Tag Archives: Interest rate

The Cost Of Bidenomics

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On Monday, The Daily Signal posted an article that provides some insight into the actual state of the American economy.

The article reports:

Small-business bankruptcies are up 61% on the year. It is a cackle-nomics miracle.

The data comes from bankruptcy analyst Epiq, which reports that commercial filings for Chapter 11 bankruptcies soared to 4,553 so far this year.

Meanwhile, total corporate bankruptcies are also rising, hitting the highest since the COVID-19 pandemic, according to S&P Global Market Intelligence, which is hitting especially hard in retail, with a parade of chains going under this year, including Red Lobster and its beloved endless shrimp. Never forget what they have taken from us.

What’s causing it? Simple: Inflation, high interest costs, and COVID-19 loans.

Inflation, of course, drives up business costs to the point they have to hike prices, which chases consumers out.

High interest rates are well-known to strangle business. In fact, that’s why the Fed does them, to strangle household spending enough that federal spending has inflation all to itself.

And then the COVID-19 loans: During the pandemic, the Small Business Administration pumped out 4 million loans—worth about $380 billion—in so-called economic-injury disaster loans. Note these were separate from the Paycheck Protection Program loans, where $800 billion were handed out to bribe voters into lockdowns.

While many of the PPP loans were fraudulent—actually, most of them, according to NPR—96% of those loans were forgiven.

Incidentally, one gang member recently killed in a Baltimore shootout had, it turned out, an outstanding PPP loan for a nanotech company. Not a joke.

Thing is, those $380 billion in injury loans actually do have to be paid back.

And it turns out a lot of companies can’t. Eighty percent are still outstanding—$300 billion—so, we’re probably just seeing the tip of the injury-loan bankruptcies.

As Tim Walz stated at a recent Pennsylvania rally, “We can’t afford four more years of this!”

Please follow the link above for further details.

Political Or Good Policy?

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At a time when Americans are still dealing with inflation, the Federal Reserve has cut interest rates by half a percentage point.

On Wednesday, Breitbart noted:

The Federal Reserve moved to cut interest rates by a half percentage point—the first reduction since the central bank cut rates to near zero when the pandemic struck in 2020—in a vote of confidence that inflation will continue to moderate and an attempt to fend off a further increase in unemployment.

“Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated,” the Fed said in a statement.

…Fed officials have also said that they now view the risks to their mandate to maintain full employment to be greater than the risks of a resurgence of inflation. Earlier this summer, the unemployment rate tripped the Sahm Rule threshold by rising more than a half a percentage point above its recent low, typically a signal that the economy is already in a recession. Claudia Sahm, whose research is behind the rule, has said she does not think the economy is currently in a recession but worries that restrictive monetary policy could unnecessarily increase unemployment even more.

The article concludes:

The longer-run projection for the fed funds rate rose to 2.9 percent, four-tenths of a point above the 2.5 percent the Fed had consistently projected from 2019 through the end of last year. In the June projections, officials had indicated an expectation for a longer run rate of 2.8 percent.

On the other hand, unemployment is now seen as going higher. When the Fed last released projections in June, officials forecast a four percent rate of unemployment at year-end. The new projections have unemployment rising to 4.4 percent. Next year, unemployment is seen as staying at 4.4 percent, up from the earlier estimate of 4.2 percent. Similarly, the median projection for economic growth ticked down to two percent from 2.1 percent this year.

Eleven officials voted for the rate cut. One Fed governor, Michelle Bowman, dissented, preferring a quarter-point cut.

I am not an economist, so I don’t have a lot to say about this. However, I do think inflation has continued to be a problem that cutting interest rates might exacerbate. I am hoping that the Federal Reserve has made the right decision for the right reasons and that this is not a political move.

The New Jobs Report

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On Friday, The Epoch Times posted an article about the latest jobs report. The economy is cooling down, which will probably provide the Federal Reserve with an excuse to lower interest rates in the hope of providing a Democrat election victory.

The article reports:

The U.S. economy created fewer jobs than the market projected in August as the overheated labor market of the past few years continues to show signs of cooling off.

Last month, payrolls increased by 142,000, falling short of the consensus estimate of 160,000, according to the Bureau of Labor Statistics (BLS).

