As the economy continues to improve and we continue to find ourselves living in a low-interest-rate world, many economists are beginning to ask when the prosperity may come to an end. Those experts point to the historically low interest rates we are currently enjoying as a liability should the economy take a dive. Such is the sentiment behind a new informational video resource produced by leading gold distributor U.S. Money Reserve. In the video, the company touches on some of the reasons the Federal Reserve may alter interest rates and how that might affect the economy.
Interest Rate Directions
Traditionally, when the economy undergoes a recession, the Federal Reserve lowers interest rates to help stimulate commerce via cheap loans. Attainable funds incite people to engage in commercial relationships, such as starting new businesses. Easier access to funds also encourages people to engage in more favorable lending practices, such as those typically associated with an uptick in homeownership. Low interest rates are also associated with increased purchase rates of many consumer goods, such as cars. With an increased ability to purchase goods, consumers help stimulate the economy and create jobs.
Conversely, when an economy is doing well for a sustained period of time, the Federal Reserve typically begins to raise interest rates. It does this in part to help regulate inflation, which has the potential to increase at an unsustainable rate if interest rates are kept too low for too long. Rampant increases in inflation, if left unchecked, can shake consumer confidence and other metrics of a strong economy. They can even trigger a recession. For these reasons, the Federal Reserve is incentivized to raise interest rates once it feels the economy is sufficiently strong enough to bear the increased rates.
Current Economic Situation
As U.S. Money Reserve observes, the Federal Reserve has recently raised interest rates. The rates, which had stayed low for an extended period since the economy underwent its most recent recession, have been a hotly debated topic, and there is some contention surrounding their adjustment. In the video, U.S. Money Reserve asserts that one of the leading reasons for increasing the rates is the sustained growth of the economy at present. In fact, Federal Reserve Chairman Jerome Powell has indicated that he thinks the economy is currently doing quite well, and he is encouraged by many metrics of strength he has observed.
But the brewing trade war between the U.S. and a number of other countries is causing Powell to waiver in his conviction that the economy will be able to sustain its recent growth rate. As the current administration alters trade policies with foreign powers, such as China, Mexico, and Europe, there is some concern that a recession could result. This is because these policies may hamper the ability of domestic companies to export and import goods. By losing the ability to cheaply and efficiently engage in international trade, companies may experience a drop in profits, which may ultimately incite them to reduce their workforces.
Rate Change Balancing Act
Taking into consideration the current low level of interest rates, along with some of the concerns touched on by the Federal Reserve chairman, U.S. Money Reserve warns that there may be impending economic hardship in the United States. The raising and lowering of interest rates is, after all, one of the prime ways in which the government affects the economy. If the Federal Reserve raises interest rates too rapidly, then a recession could be triggered by the sudden increase in loan costs. This sudden increase could hamper commerce and ultimately reduce the level of economic activity.
Conversely, since the decrease of interest rates is so integral to the government’s ability to combat a recession, the Federal Reserve must be cognizant of raising rates when possible to prepare for future economic downturns. If the country undergoes a recession while interest rate levels are too low to be substantially reduced, then the U.S. government could be left without the means necessary to significantly effect economic change.
Therein lies the dilemma at the heart of the current interest rate debates. If the government raises rates too quickly, it could trigger a recession. However, if a recession begins while rates are too low, the government may lack the ability to effectively control the economic downturn. Consider also the conflicting indicators of economic growth and uncertain international trade policy, and we have a situation that many experts characterize as ripe for potential disaster.
As the stock market is intrinsically tied to the state of the economy, the above discussion is relevant to buyers who want to retain protect their assets in the face of economic uncertainty. An economic recession would almost certainly trigger a bear market in which many stocks, bonds, and commodities would most likely lose market value for an unknown length of time. For those with cash tied up in stocks, this downturn could be extremely detrimental to their quality of life or even their ability to retire.
customers via informational videos, such as the one outlined above, and special reports available online. These resources have touched upon the ability of precious metals to serve as a store of wealth and source of profit potential over time. To take one example, if you had purchased physical gold in the year 2000, then you could have seen an incredible profit of over 375 percent. In the face of the aforementioned concerns over interest rates, economic indicators, and trade policy, many have turned to precious metals and government coins as a way to diversify portfolios and preserve purchasing power.
Though many economic indicators are strong, and we are, by many calculations, experiencing a period of resilient growth and job creation, many experts remain cautious when discussing the future of the economy. Because interest rates are a prime point of contention between policymakers, uncertainty is beginning to show through the cracks of what has so far been a successful recovery. As the recently released video resource from U.S. Money Reserve outlines, competing needs for interest rate utility is one of the major drivers of this uncertainty and may continue to affect considerations moving forward. This and other factors are inciting many to take a closer look at more traditional stores of wealth, such as precious metals. For those concerned about U.S. economic conditions, these assets may be worth considering as a means of reducing the harm from a potential recession.
Knowledge Base ad U.S. Money Reserve
As one of the leading players in its industry, U.S. Money Reserve has built up its ability to attract top-quality staff that can not only cater to customer needs, but also provide customers with helpful information on a variety of considerations related to the economy, precious metals, and government-issued coins. This is due, in part, to the example set by the firm’s president, Phillip N. Diehl. Diehl, who is a former director of the U.S. Mint, has made a career of understanding the confluence of public policy and private financial aspirations. By using this understanding to guide the organization, he has helped lead a gold company that knows how its assets can be used in the modern world.