A very difficult situation. We need to climb out of ZIRP (Zero Interest Rate Program) yet at the same time the real unemployment rate is 23% and real inflation is 8-11% (housing is up at 11% a year)
What to do ?
They should be climbing out of ZIRP, but this is too fast. Half this rate would be better. Climb out at 0.5 a year not 1.0 a year. Its too fast and people need time to adapt especially at the beginning.
This is very dangerous as we are on the precipice of depression
Trump hasn’t had time to get any of his policies going. They should hold all rate movement for a Year for trump to get his policies in place. And trump is struggling getting anything at all done, no repeal of the H-1B visa genocide for american engineers, no new trade deals, no new cash available for entrepreneurs as banks continue not loaning to startups.
Getting Glass-Steagall restored is the single most important thing Trump can do, and Mnuchen the munchkin wont do it. Why is it important? Because banks need to flow dollars to projects, entrepreneurs, and building America. Instead they just play in the derivitives market and America withers and dies.
Unemployment is unchanged at 23% now for twice as long as the great depression:
The truth is we have been in something much more severe and long lasting than the great depression for the past 16 years and we are still in it. Peak unemployment in the GD (minus the CC corps) was 19%. And that only was for 3 years. Ours is 23% for 11 years. So are we not in something far worse than the great depression at this moment? So why are rates going up? Because we must break free of ZIRP. Doing so, will allow savers to raise capital and grow money again. Unfortunately, there are bigger issues which much be addressed BEFORE we can being this rise.
No, Yellen should not have raised again. You do not raise rates in a great depression. You lower them. Check out the book link to the right to check out ZIRP Zombies, the definitive work on how ZIRP destroys nations. But, climbing out of zirp should be very slow, measured, not a speed rally. The time to get off the CRACK is longer than you think. Also, we now pay 10% of our budget to interest on our 20T debt. So what happens when interest rates triple? Will we really pay ONE THIRD of our budget to debt interest? How the heck is that supposed to work.
Trump needs to:
1) Get the budget to BALANCED
2) ESTABLISH running balanced budgets as principle. Maybe even make it criminal to do otherwise or require 2/3rds votes from both house and senate to pass a unbalanced budget!
3) Add a border import SECURITY TAX of 10% on all goods. You wanna play with the largest buying block in the world? Pay up buddies. And EVERY PENNY of that goes directly to paying down the debt.
Better yet, push all of this out as one bill. Who could stand against it except a Democrat? Because it threatens their “there is no border” “free welfare and goodies for all even ethiopians and somalians”. This Liberal psychotic view of America is madness and has driven our debt to 100% of GDP. Like Gandolf in Lord of the rings “NONE SHALL PASS” we cannot pass that line of debt. Yet we will. And our society will explode. Because when you get to the GREEK level of debt there is no way back without blowing up your currency, which as the USD is the worlds reserve currency, that could very well be an extinction event for the world.
At the end of the day, Yellen is playing with a house of cards. This has to stop. She needs to be replaced. And the rate cute REVERSED. Trump should put out a chart where we raise 0.25 to 0.5 a year for the next 10 years until we return to normal rates. It needs to be a decade long process because there is so much that has to re-adjust, especially at the beginning. With so much unemployment, for example, people cannot refinance out of high interest mortgages. We need the employment to come back before we raise up the interest rates. It is the right play to get us out of ZIRP (Zero Interest Rate Program) but it has to be done cautiously. And it needs to start out very slow, very gradual, or our frog will get boiled and as we are already headed over the cliff, Trump hoping we can hit the super thrusters at the last minute and take off into the sky, Think of Yellen as Dastardly Dan
tying a giant boulder to our ship. It’s the wrong action at the wrong time. Let’s see the GDP get back to 3.5-4% growth, which might be real not negative cooked books growth numbers and indicate that we have finally climbed out of the depression we are currently in and have been in for the past 16 years.