Thursday, June 19, 2014

Will The U.S. Economy Tank When Interest Rates Rise?



It's been years since interest rates have been allowed to rise and fall based on reality. That said, sooner or later the U.S. Federal Reserve will be forced to raise interest rates and many experts are concerned what that move will do to the economy and more importantly the stock market. While Wall Street use to be an important indicator as to the well being of the U.S. economy – that is not the case anymore. Most of the astronomical gains seen in the DOW and S&P 500 were artificially created by lower than normal interest rates. The U.S. housing market is a bubble that is just waiting to burst when the Federal Reserve raises the interest rate charged to potential home-buyers. Politicians are use to kicking the can down the road – so some future leaders are forced to deal with bad news. The biggest issue facing the Fed and other leaders in Washington is - will the U.S. economy crash when interest rates are allowed to increase based on market conditions? More than likely, much of the gains seen on Wall Street and in the housing market will disappear - once the decision is made to let interest rates go up.

Source: cbsnews.com

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