It is a question of exercise. As in Janet's exercise. AKA Yellen - the 69 year old, Chairwoman of the US Federal Reserve System or FED. More specifically it is a question of Janet exercising her right to hike the short term interest rate that the FED charges its member banks.
Today it is at Zero.
Janet is in a quandary. On the one hand American banks are also offering Zero interest for monies held in savings accounts because they in turn are not making money lending your cash to anyone. This affects the income retired savers depend on. They need the cash and the risk free returns to burn on their Lipitor, Fixodent and the occasional indulgence in a Jim Beam or Jack. No interest savings ain't going to help. They may lose interest in savings. That would be bad.
But rising rates will cause other things to likely go out of whack she worries. On the one hand it will make the US currency stronger against basket of global currencies thereby making for US exports to other nations to be non competitive and reduce travel dollars from coming in. It will in turn be good for US imports and for the locals to step out of Ohio and visit Oslo.
Lower exports will hurt large American companies that sell a lot of their wares abroad - from planes to trains to farm equipment and post-it notes. Not to mention all the technoware that people seem to want more and more than quality time with their spouse. With a strong dollar they may want but shall not receive (or afford) and that may be trouble for quarterly results and share prices for these companies. Perception of less paper wealth stateside will drive down economic activity. As 65% of the US economy is driven by the consumer we will be on the precipice of a deflationary environment.
A higher interest rate environment she worries might also make borrowing difficult for some who now cannot afford a car or home loan since most American's live from paycheck to paycheck and a higher interest rate payment throws their household budget out of whack. This could also slow down the nascent recovery (as the IMF calls the growth experienced by the USA) and lead us on the road to another recession.
All this hiking dilemma is deflating Janet and giving the various markets the heebi jeebies, I think this itchy trigger finger needs to just boot up and hike. A measly 25 basis point hike is not going to end the world and would at least quell the moronic debates on all the news channels. I am sure Janet will also get a good night's sleep. Someone tell her - hiking is good for you.
Today it is at Zero.
Janet is in a quandary. On the one hand American banks are also offering Zero interest for monies held in savings accounts because they in turn are not making money lending your cash to anyone. This affects the income retired savers depend on. They need the cash and the risk free returns to burn on their Lipitor, Fixodent and the occasional indulgence in a Jim Beam or Jack. No interest savings ain't going to help. They may lose interest in savings. That would be bad.
But rising rates will cause other things to likely go out of whack she worries. On the one hand it will make the US currency stronger against basket of global currencies thereby making for US exports to other nations to be non competitive and reduce travel dollars from coming in. It will in turn be good for US imports and for the locals to step out of Ohio and visit Oslo.
Lower exports will hurt large American companies that sell a lot of their wares abroad - from planes to trains to farm equipment and post-it notes. Not to mention all the technoware that people seem to want more and more than quality time with their spouse. With a strong dollar they may want but shall not receive (or afford) and that may be trouble for quarterly results and share prices for these companies. Perception of less paper wealth stateside will drive down economic activity. As 65% of the US economy is driven by the consumer we will be on the precipice of a deflationary environment.
A higher interest rate environment she worries might also make borrowing difficult for some who now cannot afford a car or home loan since most American's live from paycheck to paycheck and a higher interest rate payment throws their household budget out of whack. This could also slow down the nascent recovery (as the IMF calls the growth experienced by the USA) and lead us on the road to another recession.
All this hiking dilemma is deflating Janet and giving the various markets the heebi jeebies, I think this itchy trigger finger needs to just boot up and hike. A measly 25 basis point hike is not going to end the world and would at least quell the moronic debates on all the news channels. I am sure Janet will also get a good night's sleep. Someone tell her - hiking is good for you.
all the experts can take a hike, or Janet can.
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