Not shocking at all but the fed decided not to raise interest rates last week. I think this happened for several reasons.
First off, the fed would loose a tremendous amount of money if interest rates go up. Over the last few years they’ve purchased trillions of dollars in bonds and as we know when rates go up, the value of those bond will go down. Instantly the Fed’s massive bond holdings will decrease in value.
Another reason I believe rates are staying where they are is because our country is obsessed with debt. This isn’t anything new, it’s been going on for decades. From governments to business to consumers, our country is sitting on a massive pile of debt. The government believes that low rates will stimulate the economy by making debt easier to obtain. My belief is that easy access to debt creates recessions.
Debt creates artificial bubbles all over the economy that are just waiting to burst. As a nation we can’t keep living on debt. We have to stop believing low rates will fix the economy and finally raise rates. Saving money needs to become the priority. We need to encourage that and no longer keep rates low for the sake of “stimulating” the economy.
Right now we’re in unprecedented territory. The fed has never manipulated the economy like they have over the last eight years and the cost of this manipulation is an uncertain short term future. Other countries like Japan and some in Europe are experimenting with negative interest rates. This is madness. What we need is a balanced budget, not greater availability to debt.
A lot of low interest rate proponents say raising rates could cause a domino effect in the economy throwing us into another recession. This could happen but I believe the long term effects of doing nothing would be far worse. The long term is more important than the short term.