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The Fed is aggressively raising interest rates, although inflation is contained, private debt is already at 150% of GDP, and rising variable rates could push borrowers into insolvency.
So what is driving the Fed’s push to “tighten”? On March 31st the Federal Reserve raised its benchmark interest rate for the sixth time in 3 years and signaled its intention to raise rates twice more in 2018, aiming for a fed funds target of 3.5% by 2020. LIBOR (the London Interbank Offered Rate) has risen even faster than the fed funds rate, up to 2.3% from just 0.3% 2-1/2 years ago. LIBOR is set in London by private agreement of the biggest banks, and the interest on $3.5 trillion globally is linked to it, including $1.2 trillion in consumer mortgages.
If the Fed follows through with its plans, projections are that by 2027, US taxpayers will owe $1 trillion annually just in interest on the federal debt.
That is enough to fund President Trump’s original trillion dollar infrastructure plan every year. And it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds.
Where will this money come from? Even crippling taxes, wholesale privatization of public assets, and elimination of social services will not cover the bill.
“Faith-Based” Monetary Policy
... In setting interest rates, the Fed relies on a policy tool called the “Phillips curve,” which allegedly shows that as the economy nears full employment, prices rise.
The presumption is that workers with good job prospects will demand higher wages, driving prices up. But the Phillips curve has proven virtually useless in predicting inflation, according to the Fed’s own data.
Former Fed Chairman Janet Yellen has admitted that the data fails to support the thesis, and so has Fed Governor Lael Brainard. Minneapolis Fed President Neel Kashkari calls the continued reliance on the Phillips curve “faith-based” monetary policy. But the Federal Open Market Committee (FOMC), which sets monetary policy, is undeterred.
originally posted by: hopenotfeariswhatweneed
a reply to: Ameilia
Pensions they have promised? People pay into their pension funds through their careers in the U. S don't they?
California’s public employee pension systems have immense gaps – called “unfunded liabilities” – between what they have in assets and what they will need to meet their obligations to retirees. The California Public Employees Retirement System, the nation’s largest pension trust fund, and other state and local systems are desperately trying to close those shortfalls
originally posted by: hopenotfeariswhatweneed
a reply to: Ameilia
Heads need to roll for that kind of ineptitude.
Reminds me of the statement that drug dealers and prostitutes are more trustworthy than elected officials.
originally posted by: Ameilia
originally posted by: hopenotfeariswhatweneed
a reply to: Ameilia
Heads need to roll for that kind of ineptitude.
Reminds me of the statement that drug dealers and prostitutes are more trustworthy than elected officials.
Yeah. You read in history books about people being dragged out of their homes and strung up in the streets. I worry about it happening again. Not enough people are aware of the terrible state of pensions in the US and how terribly underfunded they are. Not enough people see this coming. They just think there will be a solution made, if they even see the problem to begin with.
There are going to be two groups of very angry people: the ones who are supposed to be getting a pension which is either cancelled or they end up with less than they were promised, and the ones who are currently employed and paying into the pension funds who are going to be told they need to contribute even more to this failing plan to pay off the current pensioners.
Then what happens?
originally posted by: rickymouse
They put the rate down and now people are more in debt than they ever have been. Sure, the stock market rose up, but that is just money on paper, you have to cash it in and get the money before it is real money. Pay off your debt and you will not have to worry what the interest rates are.
originally posted by: Ameilia
a reply to: FyreByrd
Interest rates have got to go up to sustain/save the failing pensions across the US. And for everyone not in the US, who has debts in US dollars, they are going to get killed by us. Our rates should have gone up long ago, but international pressure was put, and the rates were kept too low. But now they must rise. And it is going to suck for a lot of people. I personally think it is too late to save all the pensions that have been promised, especially in California. The rates were too low for too long and the pension funds were not managed correctly. Hold onto your butts.
In 2006, the United States Congress passed the Postal Accountability and Enhancement Act of 2006 (PAEA).
This bill required that the USPS prefund its future health care benefit payments to retirees for the next 75 years in an astonishing ten-year time span.
Under the PAEA, USPS is required to make $103.7 billion in payments by 2016 to a fund that will pay for future health benefits of retirees of the next 75 years. This health benefit prefunding mandate covers not only current employees that will retire in the future, but employees yet to be hired who will eventually retire.
On top of this, none of the money that the USPS contributes to this fund can be used to pay for current retiree health benefits. So the USPS must make payments for current retirees’ health benefits in addition to its required health benefit prepayments for future retirees.
This is something that no other government or private corporation is required to do and is an incredibly unreasonable burden.
What if your credit card company told you: “You will charge a million dollars on your credit card during your life; please enclose the million dollars in your next bill payment. It’s the responsible thing to do.” Doesn’t seem quite right, does it?
Well, that’s what the U.S. Postal Service’s requirement to prefund its long-term pension and healthcare liabilities is like. The Postal Service is required to pay the full estimate of its liabilities, currently estimated at nearly $404 billion, even as that estimate moves around and is based on assumptions that are highly uncertain and can frequently change over the life of the liability.
originally posted by: Phage
a reply to: FyreByrd
It's helping me. A bit. My 4% mortgage will continue to help me no matter what the fed does.
Did you think that your credit line had a fixed rate or did you select a variable rate because it was cheaper, at the time. Did you think that variable means it would stay the same?
Sounds like you may have made the same mistake as those who took out adjustable rate, interest only mortgages.
Great Minds Discuss Ideas; Average Minds Discuss Events; Small Minds Discuss People
Raising the basic rates will raise the prices of everything we use, it will effect the cost of any government service as the government relies on money borrowed from PRIVATE BANKS to provide those services.