Monthly Archives: March 2016

A VITAL THIRD OBJECTIVE FOR THE FED

The fools chatter incessantly as to whether based on its Congressional mandate the Fed missed the opportunity to raise interest rates or when they should raise interest rates based on misleading unemployment statistics and inflation prospects. Now they talk about a host of international economic events to speculate and advise on what the Fed might or should do.  The rarely mention the cost of paying interest on the National Debt which is approaching $20T on its way to $25T and $30T in a few years no matter who wins the presidency unless we have unexpected growth in the economy

At a 1% rate,  interest on the National Debt totals $200B per year and it rises to $800B if the government is required to pay 4%. The latter rate would raise interest costs to an amount roughly equal to our military budget or our federal welfare or infrastructure spending.  We need to spend substantially more on military and infrastructure needs and printing dollars to pay excessive interest will exacerbate our National Debt problem. We simply can’t afford to pay higher interest rates so that they can be lowered if our economy goes into recession. Like the Europeans and the Japanese, the Fed will be able to find ways to stimulate the economy and deal with future banking problems even if interest rates remain low.

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