Three or four years ago, as the US economy continued to recover the Fed should have slowly been increasing interest rates, but chose to do nothing. Now that the economy is slowly grinding to a halt, the Fed feels the need to constantly threaten an interest rate increase and why not? It’s been the only action causing any movement to the stock market whatsoever, except for the more than occasional borrowing of cheap money, by publicly-traded companies feeling the need to buyback company stock in order to give stockholders a visible, but completely artificial, increase in stock value (not to mention bonuses for all those executives, so incentivized).
At this point, the Fed is truly out of economic tools. Continuing to do nothing will allow the economy to slowly grind to a halt, because there is no incentive for growth and the tools provided have been misused and abused without consequence (at least to the abusers). Raising interest rates at this point will cause a more immediate economic contraction that will directly affect the entire economy, resulting in higher unemployment, higher prices and a more direct conduit for rapid inflation that’s been held at bay to this point.
The Fed nor government has done anything to correct the credit swap derivative abuse that was brought to the attention of everyone in the hit movie “The Big Short.” As a matter of fact, the abuse has become exponential and will probably result in the collapse of a number of the world’s largest banks, within a very short period of time, again due to a complete lack of punishment for the outright abuse of other people’s money.
Meanwhile, the list of negative interest rate countries continues to grow, as does the list of countries on the verge of bankruptcy. The US stock market and housing bubbles continue to grow and be unaddressed. And all this as the Chinese Yuan prepares to take its place in the IMF’s Global Reserve Currency basket, set for October 1, 2016. We’ve been painted into a corner by the “experts” put in charge, which is the best reason to consider having a sizeable amount of precious metals on hand, before the overwhelming and probably sudden bursting of our global economic bubble.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.