest on reserves to one type of institution: banks. 
 
 But there are plenty of other entities that lend their mounds of cash in the short-term debt markets where the Fed is trying to influence interest rates. And their willingness to lend money for less than the Fed’s rate could keep short term interest rates below the Fed’s reserve rate. For example, the network of 12 Federal Home Loan Banks, a Congressionally chartered system that lends money to member banks that make housing loans, has been an active lender in the Fed funds market, often charging less than the Fed’s rate on excess reserves. Their willingness to lend at lower rates has put downward pressure on the Fed funds rate, Fed officials have said publicly. 
 
 So, the Fed will try to soak up some of that non-bank money with another tool, which is called overnight, reverse repurchase agreements (ON RRPs). What are those? Essentially, they’re like overnight deposits the Fed can accept from a much broader bunch of financial institutions than banks. The interest rate on those ON RRPs is supposed to act as a kind of floor for short-term interest rates, while the rate on reserves is supposed to act as a kind of “magnet” to lift rates higher. 
 
 And the idea is that by manipulating these two rates, the Fed will be able to control other short-term interest rates, including the good old Fed funds rate. 
 
 Are we sure it will work? 
 
 The company line out of the Fed is that the central bank is sure it can lift rates. 
 
 “The committee is confident that it has the tools it needs to raise short-term interest rates when it becomes appropriate to do so,” Fed chair Janet Yellen told Congress earlier this year, adding, “and to maintain reasonable control of the level of short-term interest rates.” 
 
 And there have been some instances where the Fed moved its overnight repo rate and it seemed to have the desired effect on the Fed funds rate. 
 
 But there are still big questions. Will the Fed be as effective at manipulating rates in the US repo market as it was in a Fed funds market back in the good old days? In the US repo market some $2.3 trillion worth of trades are done every day. That’s a huge market to move. 
 
 It’s so big in fact, that the Fed said back in April that it might lift the $300 billion cap it had on daily overnight reverse operations. 
 
 Ripple down the curve 
 
 All of this effort and planning is merely to get short-term interest rates off the floor. But that’s only half the battle. 
 
 The Fed traditionally moves short-term interest rates and then relied on markets to move rates on things like the 10-year Treasury note. Those longer-term rates influence everything from corporations issuing bonds to would-be homeowners securing mortgages. 
 
 That hasn’t always work as planned. In 2005, then chairman of the Federal Reserve, Alan Greenspan, famously called the stubborn refusal of long-term bond yields to rise a “conundrum.” His successor Ben Bernanke thought that it was a “global savings glut” among emerging market nations—savings that were invested in US Treasurys—that kept long-term interest rates lower than they should have otherwise been. 
 
 The situation is a bit different today. Giant entities like China are actually burning through their savings a bit to keep their currencies propped up. On the other hand, with disinflation and deflation major macroeconomic forces, people are more than willing to buy safe government bonds with low yields, which acts as a headwind against higher rates. 
 
 But those are all challenges for another day. The Fed doesn’t need or want to push long-term interest rates sharply higher. It merely wants to prove that, nine years later, it still has the market muscle and technical know-how to get rates up and keep them there. Let’s hope they know what they’re doing. ||||| The rate-setting Federal Open Market Committee has issued five straight unanimous policy statements. Thursday could see the first dissenting votes of 2015, whether the Fed raises rates or not. Richmond Fed President Jeffrey Lacker, who is a voting member of the FOMC this year, said there is a strong case to raise rates. While he didn’t dissent at the June policy meeting, “we’re not in the same situation we were in June, so my attitude towards waiting further is going to be different now,” Mr. Lacker said. On the other hand, Chicago Fed President Charles Evans, also an FOMC voter, said he thinks the Fed should wait until 2016 to raise rates.
– Will interest rates finally go up? Federal Reserve officials begin a two-day meeting today, with the financial world waiting with bated breath on Janet Yellen's subsequent announcement. "Anyone who uses money" will ultimately be affected, observes NPR, which offers a primer here. Other highlights in coverage: 'Nail-biter': This one is tough to predict, with some members of the Federal Open Market Committee that is meeting open to a hike and others opposed. "Officials could seek some middle ground, such as holding rates near zero while sending a signal that a rate increase is likely at the Fed’s Oct. 27-28 or Dec. 15-16 policy meetings," notes the Wall Street Journal. "Given the uncertainty, how Ms. Yellen frames what the Fed is doing will be as important as what the Fed actually does." A more important question: Everyone's asking will the Fed raise rates, "but there’s another important consideration that isn’t asked nearly enough: Can the Fed raise interest rates?" writes Matt Phillips at Quartz. Things have gotten far more complicated since the last bump nine years ago, and the Fed's real challenge is to show "it still has the market muscle and technical know-how to get rates up and keep them there." 'Untested tools': "In normal times, the Fed would control rates by adding or subtracting 'reserves' to the banking system," notes Fortune. "If it wanted to raise rates, it would sell Treasury bills to banks in exchange for these reserves. But after years of quantitative easing, the system has been flooded by reserves, and therefore it must use new and untested tools" to get the job done. A firm no: "Monetary policy should seek to avoid major surprises," writes former Treasury Secretary Larry Summers at his blog. "Right now the fed funds futures market is assigning only a 28% chance to a September tightening. In the last 20 years, the Fed has never tightened without guiding the futures market to at least a 70% chance of a tightening. So a move now, given how expectations have been managed, would be an extraordinary shock at a highly uncertain time." A firm yes: It's time to "return to basics," writes Brad Brooks at Bloomberg View. "The Fed should raise rates 0.25% this September and 0.50% thereafter. Already this century, the Fed has helped enable two bubbles that resulted in equity corrections of 40% and 50%. Investors would be wise to remember that if the Fed doesn't raise rates now." Reading the dots: The key to the Fed's move may be found in something called a "dot plot" of interest rate projections. Bloomberg has a primer.