The unemployment rate eased to 4.2 percent, down from 4.3 percent in July. This was in line with economists’ expectations.

Average hourly wages surged at a higher-than-expected pace of 0.7 percent, up from a 0.1 percent drop in July—this was revised from the initial report of 0.2 percent growth. Average hourly earnings also climbed to a better-than-expected year-over-year rate of 3.8 percent, up from 3.6 percent.

The labor force participation rate was unchanged at 62.7 percent. Average weekly hours ticked up to 34.3 from 34.2.

Much of the job creation was concentrated in construction (34,000), health care (31,000), government (24,000), and social assistance (13,000).

There were some other interesting numbers in the report:

So far this year, the total number of downward job revisions equals 372,000.

The number of people working two or more jobs increased by 65,000 to 8.538 million.

In August, full-time jobs plummeted by more than 400,000, and part-time employment increased by 527,000.

Inflation is hurting all Americans, and until the government stops its runaway spending, inflation will continue to be a problem.

 

 

This Won’t Be A Surprise To Most Americans

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On Wednesday, The Daily Caller posted an article about the Biden administrations’ reporting of the jobs reporting during the past year or so.

The article reports:

The federal government overestimated the number of jobs in the U.S. economy by 818,000 between April 2023 and March 2024, according to data from the Bureau of Labor Statistics released Wednesday, stoking fears of a slowdown in the U.S. economy.

Economists at Goldman Sachs (GS) and Wells Fargo anticipated the government had overestimated job growth by at least 600,000 in that span, while economists at JPMorgan Chase had predicted a lesser decline of 360,000, according to Bloomberg. The downward revision follows a trend of the BLS overestimating the number of nonfarm payroll jobs added, with the cumulative number of new jobs reported in 2023 roughly 1.3 million less than previously thought as of February 2024

The article concludes:

Wednesday’s downward revision has also heightened concern that the Federal Reserve has waited too long to begin cutting interest rates, Bloomberg reported. If the FOMC hesitates to cut rates for too long, it could result in recession instead of a soft landing — an economic slowdown in which inflation is brought down without causing recession.

The Federal Open Market Committee (FOMC) decided to hold its target federal funds rate between 5.25% and 5.50% in July, marking the eighth meeting in a row the FOMC has decided to keep rates at their current 23-year high.

“Wall Street is increasingly waking up to the fact that the economy post-covid has never been as good as the government bean counters claimed, and a recession may have already begun,” Antoni told the DCNF. “These revisions are a violent shove in the direction of reality.”

The economic rebound has been slowed by government policies that are not totally related to interest rates. Government regulation and tax policy play a big role in America\s economy. If a Democrat is elected President in November, you will see tax rates skyrocket and the economy stumble.

President Biden’s Plan For Inflation

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On Tuesday, Hot Air posted an article about one way the Biden administration plans to fight inflation. It’s a plan guaranteed to be rife with unintended consequences.

The article reports:

Enough about Joe Biden’s mindless nastiness. I’ll take my cue from Donald Trump and Biden himself and focus on policy this morning.

Specifically, let’s talk about Joe Biden’s mindless and nasty demagoguery on economic policies. Faced with the electoral consequences of his corrosive inflationary wave, especially in shelter costs, Biden has to come up with some promised policy solution. And that is … federal rent control:

According to the Associated Press:

President Joe Biden is ready to propose a 5% cap on annual rent increases for tenants of major landlords as he tries to show he’s doing something about the high cost of housing, according to a person familiar with the plan.

The proposal, to be announced while the president visits Nevada on Tuesday, is being championed by Biden in the middle of a tense presidential campaign and a time when housing costs have been a major driver of overall inflation.

Hasn’t this man ever studied economics?

Housing costs are a major driver of overall inflation. That is true, but let’s examine why. Interest rates are double what they were under President Trump. According to U.S. News, the interest rate on November 19, 2020, for a 30-year mortgage was 2.72 percent. A loan of $250,000 would be paid back at the rate of $1,016.63 per month. On May 16, 2024, the interest rate on a 30-year mortgage is 7.02 percent. That loan would be paid back at a rate of $1,666.62 per month. The cost of the actual house you would be financing has also increased significantly in the past four years. So exactly what would be the result of federal rent control? First of all, find rent control in the U.S. Constitution. It’s not there. The 10th Amendment does not include rent control.

