This is a good thing. Low interest rates mean that business can borrow money for expansion cheaper. It means that people can build bigger houses with the same amount of money, it means more people can buy new cars, new frigs and other credit-worthy items. The only reason the federal reserve would raise interest rates is because of inflation, and there have been a lot of indicators recently that inflation may show up later this year.. things like the high consumer confidence levels as well as decent unemployement numbers. But oil.. oil saves us. Today, again oil dropped almost 10%. Oil is a big part of the economy, and trickles itself into almost every aspect of the US economy, from food to housing. When oil is low, it allows businesses to keep their prices the same, but make a bigger profit. If their prices are the same, that means no inflation. We will see, but if the price of oil doesn´t rebound rapidly, I think the fed can safely keep interest rates where they are for the rest of the year.
I think oil has bottomed because the one stock I own, Seadrill, (which has lost about 75% since its highs about 6 months ago), also seems to have bottomed an its price is staying low around $10 per share. I recently added to this position in hopes that oil will eventually recover and surpass the 70-80 dollar a barrel mark. As an investor I would benefit from an oil recovery.
You're obviously not an economist. 7 years of zero interest rates is not in any way normal or good. Neither is 19 trillion in debt, $100 trillion in unfunded liabilities, 7 years of flat or declining wages, debt to GDP well over 100%, 66% of govt spending on entitlements, and a labor participation rate barely over 60%. $40 or lower a barrel oil is not such a good thing overall these days either. And it's very undesirable in my neck of the woods, where so many people make their livings in the oil and related industries. I don't know when the bubble will pop nor how bad it will be - it may be many years. I just hope it won't be too bad.
You can´t just say I am a bad economist and then say ´7 years of low interest is bad´... and not give a reason why it is bad. I gave a reason why it is good. It is good because it allows companies to borrow money at low interest rates to grow their business. If a company is trying to decide if they should open a new factory, the interest they have to pay on that loan is certainly a deciding factor. Low interest rates allow many more companies to expand that otherwise might not have. The same is true of homebuilding.. low interest rates allow more people to build houses.. but ´I say it is bad because it is a Democrate in office´.. Do we all forget how crappy the economy was in 2007 and 2008? Last time I checked the stock market is hitting all time highs and we have been on a good 8 year run. People have been crying about the debt since Reagan was in office. Where is your post complaining about Bush2 taking us from budget surpluses we had under Clinton, to deficits again or Reagan running up huge deficits? The debt, as a percentage of GDP has not moved upward in years. Of course the absolute debt number has increased significantly, because the economy is drastically larger than it ever was. If a person has to pay $500 per month on a loan, and they only earn $2000, that is a significant thing. Compare that to a person who has to pay $1000 per month on a loan, but earns $20,000 per month. Omg... the sky is falling, right? The second person is paying DOUBLE what the first person is paying. This is the problem with Foxnewsy people.. you take whatever number can show ´shock value´ and use it, even out of context. There is no reason to ever talk about the ´debt´.. you should only ever talk about the debt/GDP ratio... because that is all that matters. And yeah, I can imagine $50 oil is not good for Texas, fortunately I am from the USA. Isn´t that what we tell factory workers who lose their jobs because of changes in the marketplace? Get an education, adapt, overcome... deal with the new reality. Russian, Nigeria, Venezuela are overproducing, the USA has mostly become energy independent and has oil production sidelined waiting to crush any bounce in prices. Saudi Arabia can no longer control other OPEC members. China´s growth is slowing. Too much production and even more waiting for slightly higher prices...welcome to the new world.
Pete, you're the one always making this political. I put up links and you don't even watch or read them, you just rail on about my political views, which have nothing to do with interest rates set by the Fed, and usually nothing to do with the links I post. I'm not talking about a particular party or politician. We've been borrowing and spending too much for at least a dozen years now. It's not just under this admin, although I think Obama is even worse than Bush was in many ways. Both are / will be bad for the country overall. But if we can at least agree that we've had this problem the last 12-15 years, then that's enough about politics... If you cannot understand why all of this debt, high debt to GDP, low labor participation, low industrial production, shrinking wages, more businesses closing than starting up, etc is bad, I don't have the time nor inclination to give you a comprehensive economics education - I'd suggest you read a good book or 2 from the library. But I'll give you an idea - stock and bond market bubbles, devaluing currencies, eventual stagflation / hyperinflation, etc. Do you understand that rates have never been kept down like this for this length of time, and that if things were so great, the Fed would not have done this? If you cannot wrap your head around the fact that keeping rates at zero for 7 years, spending more and more on entitlements and an ever-growing government, and borrowing, printing, and pumping unprecedented amounts of money for years are not good things in the long term for the overall health of the economy, markets, and the country and world overall, I don't know what else to tell you. I guess you're just not a "big picture" guy. I'd suggest you try to think beyond your next month's account statement and start thinking more longterm. http://www.cnbc.com/2015/05/13/greenspan-get-ready-for-another-taper-tantrum.html http://www.marketwatch.com/story/yellen-says-a-rate-hike-likely-to-be-needed-this-year-2015-07-10
But we don´t have high debt to GDP. It is as low as it has been since Reagan. Unemployment is fine, about where it has always been. We can talk about the rules they use to determine unemployment not being accurate, but they are the same rules they have always used. There are no staggeringly bad unemployment numbers. You don´t have to give me an education lesson because you can´t. None of the numbers are any different than they have ever been. There are always going to be bears, and their are always going to be alarmists who pull stuff out of their butts as ´proof´ that things are going to fall apart any day. This has been going on since the 1980s.. You still have not given a single reason why low interest rates are bad? Because of ´hyperinflation´ that is never coming. The Fed is watching inflation carefully, there are all kinda metrics and none of them indicate real inflation. And like I said in my original post, the fact that the oil market has broken down will prevent inflation from occurring anytime soon. The big picture is the US Economy is stable, the US dollar is the benchmark for stability that 90% of the rest of the world uses. Low interest rates will continue for at least a few more years because there is nothing that indicates inflation is coming. Again, look at the stock market for the last 5 years. Greece, Russia, China..... would beg to be the USA right now... as would the EU. Don´t worry Chicken Little, the sky is not falling, the market is doing great and the US will continue to lead for a long time... no matter what obscure graph you come up with. Of course you still think Oil is going to $150 soon.. so I guess that is part of the problem with your thinking..
