Financial Thoughts
Wednesday November 2, 2022
At 1 PM Central Time, the Federal Reserve (aka USA Central Bank) issued a statement. As expected they are raising interest rates again. In reaction stock prices fell. Gold spiked up very briefly and then rapidly dropped $30 per ounce (silver behaved exactly like gold).
The Federal Reserve indicated that they will probably continue to raise the interest rate further.
What will this do? What impact does raising the (federal funds) interest rate have?
I’m still relatively new to studying finance, so I don’t have as much credibility as the long time experts like Ray Dalio (although Ray seems to be preaching exactly what I believe). Pardon me if I get a few things wrong, but hopefully this will be helpful for some people (or at least interesting).
First of all raising interest rates hurts the economy, this will continue to push the USA toward a depression / recession. What does that mean to the average person? Jobs will be more scarce and unemployment (even if not the official statistics) will increase. Because business is hurt the stock market will usually drop (as it did).
Image from RawPixel.com
Raising the interest rate strengthens the dollar. This hurts all the other countries around the world. It also tends to lead to lower prices for gold and silver. A stronger dollar may sound good, but in the long term a government which can’t balance their budget (like the USA) will go deeper and deeper into national (government) debt leading to an eventual collapse of the nation.
Raising interest rates hurts real estate. With higher interest rates people can’t afford to pay as much for houses.
Predictions: next week’s elections will probably lead to gains / wins for Republicans. Perhaps not as much as expected or hoped for by many people on the right (the left is likely to come out strong to vote, due to fears of losing the ability to get abortions). This will be a very interesting election. It will be interesting to see how much people believe the lies they are being fed.
The stronger the Republican victories are the more the stock market will at least temporarily rally and gain (and conversely gold and silver will drop more). I’m expecting gold prices to continue to waffle around and fall through mid December, then we will likely see a long and very significant rise. If the Democrats pull off surprise victories we will likely see a very rapid collapse of our economy, times will indeed be grim!
How do we pull off the miracle of getting rid of both the Democrat and Republican parties? The future for the USA is very grim unless we can accomplish this miracle.
The next Federal Reserve meeting will be December 13th-14th.