In January 2020, The Manhattan Institute posted an article about rent control.

Here are some highlights from the article:

Rent Control Makes It Harder to Find an Apartment

    • Cities that implement rent control see substantial declines in the availability of rental housing.
    • Locking people in to existing rental units leaves many renters in apartments much larger or much smaller than they would prefer.
    • In some cities, waitlists for rent-controlled housing are decades-long.

Rent Control Does Not Increase Diversity

    • Rent control benefits incumbent tenants at the expense of migrants hoping to relocate to a city. In New York City, white tenants have disproportionately benefited relative to black or Hispanic tenants, and landlords give preference to older and childless households.
    • Many of rent control’s benefits typically flow to higher-income households even as rent control drives up rents for everyone else.

Rent Control Degrades the Quality of Its Beneficiaries’ Housing

    • Rent control reduces investment in a property’s quality and causes a city’s housing stock to decay.
    • By suppressing property values, rent control also reduces tax revenue to municipalities, hindering their ability to provide essential services.

It will not decrease inflation, but it will increase government control.

Energy Independence Matters

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The following chart was recently posted on Twitter:

As gasoline prices and interest rates rose in the early 2000’s, many people had problems paying the adjustable-rate mortgages they had taken out, and the cost of commuting to work began to increase rapidly. There were many reasons for the collapse of the housing market in the early 2000’s, but that was a contributing factor. We are currently experiencing the same financial crunch. Hopefully the banks learned their lesson in 2008 and are not issuing as many sub-prime loans.

Elections matter, and unless you want to continue deeper into stagflation, I suggest that you vote for President Trump.

Regulations Matter

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On Thursday, Issues & Insights posted an article about the regulatory nightmare that is being created by the Biden administration.

The article reports:

Just after Ronald Reagan won the presidential election in November 1980, economic adviser David Stockman wrote a memo warning the president-elect that he faced an “economic Dunkirk” thanks to the disastrous economy he was inheriting.

Among Stockman’s warnings was that the Carter administration had set a “ticking regulatory time bomb” that would blow up the economy.

“They have spent the past four years ‘tooling up’ for implementation through a mind-boggling outpouring of rulemakings, interpretative guidelines, and major litigation – all heavily biased toward maximization of regulatory scope and burden,” Stockman wrote.

Stockman – who would later serve as head of the Office of Management and Budget and ended up losing Reagan’s trust – had that part wrong. While Carter was a disaster as president, at least he showed an ability to learn on the job. And so late in his term, Carter embarked on a deregulatory campaign to fight inflation. Among other things, he freed the trucking and airline industries from onerous government mandates.

“Carter gave Reagan the phenomenal gift of deregulation. Combined with the (Reagan) tax cuts that largely took effect in 1983, the economy went on a growth tear,” wrote Brian Domitrovic, a scholar at the Laffer Center, in Forbes. “All the capital that Reagan freed up via his tax cuts found room to roam in the deregulated world which Carter had set up.”

Unfortunately the Biden administration has not studied the lessons of history. The article lists some of the regulations the Biden administration has put in place:

  • Force car owners into inconvenient, expensive, range-deficient EVs.
  • Impose emission standards on large trucks that, the industry says, will be “the most challenging, costly and potentially disruptive heavy-duty emissions rule in history.”
  • Sharply raise the cost of drilling for oil and gas on public lands and raise the cost of water.
  • Make it nearly impossible to get permits to expand or build new facilities in most areas of the country without violating impossibly strict clean-air standards.

The article concludes:

In his 1980 memo, Stockman said avoiding an economic Dunkirk required “an initial administration economic program that is so bold, sweeping, and sustained that it totally dominates the Washington agenda (and) holds promise of propelling the economy into vigorous expansion and the financial markets into a bullish psychology.”

Reagan delivered.

It will take even greater levels of boldness today. And while there is hope for such a comprehensive program under the return of Donald Trump, if Biden wins in November there will be no rescuing the economy this time.

Deregulation will be one of the keys to reviving the struggling economy. Despite the fact that the Biden administration keeps telling us that the economy is strong, people are working two jobs to keep up with inflation, there are layoffs in a number of industries, and high interest rates are making it very difficult for new home owners to afford a home.

