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The Fed will raise rates when US Treasury auctions lack buyers. Until that time we will continue to see inflation in food & fuel prices(areas not measured by the CPI). Taxes at local levels will continue to rise as the economy continues to shrink. Right now the only thing holding the markets up are: continued uncertainty in the eurozone keeping the dollar relatively strong, positive earnings based on corporations cutting to the bone, and the promise further QE by the FED.
under the current economic system, where the U.S. consumer's borrowing drives the growth of the supply of dollars, you're not going to see interest rates rise substantially for a very, very long time.
Quote:
Originally Posted by BentBow
Very interesting commentary here, although I wish more people could see the fact that it's not just inflation that needs to be tamed, but savings that need to be stimulated. Savings and subsequent investment in productive capacity is the only thing that's going to get us out of this mess.
So, what should interest rates be set at? 10%, 15%, anyone? Too bad Paul Volcker isn't around today...
a. That article was from mid- 2009
b. Volcker is around, but for some reason no one listens to him.
Savings rates have been on the rise. I believe personal savings increased last year by like 25% nationally.
I think interest rates have long been overdue for an increase personally. The constant lowering of interest rates is what floated the economy from 1981 until 2005. When we couldn't lower them anymore to keep the economy over, well, oops. And when the economy crashes, home interest rates go up also.
true personal savings rates have increased, but why have they increased? the answer is that the economy is quite soft right now, and people are saving their money in case it turns south again. we need that to change.
and i agree with you on interest rates, however not when interest rates started going down was bad. during the reagan years it was a good thing as it got the economy moving again. during the bush41 years, it was done to try to get the economy going better, and it worked, after clinton got into office. when things started going bad though was just before bush43 got into office, the fed decided to continually lower rates, until they got to where they are today, which is far too low, even in 2000 it was far too low.
and as you know the biggest problem with low interest rates is the easy credit they inevitably allow.
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