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economy

USA Raises Interest Rates

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 Gaga Monster   Paws Up 12,681
Gaga Monster
2 hours ago, Economy said:

https://www.google.ca/amp/s/amp.usatoday.com/amp/946193001

 

Janet Yellen head of the US Central Bank announced a 0.25% increase in the benchmark rate from a range of 1.25% to 1.5%

 

This will likely increase mortgage rates in private banks, student and car loans and even the Governments debt interest on bonds

Why did they raise interest rates? The GDP is at 3% for Q2 + Q3, why would they want to discourage more growth? 

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Economy   Paws Up 6,683
Economy
4 minutes ago, Gaga Monster said:

Why did they raise interest rates? The GDP is at 3% for Q2 + Q3, why would they want to discourage more growth? 

The labor market the way it is and consistent growth will cause problems down the road if rates arent raised

 

in fact they forecast that they may raise it 3 times more in 2018

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jesse_batista

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Woolfsmck   Paws Up 715
Woolfsmck
1 hour ago, Gaga Monster said:

Why did they raise interest rates? The GDP is at 3% for Q2 + Q3, why would they want to discourage more growth? 

Has to do with available credit and currency... inflation is caused by too much availability and prices start bubble, a spiral too high.

Interest rate increase shows borrowing and reduces the chance of inflation.

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like a cat in a sil, I watch life, moving&still, proceed across my face, I leave no trace.My words give a clue,look inside to see whats true

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Woolfsmck   Paws Up 715
Woolfsmck
1 hour ago, Economy said:

The labor market the way it is and consistent growth will cause problems down the road if rates arent raised

 

in fact they forecast that they may raise it 3 times more in 2018

Good news for me ..

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like a cat in a sil, I watch life, moving&still, proceed across my face, I leave no trace.My words give a clue,look inside to see whats true

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Economy   Paws Up 6,683
Economy
27 minutes ago, Woolfsmck said:

Good news for me ..

Truck driving benefits from higher rates????

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jesse_batista

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Woolfsmck   Paws Up 715
Woolfsmck

Retirement and savings earn more

like a cat in a sil, I watch life, moving&still, proceed across my face, I leave no trace.My words give a clue,look inside to see whats true

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Economy   Paws Up 6,683
Economy
9 minutes ago, Woolfsmck said:

Retirement and savings earn more

Oh true true

 

I got bervous with stock valuations so i reduced equity holdings on my portfolio to 30% and fixed income (bonds) to 70% in case of a crash

 

But now im making petty 4% to 5% annual gains on fixed income :neyde: 

 

On top of that my bank always tries to sell me bond funds they put together for you which only invest in their sector funds but charge 2% which would wipe out half my gains

 

f*ck them :fthis:

jesse_batista

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FABian   Paws Up 270
FABian
On 15/12/2017 at 1:21 PM, Woolfsmck said:

Has to do with available credit and currency... inflation is caused by too much availability and prices start bubble, a spiral too high.

Interest rate increase shows borrowing and reduces the chance of inflation.

I don't think you can reduce the chance of inflation. Maybe you can reduce inflation rates, but there will always be inflation as long as fiat is being printed daily...

If we really could reduce the 'chance' of inflation, prices wouldn't be going up every year...

Idk obv I could be wrong, just my though...

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Economy   Paws Up 6,683
Economy
2 hours ago, FABian said:

I don't think you can reduce the chance of inflation. Maybe you can reduce inflation rates, but there will always be inflation as long as fiat is being printed daily...

If we really could reduce the 'chance' of inflation, prices wouldn't be going up every year...

Idk obv I could be wrong, just my though...

They target inflation around 2%

 

Higher interest rates reduce credit creation and in turn more currency going into system

 

also higher rates reduce borrowing and therefore demand which slows economic growth

 

When economy gets stronger rates have to go up with it or else you gey imbalances and the economy overheats

 

An over-heating economy means its not growing sustainably, or that the labor force and industrial and economic capacity cannot absorb the growth rate

 

If demand ecceds capacity, you get higher prices without the economic benefit

 

Basically, its not just the more growth the better. Growth has to be balanced and sustainable

 

what happens when economy gets stronger is without higher rates people get too confident and borrow too much, get in debt, and you get too much inflation as well

 

In 2002 to 2005 they took too long to raise rates when economy recovered from .com bubble and as a result those imbalances were partially to blame for the 2008 crash

 

Many argue even right now they are taking too long

Edited by Economy
jesse_batista

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Woolfsmck   Paws Up 715
Woolfsmck

@Fabian  & @economy 

You probably already know , but growth and inflation are different aspects of the economy.

Growth is more people involved in production and consumption

Inflation just means that the same products cost more , not necessarily more demand or production. 

Hence, by increasing the cost of borrowing, as Economy pointed out,  oversupply of available purchasing power is limited ... 

The cost of the national debt is balanced by the increased revenue from bond sales and loan revenue.  

Really, to me, gov. spending needs to be held in check to balance the books more than any other way... but politicians love to spend other peoples money (tax payers)...

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like a cat in a sil, I watch life, moving&still, proceed across my face, I leave no trace.My words give a clue,look inside to see whats true

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Economy   Paws Up 6,683
Economy
23 minutes ago, Woolfsmck said:

@Fabian  & @economy 

You probably already know , but growth and inflation are different aspects of the economy.

Growth is more people involved in production and consumption

Inflation just means that the same products cost more , not necessarily more demand or production.

Hence, by increasing the cost of borrowing, as Economy pointed out,  oversupply of available purchasing power is limited ... 

The cost of the national debt is balanced by the increased revenue from bond sales and loan revenue.  

Really, to me, gov. spending needs to be held in check to balance the books more than any other way... but politicians love to spend other peoples money (tax payers)...

Right. But the two tend to go hand in hand

 

One symptom of an economy over-heating would be if demand for producs and services increased at a faster rate than companies can hire new workers, buy new machinery and expand their capacity to accomodate higher demand

 

The result is higher prices, a draining of peoples finances without having enough time for the benefits of more jobs and increased capacity to be enabled and ripple thru economy

 

Growth is good, but if the economy cannot absorb a rate above a certain rate without creatinf distortions, then the econoym is over-heating and growth needs to slow... higher rates do just that

 

How much growth causes overheating also depends on point if business cycle. Right after a recession when theres a lot of slack in labor market and eccess productive capacity... Even 4% growth for a couple of years may not cause over-heating

 

If economy is at full employment with no spare productive capacity... Even 2.5% to 3% growth can cause over-heating unless productivity also increases with it

jesse_batista

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Stan Is My Name   Paws Up 443
Stan Is My Name

Great, increase student loans that's just what I needed. :nails:

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Economy   Paws Up 6,683
Economy
On 2017-12-18 at 12:54 PM, Stan Is My Name said:

Great, increase student loans that's just what I needed. :nails:

Is urs fixed tho or variable?

jesse_batista

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scallywally   Paws Up 334
scallywally

The US just took out succh a huge 'credit card debt' to get something passed before the end of the year.

Everybody knows debt comes back to bite you in the ass even though its fun to spend it at the start. Trump is doing wat he as always done, live on debt that he cant affford and hes often gone bust. Hes now gamblinig and medling with the lovely american publics livelyhoods. His past record shows he isnt very good at it. So scary!!! 

Nobody should be excited for the short term break. The interest rates will be an interesting thing to keep an eye on. So will the workers that usually get their bonus in tax free store cards which have been banned. 

Edited by scallywally

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