Don't borrow - Earn, Save, Create!
3
You do realize that the deficit, since Trump took power, has already increased by 1 trillion dollars. From 20 trillion to 21 trillion in 12 months. This is bad...
8
You know that dt understands none of this. He just liked debt because he could walk away from it. We can’t.
Not even certain Mnuchin knows anything either as his one page analysis of the tax cut clearly showed his ineptitude.
9
It is difficult to imagine that interest rates won't rise in the current economic environment and the cost of goods will rise as well, due to both higher interest rates and Mr. Trump's tariffs.
Higher interest rates may be good for seniors like me, who have earned little on bonds and CDs in the past ten years, but for younger people buying first homes, cars, education and such, it will cost much more.
Mr. Trump shouldn't meddle in trade, where he clearly has little knowledge and less experience.
4
Anybody who thinks the Fed is going to continue to raise interest rates is dreaming. As soon as the stock market swoons from higher rates (since essentially zero rates are the fundamental reason it has skyrocketed), they will reverse course. Deficits don't matter because the Fed will just buy up all the treasury bonds with money printed out of thin air. What's not to like? The only people hurt are seniors who are looking for a decent return on safe US government debt. Who cares about them, anyway?
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Your comment shows a gross misunderstanding of the macroeconomic forces that dictate the Fed's QE and bond-buying programs. They're not beholden to markets, nor to political pressure. Its job is to protect the U.S. economy. Keeping interest rates low will lead to double-digit inflation (see 1970s-1980s). What's more, if the Fed maintains a massive balance sheet, it will be unable to adequately address the next recession--something about which Larry Summers has already expressed concern. The Fed has no choice but to raise rates, especially after the tax cut and federal spending increases.
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As others have said, this may slightly hurt folks who are borrowing, but it’s great for those who want to have a relatively safe way to earn a reasonable interest rate on savings. “The economy” is not only about what’s good for growth, but also what encourages good habits.
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I don't know anybody with a variable rate car loan, so "my" rates will NOT go up. This title is misleading.
3
"And, amid optimism about the economy’s prospects, more consumers and institutions are looking to borrow money themselves, rather than park their cash in safe havens like government bonds." Explain this quote please.
1
Imagine what could happen if we start a trade war with China who holds over $1T in US Treasuries.
They sell, interest rates rise, mortgage rates rise, house sales fall, scared consumers stop spending....
Now who would ever start that trade war???
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Please. 1 trillion is 5% of our debt. It is the Social Security trust fund that is holding the biggest IOU, about 4 trillion. Congress diverted the surplus to the general fund years ago to cover other govt expenditures (like the wars in Iraq and Afghanistan). And now they want to wipe out this debt and in the process steal from those of us who funded it for all our working lives.
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Good. Maybe people will not be so stupid about debt as they have been for the past 20 years. We can only hope.
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Actually, Mtnman, Americans were not stupid about debt for the past 20 years. After the great recession, Americans paid down huge amounts of debt and increased their savings. So what you are saying is untrue. Debt is rising, as American's prosperity has risen along side the economy...but your facts are not in order.
3
Interest rate are determined by a number of things including the supply of and demand for "money to be borrowed". The recent tax cuts will increase the borrowing of money by the government, but also increase the supply of available money in the pockets of rich people and corporations. So the tax cuts will give a bunch of money to the rich and they will purchase treasuries for that money, the same treasuries that is used to finance those tax cuts. There are many other factors that have a much bigger effect on interest rate levels.
3
Budget-constrained people won't have the money to lend the USG the additional financing it will need. That money will come from the business owners who are getting the tax cut.
Basically, the wealthy will get interest-bearing securities instead of tax receipts, but the same money will flow from the same point A to the same point B.
Income will be redistributed in favor of the wealthy by this change. Higher interest rates will be a symptom that you could use to diagnose the disease -- but it's visible enough that you don't have to resort to such sophisticated theory.
4
I have excellent credit and got a 2.6% interest rate from my bank recently. Maybe I'm an outlier, but 5% seems very high relative to what's out there.
"Could" end up ...
What are the odds.
2
If you give huge tax cuts to the rich and companies, then you either have to raise taxes on the middle class in the long run, or cut services. That is considered a feature, not a problem, by the Republican Party.
32
The assumption stated in this article on which all of its premises are based is plainly false, “The government has to borrow that money from somebody.” USD is a fiat currency, so the US government can simply print as much money as it needs to pay its military and US entitlements without having to borrow it from anybody.
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But, of course, you already know that fiat currency countries CAN'T print all the money they want without triggering inflation, and the US has already done this through "QE"'s and are pulling money back out at the moment, so . . .
10
There is little to no historical correlation between budget deficits and interest rates.
Nor is there any evidence that increased government borrowing "crowds out" private borrowing.
This article repeats widely believed yet empirically false statements.
6
There is something wrong in the credit market and incentives to save in this country and one small personal example is a perfect example. Last year I was considering to upgrade my car though the current one is in a very good shape. When I went to the dealer and negotiated an exchange he offered me a significant extra discount if I apply for a loan instead of paying from my bank balance. In any normal economy anyone who pays cash should get a discount not a penalty.
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I could have paid cash for the car I bought new last year. But when the bank offers a 0.9% loan, paying cash doesn't make any sense. Cash flow is good, and so is investing the cash in something that earns much more than the loan's interest cost.
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The dealer gets a cut of the interest paid on auto loans taken out through the dealership. The loan is sold to a lender and x interest rate is stripped off. It's not an arms-length transaction rather it's a source of profit not available on a cash purchase.
4
The dealer is getting a kick back from the
lender.
1
I am looking forward to higher interest rates. As a saver with access to cash, higher yields on money markets will be welcome . I have locked in my home mortgage rate (probably ending an era of historically low rates). Will we see 5+% interest rates for savings accounts as we did in the 90s? I hope so.
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