Showing posts with label Slowdown. Show all posts
Showing posts with label Slowdown. Show all posts

January 7, 2016

Clash Of Civilizations

Things are looking a little less rosy today in the world...

Clash of Civilizations - Tensions continuing to heat up in Middle East as Saudia Arabia is accused of bombing Iran's embassy in Yemen after the Saudi embassy in Iran was ransacked. 

Weapons of Mass Destruction - North Korea conducts H-Bomb test threating major escalation of WMD in Asia, and Iran unveils nuke capable carrying ballistic missiles at 2nd site, and claims surface that ISIS (similar to Syria) is now using chemical weapons

Wold Economy - Yesterday, China had to again halt trading (after only 30 minutes) when their stock market dropped another 10%, and the World Bank cuts global growth forecast to just 2.9% for 2016 (down another .4%). 

Violence From Immigration Crisis - Dozens and dozens of women were sexually attacked by alleged gangs of immigrants in multiple cities in Germany after Germany opens its border to 1.1 million immigrants from Syria, Afghanistan, etc. just last year.

Terrorist Attacks -- After multiple terror attacks in Paris, San Bernardino, and on a Russian airliner flying out from Egypt last year, another attack was thwarted just yesterday in Paris on the 1-year anniversary of the Charlie Hebdo killings

We may not want to say the words "clash of civilizations," except that we are desperately trying to avoid it, but it seems to be happening and with all it's effects anyway. 

The question is what happens when the proverbial politically "acceptable losses" rise to the point of being completely unacceptable disasters? ;-)


(Source Photo: here with attribution to Guio Gloor Modjib)
Share/Save/Bookmark

September 14, 2015

The Unbelievable Stupidity Of Raising Interest Rates

Interest rates have been near zero since the recession of 2008.

That supposedly to stimulate the economy. 

However, aside from a stock market bubble again, not sure we have a much stimulated economy.

We have a false low on the unemployment rate, while the the true percentage of the labor force working is the lowest in almost 40 years!

Moreover, manufacturing is down almost 40% from the 1979 peak with a loss of over 7.2M jobs

Commodities are at firesale prices as demand is sluggish and there is short-term oversupply. 

And innovation is facing a global slowdown

So people are out of work, we're not making things, demand is depressing prices, and even ideas are few and far between--not too rosy a picture, regardless of what some politicians may have you believe. 

Let's not forget that we have an over $18 trillion federal debt, and this is projected to grow ever greater as we borrow to fund social entitlements such as social security, medicare, etc. 

In this scenario, why would the Federal Reserve ever want to raise interest rates?

Well, if they don't raise rates, then they can't lower them later again when the economy really stalls out and goes into deep recession. 

Hence, this is seen as a tool for their financial toolkit--and if there are no tools with which to manipulate the economy, then there is no need for a (neutered) Federal Reserve. 

But think for a second what happens when the Fed raises rates, it's going to slow the economy even further than the chug chug chug economy that we are already dealing with. 

Maybe even more important, it will raise the amount of interest payments we must folk over on the trillions of dollars of debt we owe.  

Simply put, when we raise interest rates, we pay more interest on our already astronomically high national debt, and this pushes our national deficit up even higher as we borrow more to pay the interest on the previous debt. 

If you did this with your credit cards, you'd probably be looking at the equivalent of debtor's prison sooner or later. 

Rather than feed the Fed's toolbox with interest rate bumps and drops, why not keep rates low as long as they can stay low, reducing our interest payments, and curtailing our national deficit and debt. 

What about the stock bubble...that's a lesson investors will be learning about in their own good time--it's the stock market, stupid. ;-)

(Source Photo: Andy Blumenthal)
Share/Save/Bookmark