The Federal Reserve could raise interest rates, but what would it cost? Would you believe that every quarter of a percent increase will increase our borrowing by $50 billion per year? That’s right, because we operate at a deficit, any new interest on government debt goes straight to the bottom line of the national deficit. And then it compounds, because we borrow the money to pay the interest on the $50 billion, etc. making compound interest our enemy.
Weak global economic growth, and a stronger US dollar are not prescriptions for stronger employment or stronger exports. So why is the Federal Reserve hinting at a raise in rates? Is it because that is what they are “supposed to do?”
I hope the Fed looks beyond our borders at the economies of the world and notes the trend toward decreasing rates due to recession or rumors of recession. The US employment rate is deceptively low until you look at total wages paid to the 95% of Americans who have jobs now. Underemployment after years of unemployment, and the elimination of health insurance as a benefit, are not signs of a return to prosperity. The effective un(der) employment rate is more like 20% compared to pre-recession levels. I believe that the rise of populism on both ends of the political spectrum (Trump and Sanders) is a telling indication of the pain and anger felt by all persuasions. We need to listen to the truth: millions of citizens have not come close to getting better financially.
I say re-sheath that “sword of Damocles” until we are better healed from a decade of financial wounds.