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If the Fed Raise the Interest Rates, I’m One of the Americans Who Will Lose


#1

If the Fed Raise the Interest Rates, I’m One of the Americans Who Will Lose

Rod Adams

When I worked my way through college with a job at Chipotle, I often worked a so-called "clopen shift." I was closing the store I managed at 2 a.m. and returning to open the restaurant at 6 a.m. The work schedule didn't leave much time for sleep, let alone schoolwork. But with graduation around the corner, I figured that soon everything was going to change.

I would graduate, and I would get a job that would allow me to pay the bills, take care of my 8-year old daughter, and sleep at night.


#2

I'm sorry to tell you this Rod,

But your management degree is a bunch of useless untrue theory in the real world. That's not how the real world works at all. If you get hired in management at a Fortune 500 company, they will throw all your college theory out the window and instead, teach you how to become a corporate gangster, phucking over labor and packing your very own golden parachute.

And the job of a privately owned Central Bank like the Federal Reserve Bank is not to create full employment for the proles; it's only to make money for its elite shareholders.

And it does that just fine, by charging the people outrageous interest for the printing of their own money out of thin air.

I don't feel sorry for you at all, since, if you become successful, you will just turn into another Wall Street shark. De-regulated Capitalism does not work at all and Wall Street eats their own. This is what you really majored in: Smoke and Mirrors B.S. Cooking the Books and hiding the companies profits from the tax collector. And scouring the globe for slave labor which keeps Americans unemployed. This is the art of today's Wall Street Manager.

My advice? Go West, young man. Way West. To the third world where you can start over.


#3

I think the writer of this post is likely to be disappointed at the results if the Fed indeed leaves rates at zero, as I expect they will. Wall Street has been the main beneficiary of zero rates for years, as they've jacked up stocks, bonds, and real estate, while leaving the main street economy behind. Instead of a dramatic increase in the kind of good jobs he presumably wants to see, he's likely to find himself saddled with the same poor jobs, plus rent that is rising at double digit rates (see recent Harvard study), and other forms of inflation the Fed has managed to exclude from their "statistics", but which are very real.

I will admit that zero rates may have created some real jobs outside Wall Street in industries like fracking for oil, and among a wild profusion of tech startups in the latest Silicon Valley bubble. Of those, the frackers were stimulated by the ability to borrow cheaply, but the declining price of oil is shutting much of that down now. The tech startups are operating on similar cheap funding available to venture capitalists, but we saw all that before in the bubble in 1999, and it ended poorly. Furthermore, the longer the bubble runs (under zero rates), the worse the collapse is.

Instead of simply leaving rates at zero, the Fed needs to be completely restructured along lines suggested by Ellen Brown, so that its money flows are diverted into the real economy rather than speculative Wall Street gambling.

The idea that merely leaving rates at zero will save us is widespread, and almost certainly false, but it's a favorite line for mainstream media, due in part to neo-Keynesians like Paul Krugman. I hate to see Common Dreams buy into it ...


#4

They won't raise rates this week, they'll do it in December. Then the equity bubble will collapse. My opinion.


#6

When the markets collapse, the perps who are now looting and strangling the Real Economy to keep those bubbles bubbling -- are going to simply take the money and run. So there's no real need to worry about crashing the financial economy; that's built into the nature of these wealth-extraction schemes. They won't say when, but you won't cash in from it so it really doesn't matter to us, unless the Real Economy takes such a hit in the turbulence that someone in power feels forced to cut out the rackets and pay for a real jobs program, such as the WPA or the improved versions being suggested by the neweconomicalternatives folks. That, if it happened, might give you a real job, directly or indirectly, unlike the current subsidy-to-speculators interest-rate schemes.


#7

Let's look at the opposite side of the coin.

I am one of those who are hurt badly by near-zero interests rates. I was self-employed nearly all of my working life. As a result, I have no company pension plan or 401k plan to fund my retirement income needs.

That's all right. Throughout my entire working life I spent conservatively, saved and invested (in stocks, bonds and mutual funds) a good portion of my income. In other words, I played by the rules. When I retired in 2012, the interest rates at 1% and lower for investment grade bonds and certificates of deposit were not nearly enough to live on. That has not changed. To prove my point, consider the following example of capital saved and the guaranteed (not speculative) income it can generate:

  • $1,000,000 x 1% = $10,000 per year
  • $1,000,000 x 6.5%(*) = $65,000 per year

(*) The average annual rate of return I was earning on investment grade bonds prior to the financial collapse in 2008.

With no debt, I can live comfortably on $65,000 annually. I cannot live on $10,000 annually. (Note: I cannot collect Social Security for another 8 years.)

In 2012 I had to choose between one of the following two options:

  • Continue to work even though I had developed I health condition that prompted my retirement in the first place, or
  • Move out of the U.S. to a developing country where I could earn adequate guaranteed interest income so I could retire, as planned ... and needed.

I moved out of the U.S. to a developing country. I am currently earning an average of 7.8% interest on a guaranteed (not speculative) basis through numerous time deposits ranging from 6.25% to 9.5%.

What is the most outrageous point of all? I have to pay federal income tax to the U.S. on my earnings outside the U.S. -- even though I earned it outside the U.S. and I do not use any U.S. services or infrastructure.

So ...U.S. citizens who have saved and invested throughout their working lives and are now retiring are being hurt badly by near-zero interest rates.


#8

Blacks and Latinos left behind in the recovery? Yep, they are the only ones. Look around and stop whining, they aren't the only ones left behind. But maybe we can do something special, just for them.


#9

Im a financial guy, and I concur. All those retirees that lived on fixed investments have seen their actual returns (net inflation) drop to negative returns. Which means, according to the math, they will run out of money long before they stop needing money. sad.


#10

And the Federal Reserve will continue to THREATEN to increase interest rates as often as possible in order to get more home buyers to jump into the market "before interest rates rise" thereby stimulating the housing market.