Sicne 2016 the American central bank, the Federal Reserve, started with raising interest rates. By doing so they were undermining the American economy and the chances of re-election for President Trump. But at the latest meeting, they decided to do nothing. It is clear: they are giving it up.
The reason the interest rates where unchanged are clear. The American economy is slowing down. This means that they can no longer defend the message that it is going great. By keeping interested rates going up the FED would show it’s political color and intentions.
At the same time will the FED not reduce its massive balance sheet. The balance sheet expansion began when no one was interested in buying Mortage Backed Securities and other financial instruments. So, to keep the market going, the FED interacted. An interaction which just increased the FED market presence. If we look back at this than we see how disastrous it was. How can the FED exit the market without forcing the collapse of the market? It is impossible.
But the bad policies keep going on. Let’s see what the effect is of the ultra-low interest rates. Thanks to the ultra-low interest rates the financial institutions (banks, mutual funds, hedge funds) have access to cheap money. But a side effect is that everyone with wealth is investing. This to fight the low rates. The effect? Asset prices are going up. So increasing interest rates will reduce asset prices (like real estate) but it will also power a complete financial collapse.
The government and the ultra rich are not hurt by this. They simply hire to hurt the poor and middle class. Those who were told to depend on pensions are hurt.
But the policies are great. The government can finance its disastrous policies at a low-interest rate. But no one talks about raping the debt. I think we should forget the idea the USA government, or most western governments, are capable of repaying the debt. They need ultra low-interest rates to keep things going. It is said: but government bonds are a worthless investment. So get ready and prepare.