Federal Reserve interest rate hikes start to crush US economy

Continuing jobless claims in the USA are up 6% since the election of Trump, reports Zerohedge.


The downturn in the job market is most likely due to the first interest rate increase by the Federal Reserve since 2008 and the announcement by the Fed chair of a faster pace of increases next year.


A quarter of a percent sounds small. But in this phase of the debt bust cycle when so many people in the USA have huge debts in relation to their income, especially for subprime mortgages, it is a huge amount in absolute terms.

An example, someone earning 2.500 dollars netto a month, who owes 250,000 dollars (in mortgage, credit card and student loan debt etc), has to pay an extra 250 dollars or (ten per cent of their income) every month for every one per cent increase in the interest rate.

A two per cent interest rate increase will, therefore, result in an extra 500 dollars in payments or 20% of that person’s income. So one fifth of the real purchasing power in an economy, on average, is being removed by every single one per cent interest rate increase. That means a dramatic drop in demand for products and services and job losses.

Indicates markets indicate that the interest rate could rise to 2 or 3 per cent, a rise which could leave many Americans bankrupt and homeless.

That is why, I argue, Donald Trump has to get a grip on the Wall Street plants in his cabinet and use the opportunity eject, especially, Steven Mnuchin provided by the Senate confirmation hearings.


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