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Interest rates have been and still are near historical lows. I believe that in the 70's it was common for people to be paying double digit interest rates. It was an era known as "Stagflation" under Jimmy Carter.
Interest rates have been made so low as a means to stimulate the economy. Right now our economy is dependent upon massive debt and low rates of interest. Indeed, debt is encouraged via low rates of interest. Now that interest rates have been low for so long, people think that is normal, but its really abnormal. It just encourages more debt and ramps up housing prices and the like.
Here is the thing, though. Our economy would take a big economic hit or depression if the nation tried to normalize interest rates and debt. The economy is dependent upon those things. So expect a slowing of the economy by the end of the year.
This economic smoke and mirrors is eventually going to bring the whole system down if not stopped. Better to abolish the Fed and take the big economic hit now than to have $1 trillion buying a loaf of bread later on.
Of course, Wall Street, and others, don't like that idea of taking the hit now, and so keep wanting to kick the can as much as possible.
- Trump said he hated low interest rates, said it creates bubble.
- Trump is the one who replaced Janet Yellen, among his complaints of her is that she kept rates too low for too long.
- The guy who often criticizes his own staff openly never so much as said or tweet a word against the rate hike. None.
- We all know Trump only appoints loyalists who does his bidding. Aside from Jeff Session, no one has the balls to go against Trump; and Session only did it because law.
Shame it is only 2 more this year, they should have done 6 this year. Hopefully they do 6 next year. We need to get above 7% before the next recession or we will have nothing in our toolbox to fight it.
Keeping rates so low for so long is easily one of the worst policies of the Yellen era.
Hey, I'm stating clear out that high interest rates will benefit ME - that is, those with wealth and no debt.
My larger question is how it will affect lower wage workers......
AND
How it will affect the National Debt interest payments
and all the other stuff.
It seems like people are just glossing over that stuff. Maybe I care too much about the struggling people and the deficit. Sorry about that!
Example - if we have 21 Trillion of debt at an average of 2.5%, the yearly interest payments on the debt are about 530 Billion dollars, right?
But, looking forward even 3-4 years, if the debt is 25 Trillion (and the Trump admin says it will be - with over a trillion each year added)....and the rate is 4%, then that is about 1 Trillion per year in interest.
Follow me for a second here. The USA collects about 2.3 Trillion a year in personal income taxes. So this means in the near future we will be paying 40% of our Income taxes just to offset interest! We won't get anything for this payment (it's already been spent!).....
Am I wrong? My OP was simple - what does this do for the lower and lower-middle classes that are shouting MAGA. They don't care about a tax cut much because they hardly make it. They (and all Americans) have more debt than at any time in history....
Instead of talking about that it's "good", please explain where we are going to get the money to pay those interest payments.....
In terms of home mortgages...it's a fact that the calculations are simple. Higher payments = either less house one can afford and/or house prices declining...
This is NOT a take on the long run and whether interest rates should be 4% or 10%. Rather it is asking how the "common man" or "forgotten man" can pay 20-30% higher prices for gasoline and then vastly more for their debt....both personally as as a nation.
I'd love to have an answer which includes the actual reality of the 40-50% of Americans who live in this fashion....AND, also a comment on how we can get closer to paying down the debt given a higher interest environment....
Wow, I mean - if things are so great and so hot why aren't people getting hired for basic jobs starting at $25 an hour? That's the (inflation adjusted) wage I started at as a plain laborer in the South in 1974. ($5 plus CPI = $26.99)....
Maybe I am out of touch. Are unskilled laborers in TN making $26? Oh, BTW, we weren't able to buy a house or anything close at that wage back in 1974/1975.
Trump is guilty of a lot of things against the middle class, but raising interest rates isn't one of them.
Please read post above. It's not a question of guilty - but a question of how they are going to flourish in a high interest environment when wages have not increased...and when many fight against such (and some Trump policies do this...."right to work for less", etc.)....
I haven't even touched on the health care inflation - probably 3X regular inflation and accelerating.
How will the middle and lower-middle (and even lower) class prosper? Simple question.
Please read post above. It's not a question of guilty - but a question of how they are going to flourish in a high interest environment when wages have not increased...and when many fight against such (and some Trump policies do this...."right to work for less", etc.)....
I haven't even touched on the health care inflation - probably 3X regular inflation and accelerating.
How will the middle and lower-middle (and even lower) class prosper? Simple question.
I've asked this question for a long time and the only answer I get is "Russia"!
I wonder how this benefits low wage workers...in addition to paying 20% more for gasoline, they all are going to be paying more for all their (vast) debt. Mortgage. Even their employers will be paying more interest on all their debts and mortgages and capital equipment....meaning less for wages.
As it stand there is zero wage growth when inflation is figured in - and that is before these hikes.
What is the end game here? Those of us who are financially secure could care less...we welcome higher interest rates. But the vast majority of people, including the forgotten man Trump said would be working his arse off and back in the saddle...they are gonna be hurting....
MAGA. Or MBGA (Make Banks Great Again).
Presidents have no control over the Federal Reserve.
No doubt you're ignorant of the fact that President Carter was totally livid about about interest rate increases by the Federal Reserve, which reached 20% in March 1980. Although lowered to 8.5% during the Summer months, the rate increased to 12% in September.
The average rate during the Carter Administration was roughly 13%.
Carter still blames the Federal Reserve in part for his 1980 Election loss.
Quote:
Originally Posted by pknopp
This is a scam. We have decades to prepare for "summer driving season". Prices go up when there are shortages or unforseen circumstances. "Summer driving season" is neither.
"Summer driving season" is a shortage.
Many States require specially formulated gasoline from May to September. The Commonwealth of Kentucky does, but the State of Ohio does not.
In the industry, it's called "reformulated" gasoline, and it requires a different catalyst, among things.
Since gasoline production in the US is fixed and flat, meaning a maximum amount of gasoline can be produced and no more, and the only way to increase that is to build a new refinery, which takes an estimated 14-17 years.
Since the two forms of gasoline cannot be mixed, refinery owners shut down their refineries one at a time to make the conversion to produce reformulated gasoline.
That is the cause in the decrease of the Supply of Gasoline, and if Demand remains constant or increases, and it usually increases in Summer, prices rise.
Once enough reformulated gasoline is produced and stock-piled, which is usually by Summer's end, the refineries shut down and covert back to regular gasoline.
Note that reformulated gasoline costs more to produce.
California requires reformulated gasoline year-round, and there are several smaller older refineries dedicated to producing nothing but reformulated specifically for California. Those refineries can only refine about 30,000 to 90,000 barrels of oil per day.
That's one reason (but not the only reason) gasoline prices are always higher in California than the other States and Commonwealths.
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