The March Inflation Numbers

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On Wednesday, MSNBC posted the March Inflation Numbers. As any consumer can tell you, inflation is still and issue.

The article reports:

  • The consumer price index, a key inflation gauge, rose 3.5% in March, higher than expectations and marking an acceleration for inflation.
  • Shelter and energy costs drove the increase. Energy rose 1.1% after increasing 2.3% in February, while shelter costs were higher by 0.4% on the month and up 5.7% from a year ago.
  • Following the report, traders pushed the first expected rate cut out to September, according to CME Group calculations.

The article notes:

Stocks slumped after the report while Treasury yields spiked higher.

Shelter and energy costs drove the increase on the all-items index.

Energy rose 1.1% after climbing 2.3% in February, while shelter costs, which make up about one-third of the weighting in the CPI, were higher by 0.4% on the month and up 5.7% from a year ago. Expectations for shelter-related costs to decelerate through the year have been central to the Fed’s thesis that inflation will cool enough to allow for interest rate cuts.

Food prices increased just 0.1% on the month and were up 2.2% on a year-over-year basis. There were some big gains within the food category, however.

The measure for meat, fish, poultry and eggs climbed 0.9%, pushed by a 4.6% jump in egg prices. Butter fell 5% and cereal and bakery products declined by 0.9%. Food away from home increased 0.3%.

Elsewhere, used vehicle prices fell 1.1% and medical care services prices rose 0.6%.

The past three years or so have not been a good time for most Americans. Inflation has increased the cost of simply maintaining an average lifestyle. It will be interesting to see if inflation can be brought under control by November and if people will vote their pocketbooks.

Bidenomics And The Cost Of Buying A House

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Although President Biden has attempted to buy votes from younger voters with his student loan bailout programs, in the process he has created inflation and interest rates that put buying a home out of reach for the very people he has tried to bribe.

On Monday, Breitbart posted an article about what has happened to monthly mortgage payments under President Biden.

The article reports:

The average monthly mortgage payment in Joe Biden’s America has soared to $3,322, per analysis from the Wall Street Journal.

That $3,322 is nearly double the average monthly mortgage payment when His Fraudulency assumed office. When former President Trump left office, the average monthly mortgage payment was $1,787.

The article includes the following Twitter post:

The article notes:

Those obnoxiously high mortgage payments are not only due to the Bidenflation caused by His Fraudulency’s lunatic government spending. There are other factors…

For those of you who vote Democrat and are currently pissing away all your money on rent because you can’t afford a home, riddle me this: What happens to the housing market when a president throws open our southern border to millions and millions of illegal aliens who need a place to live? Think hard now… Could it be that when you have a finite amount of something people want and then flood the country with millions more people who want it…? Yes, that’s right, dummies, the cost of that Something People Want explodes and that Something People Want becomes scarcer. And now you want it and can’t get it because you’re a dummy.

The second factor is this… Democrats hate single-family homes. This is why they use Climate Change to justify blocking the construction of new homes. Democrats want us all packed in cities in massive government housing complexes. By the way, they make no secret of this.

The final factor is this… This is all by design, dummies. Democrats know lunatic government spending creates lunatic inflation and that lunatic inflation destroys purchasing power and creates high interest rates that make it impossible for the middle class to purchase a home. Democrats also know that when you flood a country already dealing with a housing crisis caused by enviro-lies with millions of illegals, housing costs explode.

If you are a young American just entering the workforce full time, do yourself a favor and vote every Democrat (and RINO Republican) out of office. That is the only way you can secure your financial future.

Bidenomics At Work

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Aside from what you are paying for groceries and gasoline, have you looked at mortgage rates and home sales right now?

On Monday, One America News reported the following:

Sales of new U.S. single-family homes fell more than expected in October, likely as higher mortgage rates reduced affordability, but the housing segment remains supported by a persistent shortage of previously owned properties on the market.

New home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month, the Commerce Department said on Monday. September’s sales pace was revised lower to 719,000 units from the previously reported 759,000 units.

Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would fall to a rate of 723,000 units.

New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 17.7% on a year-on-year basis in October.

