In the last few weeks and months, the Federal Reserve has raised interest rates incrementally despite the better judgment of many U.S. entrepreneurs.
The strangest anomaly to this governmental economic interference is the fact that the Fed actually has artificially increased inflation.
The Fed has increased the cost of housing, the cost of investing, and the cost of tuition by hiking rates.
Raising rates has boosted the price of food and drink and lifted the cost of your cell phone and data use. Higher rates have increased your automobile-loan payments, increased the cost of gasoline getting to market and raised the cost of fuel and heating oil.
The Fed's rate hikes also have increased the cost of borrowing money to fund domestic and global economic activity of U.S. companies.
It is time for President Donald Trump and his administration to change the rules of the game. If the Fed is going to artificially boost inflation in the United States, then Mr. Trump needs to take executive action that would create access to money for working families and those who make this country actually function on a daily basis.
Trump must provide relief to those who actually produce taxable income and small U.S. businesses, which are the heart of Main Street’s economic activity.
The way that Trump could stimulate the economy in spite of the Fed is to create lower interest rates for student loans, to create lower interest rates for 30-year loans on housing for first-time home buyers, or those who need to refinance a home loan and meet certain conditions.
Trump can create ways to lower interest rates on those who need to buy an automobile for work, so they can go to a job and produce income for the government to tax. The nasty truth is that higher lending rates from the Fed is like adding a discriminatory tariff or tax on U.S. citizens.
Overall, the Trump administration needs to take action to create less inflation on the movement of money, the movement of people, and the movement of products and services.
Unfortunately, the Fed’s unwise acts of raising rates has increased the prices on products, services, the movement of money, and the movement of people, which, in fact, makes this country less productive and gets people laid off from jobs.
There could be ways that the SBA and other governmental agencies could make more lending available for those who want to invest in the U.S.
Because the U.S. competes against over 180 nations worldwide, raising rates above what other countries are charging puts U.S. workers at a disadvantage.
Many of the other nations artificially control their currency value, stimulate the movement of money to their domestic companies, and artificially print free money for their people to borrow to stimulate the sale of products and services that they export.
Thus, the Fed creates an unfair playing field for the United States and unfortunately, the Fed has contributed to stock market uncertainty. Further, when the Fed raises rates, dividend yielding companies have less money to pay out to shareholders which hurts fixed income dependent retirees and recipients.
The reality of the situation is this: We’re living in a new paradigm. This is not 1998 or 1999, when rates went up to slow the internet boom during the Clinton administration where eventually we had the worst stock crash in recent history.
Similarly, every time the Fed raises rates, the cost of interest on our debt and the cost of running the U.S. government goes up dramatically thus reducing available money to spend on infrastructure and salaries of government employees.
High interest rates can create a crash because it slows down borrowing and the movement of money, and it slows down investment.
The reality is there are more than 40 million people with student loans. There are millions of people with margin investment loans and millions of people with small business loans.
There are millions of working families with credit card debt and raising interest rates is not going to help any of these people. Sadly, the raising of interest rates on working families will evaporate the disposable income of the average American taxpayer.
So, with higher interest rates and the higher cost of fuel at this point in time, the Fed had created a situation where the market can go into hibernation and just stay where it is for the next few years. The worst case is that rates could go up more and there could be a massive correction.
If the U.S. is not careful, other countries around the world can lend at lower rates than the U.S. and continue to stimulate their economies through smart lending and smart exporting. Thus, all other smart countries can have growing economies while the U.S. goes back into the stagnation of the prior administration.
Remember, the U.S. doesn’t need to have the greatest fiscal policy; however, the U.S. simply needs to have smarter and more agile policy than global rivals.
George Mentz JD MBA CWM Chartered Wealth Manager ® is a licensed attorney and CEO of GAFM ® global education, which is an ISO 29990 Certified professional development company operating in over 50 nations. Mentz is an award winning author and advisory board member to several companies around the world in education, charities, and crypto currency.
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