Hello Everyone, my name is ForsakenSushi!!
I come from the tribe of Splintertalk but Id like to expand on the hive blogging network, especially since I have a finance background and have been investing for whole adult life.
The stock market has been overheating for about a year on the back of Federal Reserve ZIRP(zero interest rate policy) and Quantitative Easing(open market purchase of bonds) stimulating the velocity of money and massively increasing the overall stockpile of money as expressed by M2 growth. These policies have become a normal in our life because the United States GDP growth has stagnated due to population dynamics while the national debt has soared. Structurally low GDP growth leads to a common need to boost growth, often this boost to growth is from the monetary side of the economy, meaning the Federal Reserve will print money i.e. lower interest rates to stimulate the economy. In addition to that, chronic high debt levels necessitate low interest rates.
Food for Thought:
- Current National Debt approx. $28,894,000,000,000 ($28.8 Trillion)
- Current Annual Interest on National Debt for 2020 $522,767,299,265.34 ($522 Billion)
Average Interest Rate on National Debt (1.8% APY)
- If interest rates spiked to 10%
Interest payments on current national debt with (10.0% APY) $2,889,000,000,000 (2.8 Trillion)
· The new annual interest payment would be almost 3 trillion dollars a year, which is about equal to our current deficit, so this would double the annual deficit of our country if interest rates spiked too high.
For this reason, I believe we will never see high interest rates in our life, and if we do, this will be an economic crisis they just throw endless money at.
What do you all think?