The stock of previously owned houses on the market is nearly 50% below it’s pre-pandemic level, according to the National Association of Realtors, which last week reported that home resales plunged to more than a 13-year low in October. Most homeowners have mortgage rates under 3%, making many reluctant to sell, boosting demand for new construction.

According to The Mortgage Reports, the mortgage interest rate in 2021 was 2.96 percent. In 2022, it was 5.34 percent. The current mortgage rate, according to Nerd Wallet is about 7.5 percent. That is a significant increase. Interest rates were artificially kept low for a number of years. That was not sustainable. However, the rate of increase (the Federal Reserve’s attempt to curb inflation) has hurt real estate sales. At one point many years ago because of a job change, we were forced to take out a mortgage at 8.5 percent (giving up a mortgage of 4 percent). If you are sitting on a 3 or 4 percent mortgage right now, the last thing you want to do is move and take out a 7.5 percent mortgage. Bidenomics has hurt Americans across the board. We need a new President with a new approach to the economy.

The Numbers Are In

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CNBC is reporting today that nonfarm payrolls rose by 128,000 in October, exceeding the estimate of 75,000 from economists surveyed by Dow Jones.

The article notes:

There were big revisions of past numbers as well. August’s initial 168,000 payrolls addition was revised up to 219,000, while September’s jumped from 136,000 to 180,000.

The unemployment rate ticked slightly higher to 3.6% from 3.5%, still near the lowest in 50 years.

The pace of average hourly earnings picked up a bit, rising 0.1% to a year-over-year 3% gain.

The article also reports:

Central bank leaders have largely praised the state of the U.S. economy, particularly compared with its global peers. The Fed earlier this week lowered its benchmark interest rate a quarter point, the third such move this year, but Chairman Jerome Powell clearly indicated that this likely will be the last cut for some time unless conditions change significantly.

“The October jobs report is unambiguously positive for the US economic outlook,” said Citigroup economist Andrew Hollenhorst. “Above-consensus hiring in October, together with upward revisions to prior months, is consistent with our view that job growth, while clearly slower in 2019 than in 2018, will maintain a pace of 130-150K per month. Wage growth remaining at 3.0% should further support incomes and consumption-led growth.”

The economic policies of President Trump have resulted in significant economic growth for America. American workers at all levels are enjoying the benefits of these policies. The decision for the voters in 2020 will be whether or not they choose to continue this economic growth.

The Economy Continues To Move In A Positive Direction

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Ed Morrissey posted an article at Hot Air today about the latest economic numbers. As usual when a Republican is President, the ‘experts’ were surprised that the numbers were better than expected.

The article reports:

It’s not great news for the White House, but it could have been a lot worse. The US economy’s growth slowed to 2.1% in the second quarter, down a full point from Q1. However, with economists predicting a recession right around the corner, the growth is still substantial enough to look positive:

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the second quarter of 2019 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.1 percent.

The Bureau’s second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see “Source Data for the Advance Estimate” on page 2). The “second” estimate for the second quarter, based on more complete data, will be released on August 29, 2019.

The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment, exports, nonresidential fixed investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP in the second quarter reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending.

President Trump weighed in on Twitter:

The article at Hot Air concludes:

“Not bad” is a little bit of an understatement, actually. It’s pretty good, especially in the context of the global economy. That’s the bigger anchor, especially the trade disputes that at least for one quarter hit our exports hard.

The steady growth with low inflation should result in the Federal Reserve lowering interest rates in the near future.

A Positive Economic Picture

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CNS News is reporting today that the economy is doing better than predicted.

The article reports:

A record 157,005,000 people were employed in June, the most since February and the 19th record of Trump’s presidency, the Bureau of Labor Statistics reported on Friday.

And the economy added a strong 224,000 jobs in June, well above the estimate of 160,000.

The unemployment rate, the lowest in 50 years, ticked up a tenth of a point to 3.7 percent.

In June, the nation’s civilian noninstitutionalized population, consisting of all people age 16 or older who were not in the military or an institution, reached 259,037,000. Of those, 162,981,000 participated in the labor force by either holding a job or actively seeking one.

The 162,981,000 who participated in the labor force equaled 62.9 percent of the 259,037,000 civilian noninstitutionalized population. That’s up a tenth of a point from May’s 62.8 percent participation rate. The payroll taxes paid by people who participate in the labor force help support those who do not participate, so the higher this number, the better.

