interest rates

Why Does the Fed Need to Raise Rates? | Armstrong Economics

Posted on by johnbarleycorn12

QUESTION: Hello Mr Armstrong I would like first to thank u for all the good information u give to us i have just a question : why do u write the fed need to increase rates to save the us pensionneers Not realy clear for me ( and maybe a lot of people) Thanks again and i wish u a wonderful 2019 year ! regards T ANSWER: The entire problem of lowering interest rates to “stimulate” the economy demonstrates that central banks cannot really manage anything. This theory is based upon the idea that if rates are cheap then you will borrow. They fail to even understand HOW the economy functions. The stock market and the economy has NEVER peaked with the same level of interest rates TWICE in history. If you BELIEVE the market will double you will pay 20% interest for a year. If you do not BELIEVE the market will rise at all, you will not borrow at 1%. Pension funds were based upon the idea that at 8% you double your money in less than 10 years compounded. The system of a pension cannot function at interest rates of 1-3%. This is why states are raising taxes and going broke. They have to make up the losses on investments. Then throw in the corruption of governments. They directed pensions to be “conservative” and thus must own typically more t6han 50% government bonds up to 85% generally and some are at 100% like Social Security. The lower rates on government bonds, the greater the losses and thus taxes must be raised to compensate for state pensions. Then, so many funds ran into Emerging Markets to try to compensate for the losses on government bond holdings. Spanish banks ran into Turkish debt which they assumed would become a member of the Eurozone. Turkey was one of the first members of the Council of Europe in 1949, and it became an associate member of the EEC in 1963, joined the EU Customs Union in 1995 and started accession negotiations with the European Union in 2005. However, ever since Erdogan, all negotiations with Turkey to join the EU came to an end in 2017. Therefore, the Fed realizes that the next crisis is a pension crisis and they need to raise rates to help try to bail out the pension funds. They will not be able to raise the rates fast enough to avoid the crisis coming very rapidly which will contribute to raising tax rates and further suppressing economic growth into the future.
— Read on www.armstrongeconomics.com/markets-by-sector/interest-rates/why-does-the-fed-need-to-raise-rate/

Good explanation

Trump v the Federal Reserve | Armstrong Economics

Posted on by johnbarleycorn12

QUESTION: Mr. Armstrong; A spectacular call. You gave the day and the market bottomed within 100 points of your number. You always nail it. I find it curious how they blamed Trump and the Fed. Can Trump fire the head of the Fed? I really think he seriously needs to attend your WEC. He would have seen this move coming. Congrats! FG ANSWER: No. President Trump’s comments about firing Federal Reserve Chairman Jerome Powell are really off the wall. The problem is he has the classic TV talking heads view that stocks will crash with higher interest rates. Trump’s frustration with the central bank chief intensified following the interest-rate increase and months of stock-market losses. He is oblivious to the real crisis which is the low-interest rates are destroying the pension funds. Meanwhile, the media blames Trump for his tweets and the talking heads attribute the decline to interest rates. Powell cannot publicly state why rates have to rise or he would create a real debt panic. Trump is clueless as is Capitol Hill with the monumental crisis in global debt. For now, the news will bash the stocks when down, and when investors/traders see there can be no flight to bonds as quality, the real panic will begin. I wish I could reverse this mess, but reality states Trump’s handlers are rooting for the Deep State and would never let me near him. The Democrats want the stocks to crash for they can blame Trump and try to win the losers to vote for their team. The shame here is this is not about running the nation or the economy to benefit all, it is just about winning the 2020 election. Since the ECM turns in January 2020 rather than the elections in November 2020, this is indicating that we may have a psychological shift prior to the elections.
— Read on www.armstrongeconomics.com/international-news/politics/trump-v-the-federal-reserve/

The rise in interest rates will mean that banks can start paying interest on savings at guaranteed rates for specific dates, six months, one year etc. This will create real wealth and stop the need for endless money printing and risky investments. A win win for everyone except shaky derivatives and those who deal in them.