Author: Bill Still
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Good morning, I’m still reporting on the economy. Worldwide stock markets are down sharply this morning after Friday’s plunge in New York stocks. In London, the British FTSE – which stands for Financial Times Stock Exchange – plunged 1.5% in the first 5 minutes of trading this morning. According to one British online newspaper that’s a loss of one billion British pounds a minute. The situation in France and Germany is even worse, both markets are down 2% at this hour. However, markets are now relatively flat as the big money overseas waits to see if on the open @ 9:30am. New York will continue Friday’s 2% drop, or rally back. What’s this mini-panic all about? Sudden rumors that the Federal Reserve could raise interest rates at its Sept. meeting next week. A hike in America’s interest rates would mean higher borrowing cost worldwide. The Fed raised interest rates in December with little long-term effect. This broke an unprecedented 8-year decline in interest rates following the 2007 global crash. If interest rates are raised again, it comes at an interesting time in the U.S. political cycle as Wall Street has heavily supported Hillary Clinton and her expensive television ad campaign against her opponent, Donald Trump, but she continues to sink in the polls. Trump is the first candidate to self-fund his primary campaign and not take big donations from the Wall Street banks. Raising interest rates causes a contraction in the U.S. money supply – in other words, less money in the system. That means less money in your pocket. Why? Because higher interest rates mean there is less borrowing and since all our money is created by banks when they make loans, there is less money. If every American understood this one basic fact about the present-day American economy, we would be well down the road to fixing the inherent economic instability. For example, the result of an interest rate rise is that the already teetering U.S. GDP growth could easily tip back into recession - a recession which an incoming President Donald Trump would have to handle. However, the good news is that Trump is better prepared than any president since the creation of the Fed in 1913 to handle such an economic squeeze because he has acknowledged that he can order the Treasury to increase the amount of money in the system at any time to counter the Fed’s control over the quantity of money. Yes, Trump is the first President who may try to negotiate a better deal for the average American by breaking the Fed’s stranglehold over the nation’s economy. I’m still reporting from Washington. Good day. http://www.billstill.com/ https://youtu.be/g0jlOpAm8PE