The participation rate reached a record high of 67.3 percent in early 2000; the highest it’s been under Trump is 63.2 percent.

In December 2016, the labor force participation rate was 62.7. It has moved between 62.7 and 63.1 since President Trump took office.

I love the fact that during a Republican administration, the estimates of jobs created is always low and economists are always surprised when the real numbers come out.

The article concludes:

And wages continue rising: In June, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $27.90, following a 9-cent gain in May. Over the past 12 months, average hourly earnings have increased by 3.1 percent.

Federal Reserve Chairman Jerome Powell, in a June 25 speech, said the economy has performed “reasonably well” so far this year, with continued growth and strong job creation keeping the unemployment rate near historic lows.

But Powell also mentioned “some ongoing cross-currents,” including trade uncertainty and incoming data about the strength of the global economy.

He said the Fed “will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion…” That could mean lower interest rates — or not, if the employment and job numbers remain strong.

Economic policies impact the economy. It matters who is occupying the White House. President Trump has proved that.

Trying To Drive A Stake Through The Establishment

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On March 22, President Trump nominated Stephen Moore to serve on the Board of the Federal Reserve. The establishment began their attack almost immediately. Why? Because Stephen Moore is a respected economist who will rock the boat of the establishment. He supports the economic policies of President Trump (which incidentally have been successful in reviving a struggling economy). The negative reports and personal attacks are all through the mainstream media–very little is being said about the accomplishments of Stephen Moore.

In December 2018, World Net Daily posted an article by Stephen Moore titled, “Fire the Fed.” Stephen Moore called on Chairman Powell to resign in wake of interest-rate hike.

In the article, Stephen Moore states:

In one of the most remarkable Abbott and Costello routines in modern times, the economic wizards at the Fed again raised interest rates on Tuesday. Their crackerjack logic for doing so is to steer America on a course toward recession so they have the tools in hand to end the recession they themselves created. Can anyone tell us who’s on first?

Worse, this Fed move doubles down on its blunderous interest rate rise in September. President Donald Trump turned out to be exactly right: The central bank pullback on money would slow growth and crush the stock market in order to combat nonexistent inflation.

…Since its peak on Oct. 3, which, not coincidentally, was right after Powell gave a speech suggesting that the Fed might be through tightening money, the Dow has fallen by more than 3,500 points. Market fears about his bad judgment have cut the value of all U.S. stocks by about $4.5 trillion, which is enough to buy 16,000 Boeing 787 Dreamliners.

The Fed economists use twisted logic that the economy is “strong enough” to absorb the rate hikes – which is simply an admission that their policy will slow growth.

Stephen Moore needs to be on the Board of the Federal Reserve. His presence might prevent the Federal Reserve from raising rates just before the 2020 election in order to cause a recession. Just as the Federal Reserve kept rates low during the Obama administration to give the appearance of a healthy economy, they may raise those rates in the coming year to give the impression that President Trump’s economic policies are not working. They need a watchdog.

Raising Interest Rates Is Not The Right Move

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Interest rates were kept artificially low during the Obama administration. This resulted in lower interest payments on the national debt, which increased from $7.27 trillion in 2009 when President Obama took office to $14 trillion at the end of fiscal 2016. The current national debt is $16 trillion. Increasing interest rates from 2.25 percent to 2.50 percent increases the amount of money all taxpayers will have to pay as interest on that debt.

Breitbart reported today:

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2‑1/2 percent,” the Federal Reserve announced. The Fed indicated the possibility of just two rate hikes in 2019.

The Dow Jones industrial average rose leading up to the announcement.

Predictions looked toward a likely rate hike ahead of the announcement and possible signaling to a slowing of potential future rate hikes. USA Today reported ahead of the announcement, “Most Wall Street pros expect the Fed, as it has signaled, to hike its key rate another quarter point to a range of 2.25 percent to 2.50 percent. This would be the fourth increase this year and ninth since late 2015.”

