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As long as the corporate interests are robbing the treasury the interest rates will remain low. And yet, I bet they are all wondering why the world is abandoning the dollar....
I think that the Fed will keep interest rates low for as long as possible, despite the weakness of the dollar. That will stimulate exports, help credit, and the banks, too. So I predict the Fed won't raise interest rates until 2011. Meantime, savers will suffer!
As soon as there's a hint of inflation beyond the norm, the Fed will act quickly.
Interest rates are killing those of us that saved modest amounts in CD's, other safe savings - now when we count on a decent return... the US has really screwed things up! Explain: "Petroleum stockpiles are at a high", yet "gasoline prices surge!" You need to be a multi-millonaire to sleep at night!
The Fed should be raising rates now, on a gradual basis to ~3% within 2 years and should make the 2 year commitment now. This would help slow down the "Mother of Carry Trades" spelled out by Nouriel Roubini.
The Fed will probably wait until inflation gets under way in late 2010 or so and then make sharp moves. The results will be to light new fires while trying to put out the fires of inflation.
Artificially low interest rates (a la Greenspan and housing) helped to get us into this mess, and today's rates are further distorting savings and long term housing rates so that another round of home loans will become toxic assets for lending insitutions when inflation takes off!
These low rates are like heroin... keeping us passive and superficially happy but setting us up for massive withdrawel pains.
I've written extensively about this on my blog.
The "government" isn't going to raise interest rates until we elect a new set of congressmen and senators who answer to the people and not wall street. The Goldman Sachs and Morgan Stanley's of the world get rich on the spread between cost of funds and returns on investment. They'll continue to feed on the carcass that was once the US economy until there is nothing left, leaving us with a bankrupt treasury and a gutted dollar, while they quietly move all their wealth to other countries and currencies. This is called globalization.
We can stop them only by government action. To get government action we have to flush the toilet that DC has become and regain what we should have had all along, a government responsible to the people rather than to the criminal Uber Rich.
Obama is not the problem, in fact, it is possible that given a legitimate legislative branch he might get something done. You can do it, simply vote out every non first term incumbant up for re-election. The House controls the budget and they are the most vulnerable to action by the electorate. Send a message, vote out all the crooks and the cronies bought and paid for by the crooked banks and corporations. We can start over in less than one year. Let's do it
I agree with ex-banker, we do need to vote out congress members who are not concerned about a) our freedoms and b) enslaving Americans (our grand children) to debt.
Well President Obama only has three options on the table. First, he and congress could let the economy balance naturally. This would throw the country into a great depression. The second option is for our leaders to devalue the dollar against all other currencies. The third option is to repeal Free Trade Agreements.
Consumers buy value. China and India export companies have the highest value potential, because of their cheap labor. Since, China and India exporters have a competitive advantage over US based businesses, the US based business lose money and cut jobs. This will continue to happen, until Chinese and US labor are the same cost. To reduce the cost of US labor the President can devalue our currency or see massive US unemployment. Even if you won't see your job outsourced, all companies compete for your dollar, so all companies are affected by Free Trade Agreements. The whole economy is tied to the value of a good compared to another goods' value. Therefore, Free Trade Agreements caused most of this economic recession and it won't get better without a global policy, US solution.