Feeds:
Posts
Comments

Posts Tagged ‘Interest rate’

The Economic Policy Institute (EPI) reports that US wages grew in real terms (wage growth minus inflation) during 2016. While good news for the people who actually do the work of producing the goods and services necessary to keep the economy humming, this is also bad news.

EPI reports that income inequality continues to rise. “Rising inequality,” the report states, “means that although we are finally seeing broad-based wage growth, ordinary workers are just making up lost ground, rather than getting ahead. The way rising inequality has directly affected most Americans is through sluggish hourly wage growth in recent decades, despite an expanding and increasingly productive economy. For example, had all workers’ wages risen in line with productivity, as they did in the three decades following World War II, an American earning around $40,000 today would instead be making close to $61,000 (EPI 2017c).” That income difference has been redistributed to the very rich since 1981.

The report went on, “A hugely disproportionate share of economic gains from rising productivity is going to the top 1 percent and to corporate profits, instead of to ordinary workers—who are more productive and more educated than ever. This rising inequality is happening largely because big corporations and the wealthy have been rewriting the rules of the economy, particularly the job market, to stack the deck in their favor. This has prevented the benefits of productivity growth from “trickling down” to reach most households.” In other words, trickle down economics was a complete farce.

Now for the bad news. The economy is heading on a crash course with the worst and most prolonged recession since the Great Depression sometime around June of this year, give or take a month or two. The severity of this recession is due to the income and wealth inequality the US and the world has experienced since 1981, the year it pretty much began. I have been watching this current business expansion unravel since before November 2015. See The Coming Recession is Going to Be a Big One-JohnHively.wordpress.com There are always certain variables that precede a recession. Many of those began a year and a half ago.

Typically, the last variables to happen before an economy tanks is that wages rise and the Federal Reserve raises interest rates. Now those variables have officially happened. The Fed will likely raise interest rates again this month.

Somebody might point out that the economy is humming along with wage growth, low unemployment, etc…. How can we go into recession?

The growth of any business expansion has much in common with hiking up a mountain. Once you step on the highest point of any mountain, the next step is down. And so it is with any economic expansion; once it hits a peak, the very next step is down into recession. This month, March 2017, is the 93rd month of this economic expansion, making it the third longest in history. Compared to every economic expansion lasting six or more years, the current is the weakest by almost every measurement. So don’t expect it to go on much longer.

Click here for the entire EPI report on wage growth in 2016.

Read Full Post »

The corporate press has done their duty to mislead the American people about mortgage interest rates. Here’s how.

Federal Reserve Chairman Ben Bernanke announced in June that he intended the Fed to stop propping up the economy by buying worthless bonds from stupid investors. The process is called quantitative easing and increases the money supply by nearly a trillion dollars every year.  Soon after  the announcement, the corporate press dutifully claimed that mortgage interest rates were rising because of Bernanke’s statement. Let’s see if that’s true.

Bernanke announced last Thursday that the Fed intends to keep rates where they are until the unemployment rate drops to its 2008 level. The stock markets around the world soared on that news. The Dow Jones climbed to a record high of 15,423 on Bernanke’s announcement.

What the corporate propaganda media hasn’t told us is that mortgage applications are near historic lows. Thirty year fixed mortgages are the only kind that are up. Mortgage interest rates have risen to around 4.5 percent, a rise of roughly 38 percent from around 3.25 percent just six months ago.

The big banks have illegally conspired to take millions of homes off the market, thereby increasing prices. By illegally rigging the housing market, the banksters have forced people to dive into the market before the illegally rising prices put them out of financial range of owning homes. This stampede has driven interest rates higher, and not Bernanke’s June announcement.

It’s possible that Bernanke’s announcement, and the banks illegally driving housing prices up, have both played a role in the upward movement of mortgage interest rates. We’ll see how far they go down now. Although, to be blunt, it already looks like the housing market bubble is already imploding, as I wrote earlier. In which case, home mortgage interest rates should drop anyway regardless of the actions of the Fed.

Check out the link below for more on Bernanke’s Thursday announcement.

US markets hit record highs with Federal Reserve interest rate pledge–The Guardian UK

Read Full Post »

In an op-ed for USA Today, Middle Class Senator Elizabeth Warren wrote, “Every time the government lends at a low rate to a borrower, it invests in that borrower. Right now, the government lends money every day to big banks at less than 1% interest. If Congress does not act before July 1, interest rates on new subsidized Stafford loans will double — and the government will be charging our students nine times as much as they charge big banks.”

Click the link below for the rest of the op-ed.

USA Today–Elizabeth Warren op-ed.

Read Full Post »