The Federal Reserve is not a government agency. They are supposed to be apolitical, but their actions in recent years bring that into question. Lower interest rates during the Obama administration kept the stock market high, paid dividends to those on Wall Street and any well-connected politicians. It provided the appearance of an okay economy despite decreases in the Workforce Participation Rate and the rapidly shrinking middle class. Since President Trump took office, the middle class is growing, and the Workforce Participation Rate is slowly climbing. This rate increase will increase the amount of money needed to pay interest on the national debt and will be a drag on the economy. I don’t mean to be cynical, but I believe that is by design. The Federal Reserve is part of the political establishment that does not want to see the economic success of President Trump’s economic policies. President Trump is not a member of the political establishment, and it will be more difficult to get rid of him in 2020 if the economy is growing. The rate hikes announced today will put a damper on economic growth. The question will be how much of a damper.

 

Don’t Get Too Excited At The Stock Market Numbers Today

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The Stock Market reached record levels today. Normally that would be cause for celebration, but if you look at the reasons behind the rise in the stock market, the news doesn’t look quite so good.

Yahoo Finance reported today that the federal government will continue putting stimulus money into the economy for the near future because the economy is not growing at a satisfactory rate.

The article reports:

The Fed predicted Wednesday that the economy will grow just 2 percent to 2.3 percent this year, down from its previous forecast in June of 2.3 percent to 2.6 percent growth.

Next year’s economic growth will be a barely healthy 3 percent, the Fed predicts.

Fed officials decided to continue their $85-billion-a-month bond purchase program, surprising most economists, who had expected a slight reduction. The bond purchases have been designed to keep long-term loan rates low to encourage spending.

So what has this got to do with the stock market? Financial people expected the Fed to begin to slow its bond purchases, which would have begun the rise of interest rates. Right now, with interest rates at record lows, and the possibility of inflation, the stock market is a logical place to invest. As the Fed begins to pull back from its bond purchases, the stock market will fall slightly, mortgage rates will increase, and we will probably begin to see some serious inflation.

The stock market is currently being propped up by the Fed. I have not heard any good guesses as to what will happen when the Fed begins to slow down the money flow.

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Behind The Scenes In The Student Loan Battle

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Today’s Wall Street Journal posted an editorial about the current debate over student loan interest rates.

Today the Senate voted on student-loan subsidies. The news just reported that an attempt to roll back the interest rate increase has failed a procedural hurdle. One proposal suggests that the interest rate on the loans be tied to the 10-year Treasury rate. The advantage of this idea is that the taxpayers do not have to guarantee the lower rate to borrowers while the cost of the loans to the government goes up.

The Congressional Budget Office recently estimated taxpayer losses on student loans to be $95 billion over the next ten years. Remember that the government takeover of student loans was part of ObamaCare. (see rightwinggranny.com)

The article in the Wall Street Journal reports:

Liberals apologize for the price hikes imposed by their friends in the faculty lounge by pretending that universities are starved for revenue. Rep. Frank Pallone (D., N.J.) claimed on MSNBC on Saturday that “the federal government is not making the investment in higher education.” Perhaps he’s forgotten that annual Pell grant spending of $34 billion has roughly doubled in the Obama era, or that Uncle Sugar now originates more than $100 billion in annual loans.

In October 2011, I wrote in rightwinggranny.com:

The article also points out that under the proposed changes, the government would be entirely responsible for college loans. Students would borrow directly from the government and pay the government back. What happens when students default? The taxpayers pick up the tab. Aside from the fact that the benefits to the students of this program are minuscule, we need less government in all aspects of our lives–not more.

In a New York Post article quoted in the above article, John Podhoretz wrote:

One federal study found that between 1982 and 2007, tuition costs rose 432 percent while family income rose only 147 percent.

As taxpayers, we are subsidizing inflationary spending on the part of higher education. There is no incentive to cut costs if you know that the money will keep pouring in and that the government will enable the students to afford the rising tuition. Until parents refuse to pay the rising tuition at some of the prestige schools, we will continue to have this problem.

The Harvard University website reports:

The complete budget at Harvard College (exclusive of transportation) for 2012-2013 is $57,950. Tuition – $37,576; Room and Board – $13,630; College Facilities Fees (for use of library and other University facilities including the Health Services) – $3,290; Minimum for extras (books, clothing, dues, recreation, etc.) – $3,454.

In some parts of America, you can buy a house for that amount.

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