It is a bit annoying that you are so condescending with your comments when everything you are saying has been wrong for the past 15 years. The stock market has been amazing the last 5 years, despite all those charts saying the world should have blown up by now. meanwhile, the rest of the world collapses while we are the beacon of stability.. Do you understand that rates have never been kept down like this for this length of time, and that if things were so great, the Fed would not have done this? And do you not understand that there have always been ´unique´ moments in time where a series of events unfold that has never happened before? Normally you are correct, the Fed could never keep interest rates this low because they had to raise them to prevent inflation. And that is entirely my point.. because oil is broken now, and because oil is such a big part of the inflation picture, the Fed is able to keep interest rates low. There is nothing evil about low interest rates, it is what everyone wants, but the Fed normally can´t keep them this low because they fear inflation. Right now, there is no fear of inflation, so the economy benefits from low interest rates for an extended period of time. it is a good thing.
You're lying again about debt to GDP. Stop that right now. Either prove it or stop repeating it - you can't and won't. A lack of inflation in 7 years is not a good thing - it is something to be concerned about. And inflation isn't the only metric used to determine rates. If you understood economics, you'd understand this. You're basically saying that you know better than Icahn, Greenspan, Drukenmiller, Einhorn, et al, all of whom say it's time or past time for us to get off this Fed crack cocaine. You're not even reading what I'm actually saying - you're just making assumptions and taking me out of context. I never said anything about the sky falling, but it certainly could. We'll be another Greece in 25 years at the rate we're going - according to REAL experts. You don't get it, and never will. It's not normal to keep rates at zero for any length of time. Bull markets cannot go on forever. We cannot borrow infinite amounts of money and simply print zillions to pay it off at some point. Rates cannot stay at zero for years on end without consequences down the road. I don't know when things will get bad again, but they eventually do sooner or later. I started investing in '95. Things were great for a few years, then the tech bubble popped, and we had 9-11 a little while later. Things were great again from '03-'07 due mainly to real estate and financial bubbles that popped bigtime. Then 6 years ago things turned around again. But we will again see a decline sooner or later. And with all of the QE and other things going on, the next pop of the current bubble may perhaps be the worst yet. You'll see as you go along that bull markets don't last forever. If you're so great, surely you can make money like I do pretty consistently whether the market is up or down? Debt to GDP is higher than it's ever been, which I have proven with charts I've posted. Stop lying about this right now - I wanted to give you the benefit of the doubt months ago, but you're obviously trolling on this topic on this serious educational message board. You never back up any of your bullshit with anything. You even call yourself an "expert", which I suppose means you don't need to back anything you say up or cite any references. Here's another source: https://research.stlouisfed.org/fred2/series/GFDEGDQ188S Feel free to have the last word as you always do, since you know everything and everybody else is stupid or crazy or whatever. I'm done with trying to have any intelligent conversation with you. But I will call you out on lying and making up shit. I'm warning you to stop that shit right now. If you're going to tell someone that their facts are wrong that they've cited with reputable sources, you need to back it up with your own sources. You're entitled to your own opinions, NOT your own facts, Mr Expert.
In a way yes, our economy has to be on a fine balance. Oil, gas, food, housing, utilities, health and other insurances, etc GNP... On a very basic level Rates (I think) has to = how our national economic balance should work. If not, simply we are off kilter eventually causing a recession or even a depression. My opinion, respectfully.
I actually had a great conversation with a friend last night about our insanely low interest rates. He said low interest rates for too long is bad and will cause inflation or hyperinflation. Which is conventional understanding of the issue. I have to agree, except then we started talking about Japan. Japan has had ZERO (or darn close) interest rate since the 90's, yet hasn't had any of the negative effects associated with an long term ZIRP. The issue is NEVER as clear cut as low oil low interest rates are good/bad. Low oil prices are good for my wallet at the pump, not so much for the oil companies (which many of us hold.)
